Nonprofit Exemptions and Homeowner Property Tax Burden

Calabrese, Thad, and Deborah A. Carroll
Public Finance and Management 12(1): 21-50.

This paper examines the question of whether there is any correlation between the prevalence of nonprofit organizations with property, plant, and equipment exempt from property taxation and the property tax burden for homeowners. Data from the Tax Foundation and Internal Revenue Service was used to analyze general-purpose local governments within larger counties (populations greater than 65,000) in the United States for years 2005 and 2006. Several econometric specifications were used to estimate homeowner property tax burden as a function of the value of nonprofit fixed assets, government tax structure characteristics, and a series of control variables. Our estimates suggest that county geographies with greater presence of nonprofits tend to have higher homeowner tax burdens on average. Specifically, the value of nonprofit tax-exempt fixed assets within a county geography that is 10% above the mean of $15.4 million is generally associated with a median property tax paid by homeowners as a % of household income that is between 0.0009% and 0.0154% above the mean or between $2 and $24 higher on average. The median property tax paid as a % of homeowner’s home value would be between 0.0006% and 0.0069% above the mean or between $3 and $12 higher on average. Overall, we find a strong, positive correlation between nonprofit fixed assets and property tax burden for homeowners at the local level.

Wagner Faculty