Book Description

This paper investigates the financial burdens of changes in property taxes on homeowners, a margin that is not well studied in the literature. Exploiting a unique reform in Philadelphia that generated changes in property taxes across census tracts without changing the provision of public goods and services, I measure how sensitive homeowners are to increases in their property tax bills. Using a border discontinuity design, I find that a $100 increase in property taxes raises property tax delinquency by 3.9% after one year and 7.7% after two years. Home sales also increase by 4.1% after two years, but there is is no evidence of price capitalization. Further, the financial burdens vary considerably by owner race and occupancy status: White owners are more likely to recover from delinquency and sell their homes than Black and minority owners, and owner-occupied properties are more likely to undergo a sales transaction than absentee owner properties.