Working Paper

The connection between house price appreciation and property tax revenues

Abstract: This paper explores two aspects of the connection between property tax revenues and house prices. First, I estimate the elasticity of property tax revenues with respect to house prices. This elasticity does not necessarily equal one as governments may adjust effective tax rates to offset changes in property values. Second, I examine the timing of the relationship. Institutional features of the property tax make it unlikely that changes in house prices will immediately influence tax revenues. The results suggest that the elasticity eventually equals 0.4 and that it takes three years for house price changes to impact tax revenues.

Keywords: Housing - Prices; Property tax;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2008

Number: 2008-48