THEORY AND MEASUREMENT OF THE INCIDENCE OF DIFFERENTIAL PROPERTY TAXES ON RENTAL HOUSING

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Abstract
A recent study of incidence of differential property taxes on rental housing by Larry L. Orr presumed that if, ceteris paribus, tax differentials between communities are matched by rent differentials, tenants are bearing the burden of tax differentials. It is shown here that, in general, the relationship between tax and rent differentials tells us nothing about the incidence of tax differentials. Also, Orr's cross-section evidence of no relation between tax and rent differentials is questionable; he presupposes that cross-elasticities of demand between communities are zero and that n community effects" are fully captured in his limited set of community-characteristics variables. Time series data on a sample of communities are required to identify the incidence of property tax differentials.

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