Tax Incentives for Homeownership and the Provision of Local Public Services in Low-and-Moderate Income Areas

41 Pages Posted: 10 Jun 2007

See all articles by Kelly D. Edmiston

Kelly D. Edmiston

Center for Insurance Policy & Research / NAIC; University of Kansas - School of Medicine; University of Missouri; Baker University

Kenneth Spong

Federal Reserve Bank of Kansas City

Date Written: June 2007

Abstract

There is a substantial literature that assesses the distributional impact of the mortgage interest and state and local property tax deductions and the disparate incentives for buying a home across income groups, but virtually no work exists that evaluates the secondary effect on the provision of public services in high-income vis-à-vis low-income areas. In this paper we reveal significant geographic variation in homeowner tax subsidies in the State of Missouri. We then evaluate the impact that disparate subsidies have on the provision of local public services, specifically, schools. Estimating a structural model and performing a path analysis, we find that a 100 percent increase in the average homeowner tax subsidy yields a ten percent increase in local spending per student.

Keywords: mortgage interest, property tax, school spending

JEL Classification: H24, I22, R58

Suggested Citation

Edmiston, Kelly D. and Spong, Kenneth, Tax Incentives for Homeownership and the Provision of Local Public Services in Low-and-Moderate Income Areas (June 2007). Available at SSRN: https://ssrn.com/abstract=992266 or http://dx.doi.org/10.2139/ssrn.992266

Kelly D. Edmiston (Contact Author)

Center for Insurance Policy & Research / NAIC ( email )

1100 Walnut Street
Suite 1500
Kansas City, MO 641056
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8167838067 (Phone)

HOME PAGE: http://https://www.naic.org

University of Kansas - School of Medicine ( email )

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Kansas City, KS 66160
United States

University of Missouri ( email )

Columbia, MO 65203
United States

Baker University ( email )

Baldwin City, KS
United States

HOME PAGE: http://https://www.bakeru.edu

Kenneth Spong

Federal Reserve Bank of Kansas City ( email )

Division of Bank Supervision and Structure
Kansas City, MO 64198
United States
816-881-2878 (Phone)

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