State and Local Fiscal Policy: Implications for Property Values and Economic Growth

Previous research has examined the effect of property tax levels and related Abstract public expenditures on property values. However, a more comprehensive proposition, implied by the property rights literature and market efficiency, suggests interjurisdictional differences in taxes of all forms, not just property taxes, will be capitalized in property values. Furthermore, cross-sectional property values are expected to vary systematically with differentials in welfare program expenditures and with differentials in the extent to which tax burdens are shifted to nonresidents. Empirical results are consistent with these expectations and also provide insight into the relationship between political competition and property values and between local fiscal choices and regional growth patterns.