Center for Policy Research
Property Tax Web Series
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I study how downside protection for local property tax revenue affects local governments’ ability to commit to bondholders, and in turn their borrowing costs and human capital investment.
To identify these effects, I exploit statewide regulations that limit declines in the property tax revenue of school districts, but not of counties. Using a staggered difference-in-differences estimation, I find that these regulations increase school district bond issuance by 4% and decrease the school district bond yield spreads by 13 basis points compared to unprotected school districts and counties.
Protection could encourage wasteful spending and generate moral hazard problems. However, I find that these regulations improve educational outcomes rather than encouraging wasteful spending, as evidenced by lower student dropout rates and higher teacher salaries in protected school districts. These benefits for school districts come at the expense of counties, showing an increase in county borrowing costs.
This paper was presented by Yunjoo An (Indiana University) on May 8, 2026 as part of the 2025-2026 Syracuse-Chicago Webinar Series on Property Tax Administration and Design. Justin Ross (Indiana University Bloomington) was the discussant for this presentation.
This Syracuse-Chicago Webinar Series on Property Tax Administration and Design aims to gather insight and scholarship through domestic and international comparative studies with common threads to help reform and improve property tax administration and design in the U.S. and other countries facing similar problems.
For questions about the webinars, please contact Heidi Perry. For questions about this paper, please contact the author or authors.