THE INCIDENCE OF INTER-JURISDICTIONAL DIFFERENCES IN COMMERCIAL PROPERTY TAXES

Abstract

Within a metropolitan area, differences in commercial property tax rates between towns, can be borne by either property users (tenants) or property (land) owners. The former (latter) case occurs when the spatial demand for property is price inelastic (elastic). Using data on office buildings, hedonic rent equations are estimated, incorporating among other variables, taxes or tax rates. Across a number of different statistical specifications, the tax variables never have a significant impact on gross rents. This suggests that land or property owners bear the burden of interjurisdictional tax differences, and that these in turn may have substantial resource allocation effects.

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