Do Local Governments Tax Homeowner Communities Differently?

51 Pages Posted: 26 Sep 2017

See all articles by Roland Füss

Roland Füss

University of St. Gallen - School of Finance

Oliver Lerbs

University of Muenster

Multiple version iconThere are 2 versions of this paper

Date Written: September 20, 2017

Abstract

This paper investigates whether and how strongly the share of homeowners in a community affects residential property taxation by local governments. Different from renters, homeowners bear the full property tax burden irrespective of local market conditions, and the tax is more salient to them. "Homeowner communities" may hence oppose high property taxes in order to protect their housing wealth. Using granular spatial data from a complete housing inventory in the 2011 German Census and historical war damages as a source of exogenous variation in local homeownership, we provide empirical evidence that otherwise identical jurisdictions charge significantly lower property taxes when the share of homeowners in their population is higher. This result is invariant to local market conditions, which suggests tax salience as the key mechanism behind this effect. We find positive spatial dependence in tax multipliers, indicative of property tax mimicking by local governments.

Keywords: Homeownership, public financing, residential property tax, spatial tax mimicking, yardstick competition

JEL Classification: D72, H20, H31, H71, R31

Suggested Citation

Füss, Roland and Lerbs, Oliver, Do Local Governments Tax Homeowner Communities Differently? (September 20, 2017). University of St.Gallen, School of Finance Research Paper No. 2017/14. Available at SSRN: https://ssrn.com/abstract=3043136 or http://dx.doi.org/10.2139/ssrn.3043136

Roland Füss (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland
+41 (0)71 224 70 42 (Phone)
+41 (0)71 224 70 88 (Fax)

HOME PAGE: http://www.sbf.unisg.ch/en/Lehrstuehle/Lehrstuhl_Fuess.aspx

Oliver Lerbs

University of Muenster ( email )

Schlossplatz 2
Muenster, D-48149
Germany

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