Full Citation

Title: What happened to property taxes after the Great Recession?

Citation Type: Working Paper

Publication Year: 2021

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DOI: 10.2139/SSRN.4101432

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Abstract: We use newly collected data on property tax rates, assessment values, and property tax levies to study the effect of falling home prices associated with the Great Recession on local property tax revenues. We tease out the mechanical channel through which home values affected assessed values, and the policy channel through which policymakers responded to changes in the tax base. We find that the resilience of property tax revenues can be attributed to two main factors: a small correlation between home price changes and assessed values after 2007, and large increases in property tax rates in areas facing a negative shock in their tax base. Contrary to the mainstream perception, we find that the recession had a small but negative and lasting impact on the tax base. Negative shocks were offset by as much as 80-85% in the long run, implying that a 10% decrease in the tax base lead to only a 1.5% decline in property tax revenues. We document a large variation in responses, and look at the role of property tax rate and levy limits during and post-recession. Rate limits seem to reduce the ability of policymakers to offset negative shocks in the tax base and lead to a bigger decline in revenues. Jurisdictions with a levy limit are much more likely to smooth out negative and positive shocks.

Url: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4101432

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Authors: Brosy, Thomas; Ferrero, Chiara

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Institution: University of Michigan

Pages: 1-65

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Data Collections: IPUMS NHGIS

Topics: Housing and Segregation, Poverty and Welfare

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