Property Tax Strategic Interaction: A Test of Tax Versus Yardstick Competition

Abstract

This study uses county-level property tax data to assess alternative theories for government interaction in setting tax rates. Tests of the two theories, tax competition and yardstick competition, incorporate data for both mobile and immobile property. Using spatial econometrics, results show a statistically significant, positive effect of neighbor rates on local rates for mobile property, consistent with both forms of competition. However, similar statistically significant positive effects for immobile property are consistent only with yardstick competition. The results have implications for decision making in the competitive environment government authorities face.

Citation

Key, K.G. (2012), "Property Tax Strategic Interaction: A Test of Tax Versus Yardstick Competition", Stock, T. (Ed.) Advances in Taxation (Advances in Taxation, Vol. 20), Emerald Group Publishing Limited, Leeds, pp. 181-201. https://doi.org/10.1108/S1058-7497(2012)0000020010