Property Taxation and Local Government Finance.

William E. Oates, editor

Cambridge, Massachusetts: Lincoln Institute of Land Policy (345 pp.)

Reviewed by Brian Flahaven, policy analyst, GFOA Research and Consulting Center, Chicago, Illinois.

Over the past 30 years, the property tax has been the subject of intense criticism and major reform. When citizens grumbled that their property tax rates were too high or subjectively assessed, many states enacted property tax limitation legislation. When older Americans complained that rising property taxes unduly burdened those with fixed incomes, states developed circuit breaker and homestead exemption policies to assist them with property tax payments. Faced with court-ordered reform of property tax-based school funding systems, a number of states have dispensed additional state revenue directly to school districts.

Property Taxation and Local Government Finance is an effort to "rehabilitate local property taxation." Edited by Wallace E. Oates of the University of Maryland, the book consists of papers that discuss issues ranging from the economics of the property tax to the policy implications of the aforementioned reform measures. It is the result of a 2000 Lincoln Foundation conference of the same title. Books that compile papers or discussions from conferences sometimes end up as an agglomeration of chapters lacking coherent focus or order. For the most part, however, this book succeeds in maintaining coherency across its 12 chapters.

Oates' overview chapter outlines both the theoretical and practical issues addressed in the subsequent chapters, appropriately weaving the papers into the discussion. The book flows nicely from chapters on the competing theoretical views of the property tax to chapters on the various policy implications of the tax. The one exception is John Wallis' chapter on the history of the property tax in the United States, which, although informative, seems out of place. Since the Wallis chapter presents a good overview of the issue in a historical context, placing it before the chapters on theory would have been a better fit.

Theoretical issues dominate the first part of the book. Chapters by William Fischel and George Zodrow discuss the benefit view and "new" view of the property tax, respectively. Fischel argues that the property tax does not lead to inefficient outcomes because local decisions are capitalized into housing values. Assuming ...