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Intra-school district capitalization of property tax rates

Mitchell R. Livy

Journal of Housing Economics, 2018, vol. 41, issue C, 227-236

Abstract: While previous studies have attempted to measure property tax rate capitalizations by proximate housing prices, disentangling school quality, and its associated amenities, from tax rates has impeded accurate estimation. I overcome this issue by investigating school districts containing varying tax rates. Identification is derived from the use of school and spatial-temporal boundary fixed effects to eliminate unobserved variation associated with tax districts that can confound capitalization estimates. Results from the primary model provide evidence of a negative capitalization of tax rate levels that corresponds to full capitalization at discount rate of nearly 3.5 percent. Further, property fixed effects are uniquely incorporated within the boundary identification method to show that tax rate changes are capitalized similar to baseline tax rate differences.

Keywords: Property tax capitalization; Housing prices; Regression discontinuity (search for similar items in EconPapers)
JEL-codes: H2 R2 R3 R5 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:jhouse:v:41:y:2018:i:c:p:227-236