When Do Property Taxes Matter? Tax Salience and Heterogeneous Policy Effects

77 Pages Posted: 28 Apr 2023 Last revised: 24 May 2023

See all articles by Marina Gindelsky

Marina Gindelsky

George Washington University - Department of Economics; Government of the United States of America - Bureau of Economic Analysis (BEA)

Jeremy Moulton

University of North Carolina, Chapel Hill - Dept. of Public Policy

Kelly Wentland

George Mason University - Department of Accounting

Scott Wentland

Bureau of Economic Analysis (BEA)

Date Written: May 22, 2023

Abstract

Taxes create incentives; yet, the potency of these incentives may depend on the salience and households’ perceptions of the tax itself. We investigate this issue in the context of property taxes, exploring how accurately households perceive their property tax liabilities and what factors determine misperception. Leveraging a unique national dataset, created by linking Zillow’s ZTRAX data to internal data from the American Community Survey, we first compare survey responses for how much households think they pay in property taxes to how much they actually pay based on municipal administrative records from ZTRAX. While homeowners’ tax perceptions are not substantially biased on average, we observe significant inaccuracy and systematic bias across different household(er) characteristics, institutional settings, and across states. Given that the vast majority of studies in the property tax capitalization literature use data concentrated in one state or locality, we also explore whether variation in tax misperceptions across states can help explain the heterogeneity in property tax effects on home prices. Results from a meta-analysis show that studies conducted in states with higher property tax misperceptions are significantly less likely to find property tax policy changes are fully capitalized into home prices.

Keywords: Property Taxes, Tax Salience, Tax Misperception

JEL Classification: H22, H71, J14, R23, R28

Suggested Citation

Gindelsky, Marina and Gindelsky, Marina and Moulton, Jeremy and Wentland, Kelly and Wentland, Scott, When Do Property Taxes Matter? Tax Salience and Heterogeneous Policy Effects (May 22, 2023). George Mason University School of Business Research Paper , Available at SSRN: https://ssrn.com/abstract=4420998 or http://dx.doi.org/10.2139/ssrn.4420998

Marina Gindelsky

George Washington University - Department of Economics ( email )

Washington, D.C., DC
United States

Government of the United States of America - Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

Jeremy Moulton

University of North Carolina, Chapel Hill - Dept. of Public Policy ( email )

Abernathy Hall
Chapel Hill, NC 27599-3435
United States

Kelly Wentland

George Mason University - Department of Accounting ( email )

Fairfax, VA
United States

Scott Wentland (Contact Author)

Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

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