NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Hated Property Tax: Salience, Tax Rates, and Tax Revolts

Marika Cabral, Caroline Hoxby

NBER Working Paper No. 18514
Issued in November 2012, Revised in February 2015
NBER Program(s):Economics of Education, Public Economics, Political Economy

Because of the obtrusive manner in which they are normally paid, property taxes are likely the most salient taxes in the U.S. However, they are much less salient to homeowners with tax escrow. Exploiting geographical variation in tax escrow, we test how salience affects property tax rates and limits. We instrument for tax escrow using bank holding companies' national mortgage servicing assets, focusing on companies that have local branches but do most of their business outside the area. We find that a one standard deviation increase in tax escrow produces about a one standard deviation decrease in property tax rates.

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Document Object Identifier (DOI): 10.3386/w18514

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