Title

Evaluation of New York State property tax policy: Administration and behavioral impacts of School Property Tax Relief (STAR) program

Date of Award

2004

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Public Administration

Advisor(s)

John M. Yinger

Keywords

New York, Property tax, School Property Tax Relief, Public finance

Subject Categories

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

Abstract

The heavy reliance on the property tax, combined with a wide range in wealth per pupil across school districts in New York State, has been a major source of existing disparities in education funding. Two essays in this dissertation examine two important areas of property tax policy in New York State.

The first essay stems from realizing that New York State (NYS) is one of the states which suffer from the low quality of property tax assessment. The quality of property tax assessment is the most basic, but critical, factor when the whole property tax system is being evaluated, and none of the existing research provides a comprehensive evaluation model for property tax assessment. I have found that key property tax administration factors, such as assessment ratio, assessing jurisdictions, and reassessment activities are critical in improving property tax assessment. Additionally, our monitoring pressure model reveals that monitoring pressure through median tax share, median property value as a share of median income, and ratio of state aid to total expenditure significantly affects the quality of property tax assessment.

The second essay explores the behavioral impacts of a major property tax exemption program passed in New York State in 1997, called School Tax Relief Program (STAR). Based on the well established local public finance model called "median voter model," STAR lowers the price voters must pay for higher level education service, which is called "tax price". Based on the model, the lower tax price is likely to increase the demand for education and eventually result in higher student performance. A body of literature investigated the impacts of tax price change on education demand caused by state matching aid. This study, however, is the first to show the impact of property tax exemptions, currently adopted by many states, on education demand. Such demand side impacts also have critical implications in terms of educational adequacy and state budget distributions. In addition to the demand side implications, STAR also affects school district managerial efficiency by lowering the tax price and thereby lowering the monitoring pressures voters exert on school district management. I have performed cross-sectional analysis for three school years, from 2000 to 2002, and panel data analysis from 1999 to 2002. The estimation results confirm all of the arguments above.

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