The Unintended Consequences of Property Tax Relief: New York’s STAR Program

Tae Ho Eom (), William Duncombe, Phuong Nguyen-Hoang () and John Yinger
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Tae Ho Eom: Department of Public Administration, Yonsei University
William Duncombe: Department of Public Administration and International Affairs, Syracuse University
Phuong Nguyen-Hoang: Public Policy Center and School of Urban and Regional Planning, University of Iowa

Education Finance and Policy, 2014, vol. 9, issue 4, 446-480

Abstract: New York’s School Tax Relief Program, STAR, provides state-funded property tax relief for homeowners. Like a matching grant, STAR changes the price of education, thereby altering the incentives of voters and school officials and leading to unintended consequences. Using data for New York State school districts before and after STAR was implemented, we find that STAR increased student performance, school district inefficiency, and school spending by 2 to 4 percent in most districts, leading to an average school property tax rate increase of 14 percent. The STAR-induced tax rate increases offset about one third of the initial STAR tax savings and boosted property taxes for business property. STAR did little to offset the existing inequities in New York State’s education finance system, particularly compared to an equal-cost increase in state aid. This article should be of interest to policy makers involved in property taxes or other aspects of education finance. © 2014 Federal Reserve Bank of New York

Keywords: STAR; tax relief; education; state aid; education finances; policy makers (search for similar items in EconPapers)
JEL-codes: I22 I24 I28 K34 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: Unintended Consequences Of Property Tax Relief: New York’s Star Program (2005)
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