Economics at your fingertips  

On Fiscal Illusion in Local Public Finance: Re-Examining Ricardian Equivalence and the Renter Effect

Spencer Banzhaf () and Wallace Oates

National Tax Journal, 2013, vol. 66, issue 3, 511-540

Abstract: We reevaluate fiscal illusion in local public finance. The Ricardian Equivalence Theorem suggests that the financing of a public program using either taxation or debt shouldn’t affect outcomes, because debt is capitalized into property values. In contrast, we show individuals may rationally prefer public debt if governments can borrow on more favorable terms. We also propose a new test for the renter effect: controlling for differences in demand, the renter effect suggests renters prefer property taxes to sales taxes. Using data from U.S. open space referenda, we find that households do prefer debt financing, but find no evidence of the renter effect.

Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9) Track citations by RSS feed

Downloads: (external link) ... l-public-finance.pdf (application/pdf) ... -public-finance.html (text/html)
Access to most recent volumes (current and past two years) is restricted to subscribers and members of the National Tax Association.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

National Tax Journal is currently edited by Stacy Dickert-Conlin and William M. Gentry

More articles in National Tax Journal from National Tax Association, National Tax Journal Contact information at EDIRC.
Bibliographic data for series maintained by Sally Sztrecska ().

Page updated 2020-07-03
Handle: RePEc:ntj:journl:v:66:y:2013:i:3:p:511-540