Date of Award

Summer 7-1-2022

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Public Administration

Advisor(s)

Yinger, John M.

Keywords

Fiscal Federalism, Local Economic Development, Property Tax Reassessment, Tax Equity, Urban Governance, Urban Public Finance

Subject Categories

Public Affairs, Public Policy and Public Administration | Social and Behavioral Sciences

Abstract

This dissertation consists of three essays that examine the economic and fiscal effects of property tax policies in urban areas. The dissertation aims to expand current understanding of urban property tax dynamics and fragmentation features.In the first chapter, titled "Property Tax Interaction among Overlapping Local Jurisdictions: Quasi-experimental Evidence from School Bond Referenda," I empirically examine interactive behaviors of local jurisdictions that are not perfectly overlapping. This topic remains largely underexplored in current scholarship. I specifically estimate the causal effect of a property tax increase by a school district on the fiscal decisions of overlapping municipal governments using both regression discontinuity and difference-in-differences designs. The results, which use Texas district-level fiscal data, show an increase in school taxes would eventually lead to higher tax rates in overlapping cities. The findings support the existence of strategic tax interaction, which is theoretically consistent with the yardstick competition model. Furthermore, I find the effects of bond passage increases with a district's susceptibility to intergovernmental constraints, particularly in cities having a smaller capital budget and greater population density. The interactions are not simply uncoordinated but tend to reflect asymmetric power relations which may exacerbate the wider problem of inter-regional disparities. The study concludes by discussing implications for fiscal institutions, which have evolved to coordinate service delivery across municipal boundaries and address redistribution and spillovers concerns. In the second chapter, titled "Does Revaluation Eliminate Inequity in Property Tax Assessment? The Case of Pittsburgh," I examine the distributive effects of reassessment reform on assessment disparities and capital gains and losses across income and racial groups. I study the 2012 court-ordered reassessment in Allegheny County, Pennsylvania to identify systematic variations in effective tax rates. Allegheny County had not been reassessed for many years, so the reform resulted in dramatic changes in property tax burdens for individual homeowners. Without regular reassessments, every deviation in effective tax rates from the city average grows larger from year after year and may be expected to remain indefinitely, which in turn poses serious financial consequences for households. Considering that this annual flow of tax benefits (burdens) is either partially or fully capitalized into house values, I examine how much change is observed in the effective property tax rates within the City of Pittsburgh affects house values in the jurisdiction. I find the expected tax stream is partially capitalized at 6.7 percent, and that current homeowners experience economically significant losses and gains that partially offset previous capital gains and losses. The final chapter, titled "Entry or Exit?: The Impact of Tax Increment Financing on Firm Dynamics in Iowa," examines the impact of tax increment financing (TIF) on firm entries and exits. TIF has been introduced to increase entry and decrease exit of businesses in designated areas. I use data from Iowa's retail sales tax permit, which includes the physical locations of businesses that obtained permits and had them expire during the period 1990-2017. I evaluate the impact of TIF policy on firm entry and exit at the census block level, using a staggered event study design. The findings indicate that TIFs help retain existing businesses but do not influence the entry of new firms. Findings at the industry level suggest that TIFs mainly affect retail businesses, which are not among the targeted industries. Overall, this study suggests that TIFs moderate firm exits and the retail sector but do not provide significant positive spillovers on firms, industries, or regions.

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