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Property tax interaction among overlapping local jurisdictions: quasi-experimental evidence from school bond referenda

Yoon-Jung Choi ()
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Yoon-Jung Choi: Syracuse University

International Tax and Public Finance, 2022, vol. 29, issue 3, No 1, 537-580

Abstract: Abstract This study aims to extend the study of property tax competition to a highly fragmented local context. Applying the tax competition theory to the property tax, I estimate the causal effect of a property tax increase at one level of government on fiscal decisions of another level of overlapping governments. To address endogeneity concerns in jurisdictional overlap, I employ different quasi-experimental approaches based on school bond referenda, using regression discontinuity (RD) and difference-in-differences (DiD) frameworks. The RD and DiD estimates together suggest that an increase in school taxes would eventually lead to higher tax rates in overlapping cities. The findings confirm the existence of tax competition, which is consistent with the yardstick competition model. Furthermore, given the cross-district heterogeneity in taxing capacity and intergovernmental constraints, the results indicate the presence of power dynamics among localities.

Keywords: Vertical tax competition; Yardstick competition; Property taxes (search for similar items in EconPapers)
JEL-codes: H71 H73 H74 H77 R51 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10797-021-09678-x

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