Who supports portable assessment caps: The role of lock-in, mobility and tax share

a r t i c l e i n f o JEL classification: H71 R23 Keywords: Property tax Voting Assessment cap Lock-in Mobility Local public finance Local political economy Popular support for property assessment caps has been explained as attempts to protect long-time home owners and to constrain local public expenditures. However, in the absence of a binding cap on millage rates, an assessment limit simply lowers the tax share of low-mobility homeowners at the expense of high-mobility homeowners. A recent amendment in Florida made existing exemptions portable, lowering the tax share of high mobility households and raising the tax share of low mobility households. Examining vote share by precinct, we find that more mobile households support portability but that precincts with larger exemptions do not. We also find evidence that voters understood how the amendment impacts their tax share. Support for portability is higher when a city has many out-of-state and thus " exemption-less " immigrants and support is lower when mobility in the rest of the tax jurisdiction is high. These findings suggest that voters alter assessment rules to minimize their own tax share. Since California voters' approval of Proposition 13 in 1978, fifteen states have limited the growth in property assessments (Hoyt et al., 2009). The tax protection afforded by such caps may induce households to over-stay in their current home 1 If housing match quality diminishes over time, then this " lock-in " effect from assessment caps will generate an aggregate welfare loss (O'Sullivan et al., 1995, 1999) and could induce additional construction at the urban fringe (Wassmer, 2008). The leading explanations for popular support for property assessment caps are that they are intended to constrain local public expenditures or to protect long-time home owners. 2 However, in Florida, where an assessment cap has been in place since 1995, few cities have tax rates near the cap, discounting the first hypothesis. Then in 2008, voters passed a novel amendment to make the existing exemption portable, calling the second hypothesis into question and providing the subject for our empirical analysis. (1997) does not find an effect on mobility. 2 When combined with a cap on millage rates, an assessment cap can significantly reduce local revenues and expenditures (Downes, 1992; Figlio, 1997). Voters may support these limitations because they believe they will improve local government efficiency rather than reduce public services In addition, voters' estimation of government efficiency …