Do local governments tax homeowner communities differently?

Roland Füss () and Oliver Lerbs

No 17-036, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper investigates whether and how strongly the share of homeowners in a community affects residential property taxation by local governments. Different from renters, homeowners bear the full property tax burden irrespective of local market conditions, and the tax is more salient to them. "Homeowner communities" may hence oppose high property taxes in order to protect their housing wealth. Using granular spatial data from a complete housing inventory in the 2011 German Census and historical war damages as a source of exogenous variation in local homeownership, we provide empirical evidence that otherwise identical jurisdictions charge significantly lower property taxes when the share of homeowners in their population is higher. This result is invariant to local market conditions, which suggests tax salience as the key mechanism behind this effect. We find positive spatial dependence in tax multipliers, indicative of property tax mimicking by local governments.

Keywords: homeownership; public financing; residential property tax; spatial tax mimicking; yardstick competition (search for similar items in EconPapers)
JEL-codes: D72 H20 H31 H71 R31 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-geo, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.econstor.eu/bitstream/10419/169399/1/898931932.pdf (application/pdf)

Related works:
Working Paper: Do Local Governments Tax Homeowner Communities Differently? (2017)
Working Paper: Do Local Governments Tax Homeowner Communities Differently? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:17036

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