Taxation without representation: Four essays in local public finance

Owners of vacation homes pay local property taxes, yet cannot vote on local referenda. From the standpoint of full-time residents, significant numbers of vacation homes reduce the real costs of public spending, since vacation home owners contribute to the local tax base but consume very few public services. Owners of vacation homes fear that local spending and therefore tax rates might be higher as a result of the incentives thereby created. Cross-sectional analysis of data from several states confirms that communities with high concentrations of vacation homes face lower tax rates yet spend more per permanent resident than do other communities. A one-time change in Minnesota tax assessments of vacation property in 1996 affords the opportunity to identify further the effect of vacation property on local spending and tax rates by comparing spending patterns before and after the change. The results suggest that a one percent increase in the concentration of vacation homes in local tax base is associated with a 0.48% increase in per capita spending. This result is in line with previous estimates of the effect of real prices on state and local expenditure, and suggests that fiscal policies are significantly affected by the composition of the tax base.; In a two-community model with free mobility, public expenditures set by majority voting, permanent residents of different income levels, and vacation home owners, it is shown that the presence of vacation homes in poor communities can allow for these communities to increase their level of service provision and that these increases are pareto improving. Relatively wealthy districts, however, are sometimes unable to use tax exporting to increase their service provision.; Differences in local tax rates may distort the location decisions of individuals since effective tax rates depend on location. The deadweight loss of the local income tax in Ohio is examined. The results demonstrate that due to the high uniformity and small magnitude of local income tax rates across municipalities the measured locational excess burden is quite small. However, it can eclipse the efficiency costs due to labor supply distortions by over 100%.