Estimating property tax base elasticity over time: Evidence on the revenue maximizing politician

William Stine

Public Choice, 1988, vol. 58, issue 1, 35-44

Abstract: The Laffer curve analysis suggests a possible policy conflict between short-run revenue maximization and long-run fiscal health. This paper estimates short-run and long-run property tax base elasticity in order to test whether such a conflict exists for the property tax in central cities. A stock adjustment model is used and separate time-series estimates for four New York State central cities lend empirical support to such a conflict. The results show that while disincentive effects associated with property tax rate increases are not strong enough to reduce proeprty tax revenue in the short-run, they are substantial enough to reduce long-run revenue in all but one city. The paper also tests for asymmetric response to property tax rate changes and finds significant results for only one city. Copyright Kluwer Academic Publishers 1988

Date: 1988
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DOI: 10.1007/BF00183327

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