The Effects of Changes in Property Tax Rates and School Spending on Residential and Business Property Value Growth

34 Pages Posted: 19 May 2015

See all articles by Sung Hoon Kang

Sung Hoon Kang

Korea Institute of Public Finance; Michigan State University

Mark Skidmore

Michigan State University - Department of Agricultural Economics

Laura Reese

Michigan State University

Multiple version iconThere are 3 versions of this paper

Date Written: Summer 2015

Abstract

In this article, we examine the effects of changes in property tax rates and school spending on residential and business property value growth in southeast Michigan. We use panel data for 152 communities in the five counties surrounding Detroit between the years 1983 and 2002, a period during which state government mandated major changes to school finance. Using the mandated changes to identify causality, we find that: (1) residential property values are more responsive to school spending changes than property tax rate changes; (2) business property values are more responsive to tax rate changes than school spending changes; and (3) business property values are more sensitive to changes in tax rates as compared to residential property. We also examine tax competition effects on property value growth, showing that tax competition plays an important role in property value growth in the southeast Michigan region.

Suggested Citation

Kang, Sung Hoon and Skidmore, Mark L. and Reese, Laura, The Effects of Changes in Property Tax Rates and School Spending on Residential and Business Property Value Growth (Summer 2015). Real Estate Economics, Vol. 43, Issue 2, pp. 300-333, 2015, Available at SSRN: https://ssrn.com/abstract=2607754 or http://dx.doi.org/10.1111/1540-6229.12077

Sung Hoon Kang (Contact Author)

Korea Institute of Public Finance ( email )

79-6 Garak-Dong, Songpa-Ku
Seoul
United States
+82-2-2286-2207 (Phone)

Michigan State University ( email )

Agriculture Hall
East Lansing, MI 48824-1122
United States

Mark L. Skidmore

Michigan State University - Department of Agricultural Economics ( email )

East Lansing, MI 48824
United States

Laura Reese

Michigan State University ( email )

Agriculture Hall
East Lansing, MI 48824-1122
United States

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