THREE ESSAYS ON PROPERTY TAX ADMINISTRATION AND POLICY

Date of Award

May 2020

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Public Administration

Advisor(s)

Robert Bifulco

Keywords

Discrimination, Intergovernmental Aid, Property Tax, State and Local Public Finance

Subject Categories

Social and Behavioral Sciences

Abstract

The property tax is the fiscal backbone of local governments in the United States—it provides over 30 percent of total local revenue and over 60 percent of own-source revenue. While the property tax has been studied by researchers for decades, there are many unanswered questions about the administration and economics of the property tax. For example, do local overlapping governments that share a common geographic territory affect one another when making spending and taxing decisions that affect their utilization of a shared property tax base? Do tax administrators or assessors treat all local residents equally? Who bears the economic burden of the property tax in non-owner-occupied housing, such as rental housing? The dissertation is comprised of three empirical essays that explore these three questions and, in doing so, examines various features of the economics and administration of the property tax in the United States.

Chapter 1, “The Effect of Intergovernmental Aid on Overlapping Local Governments: Evidence from New York State,” investigates the extent to which state aid to one local government affects the fiscal decisions of a different overlapping local government. Specifically, I exploit the change in the tax price for education services induced by the New York State School Tax Relief (STAR) program to identify the effect of intergovernmental aid for school districts on the fiscal decisions of overlapping county governments.

I find that a 10 percent reduction in the tax price for education services increases county spending per household by approximately 0.93 percent, property tax levies by 1.51 percent, and long-term debt per household by 0.82 percent. I then examine whether changes in county spending translated into changes in county outcomes. I do not find any evidence that changes in the school-district tax price are associated with changes in county outcomes. Although the limited number of outcomes I am able to examine do not capture the full range of outcomes that residents value, these results do suggest that the increase in county spending induced by STAR was not used productively. Thus, this increase in spending may not be welfare maximizing. This is the first paper to examine if there is an effect of intergovernmental aid on the fiscal behavior of an overlapping, non-recipient local government.

Chapter 2 explores three important questions in public administration. First, do government officials discriminate against certain groups, notably racial and sexual minorities? Second, are minority and female bureaucrats more or less responsive to inquiries from racial and sexual minorities? Lastly, are there institutional features or laws that correlate with higher or lower rates of bureaucratic discrimination? Using an email-correspondence field experiment, I test whether local property assessors discriminate against racial and sexual minorities.

I find that property assessors are less likely to respond to emails containing stereotypical black names or emails from same-sex married male couples. Assessors are significantly less likely to provide helpful and specific responses to inquiries from black and gay married male constituents. Assessors are also less likely to respond cordially to black constituents, and they are noticeably less likely to use honorifics (e.g., “Mrs.” or “Mr.”) when addressing black constituents. Non-white assessors are more likely to respond to same-sex couples and minority constituents compared to white assessors. Appointed assessors are more likely than elected assessors to respond to minority constituents. I find that state-level anti-discrimination laws correlate with less discrimination for same-sex male couples. However, this correlation is weak. This study extends previous observational and experimental work on bureaucratic biases and discretion in citizen-state interactions. This paper is also the first nationally-representative field experiment on bureaucratic behavior to offer causal evidence of public-sector discrimination on the basis of sexual orientation.

In the third chapter, John Yinger and I examine the extent to which property owners shift increases in the property tax onto renters in the form of higher rents. In 1981, New York State enabled their cities to adopt the Homestead Tax Option (HTO), which created a multi-tiered property tax system for rental properties in New York City, Buffalo, and Rochester. The HTO enabled these municipalities to impose a higher property tax rate on rental units in buildings with four or more units, compared to rental units in buildings with three or fewer units. Using restricted-use American Housing Survey data and historical property tax rates from each of these cities, we exploit within-unit across-time variation in property tax rates and rents to estimate the degree to which property taxes are shifted onto renters in the form of higher rents. We find that property owners shift approximately 10 percent of an increase in taxes onto renters. This study is the first to use within-unit across time variation in property taxes and rents to identify this shifting effect. Our estimated effect is measurably smaller than most previous studies, which often found shifting effects of over 60 percent.

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