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

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  • Yoon-Jung Choi

    (Syracuse University)

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.

Suggested Citation

  • Yoon-Jung Choi, 2022. "Property tax interaction among overlapping local jurisdictions: quasi-experimental evidence from school bond referenda," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(3), pages 537-580, June.
    • Handle: RePEc:kap:itaxpf:v:29:y:2022:i:3:d:10.1007_s10797-021-09678-x
    DOI: 10.1007/s10797-021-09678-x
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    More about this item

    Keywords

    Vertical tax competition; Yardstick competition; Property taxes;
    All these keywords.

    JEL classification:

    • 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
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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