Is the Property Tax a Benefit Tax? The Case of Rental Housing

Is the property tax a benefit tax? This paper tests the benefit-tax hypothesis for rental housing. In the case most favorable to this hypothesis, namely with mobile tenants, relatively high property taxes cannot be directly reflected in rents but can be indirectly reflected to the extent that they lead to relatively high-quality public services. This indirect shining equals tenants' willingness to pay for the public service increment. Even in this case, however, the property tax is not a benefit tax unless the tax rate is set so indirect shining equals a landlord's tax increase. This second condition is not met in the Boston area in 1980; on average, indirect shining covers only about $0.11 of a $1.00 increase in property taxes.