{"title":"Property taxation as compensation for local externalities: Evidence from large plants","authors":"Rebecca Fraenkel , Sam Krumholz","doi":"10.1016/j.jpubeco.2024.105294","DOIUrl":null,"url":null,"abstract":"<div><div>Large scale industrial plants often create broad economic benefits, but impose harms on nearby residents. When local jurisdictions have control over land use, such plants may not be built absent sufficient compensation. In this paper, we study the extent to which large plants’ property tax payments compensate for local harms and whether local governments internalize these fiscal benefits when making decisions about local industrial development. We first demonstrate that the tax base impact of plant openings are economically large, lead to increases in local expenditures and reductions in local property tax rates, and are valued by local residents. We next show suggestive evidence that limiting local jurisdictions’ access to property taxation reduces the likelihood that they will contain large industrial plants. Together, these results suggest that increases in the local tax base are an important benefit of large externality-producing projects that are valued by residents and that local governments may internalize the fiscal impact of these plants when making development decisions.</div></div>","PeriodicalId":48436,"journal":{"name":"Journal of Public Economics","volume":"243 ","pages":"Article 105294"},"PeriodicalIF":4.8000,"publicationDate":"2025-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Public Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0047272724002305","RegionNum":1,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
Large scale industrial plants often create broad economic benefits, but impose harms on nearby residents. When local jurisdictions have control over land use, such plants may not be built absent sufficient compensation. In this paper, we study the extent to which large plants’ property tax payments compensate for local harms and whether local governments internalize these fiscal benefits when making decisions about local industrial development. We first demonstrate that the tax base impact of plant openings are economically large, lead to increases in local expenditures and reductions in local property tax rates, and are valued by local residents. We next show suggestive evidence that limiting local jurisdictions’ access to property taxation reduces the likelihood that they will contain large industrial plants. Together, these results suggest that increases in the local tax base are an important benefit of large externality-producing projects that are valued by residents and that local governments may internalize the fiscal impact of these plants when making development decisions.
期刊介绍:
The Journal of Public Economics aims to promote original scientific research in the field of public economics, focusing on the utilization of contemporary economic theory and quantitative analysis methodologies. It serves as a platform for the international scholarly community to engage in discussions on public policy matters.