Political Economy of Parcel Tax in California School Districts
39 Pages Posted: 2 May 2016 Last revised: 22 Apr 2017
Date Written: April 20, 2017
This paper examines the political and economic conditions for parcel tax adoption in California school districts to supplement public school funding. A parcel tax is a regressive tax on a unit of property approved by at least two-thirds supermajority vote in a local referendum. Despite its growing role as a funding source, how local conditions affect adoption of this regressive form of property tax with a high threshold has been poorly understood. Unlike previous studies that emphasize income differences across school districts, I argue that distribution of home prices within a district is key to successful parcel tax adoption, due to the regressivity and the resulting differentials of property tax rates. Using the Heckman selection models and California school district level data, I find that a large gap in home values within a district significantly reduces the likelihood of parcel tax adoption.
Keywords: parcel tax, school finance, California, property tax, Proposition 13
JEL Classification: H71, H75, K00
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