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Property tax capitalization, a case study of Dallas County

Author

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  • Giertz, Seth H.
  • Ramezani, Rasoul
  • Beron, Kurt J.

Abstract

We estimate the degree to which local property taxes are capitalized into house prices using administrative data from the Dallas Central Appraisal District (DCAD) from 2014 to 2016. Capitalization rates are measured using a hedonic price regression model. To control for unobservable neighborhood characteristics, we employ a border discontinuity research design, restricting our sample to homes within half-mile blocks of jurisdictional boundaries. With respect to school district taxes, we estimate that more than 70 percent of the increase in the present value of property tax liabilities resulting from a tax increase is capitalized into current house prices. The null hypothesis of full capitalization cannot be rejected. For city taxes, capitalization rates are even larger. We also estimate the willingness to pay for public schools, finding that a one standard deviation increase in test scores results in a roughly four-percent increase in house prices.

Suggested Citation

  • Giertz, Seth H. & Ramezani, Rasoul & Beron, Kurt J., 2021. "Property tax capitalization, a case study of Dallas County," Regional Science and Urban Economics, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:regeco:v:89:y:2021:i:c:s0166046221000405
    DOI: 10.1016/j.regsciurbeco.2021.103680
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    Cited by:

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    2. Brasington, David M. & Parent, Olivier, 2024. "Fire protection services and house prices: A regression discontinuity investigation," Regional Science and Urban Economics, Elsevier, vol. 105(C).

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    More about this item

    Keywords

    House prices; Property tax; Tax capitalization; Public schools; Border discontinuity;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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