Effects of Property Tax Abatements on Tax Rates and Capital Costs

Research on property tax abatements has focused mostly on the determinants of abatements, and on the effectiveness of abatements in influencing relocation, jobs, investment and other outcomes. Two questions that have not been addressed in the literature are the effect of tax abatements on tax rates, and the effect of tax abatements on capital cost savings for individual taxpayers. This paper provides the first systematic look at the effects of property tax abatements on tax rates and capital costs. Due to the high degree of variation among abatement programs in the United States, this analysis is best performed as a case study. Therefore, the effect of property tax abatement programs in Monroe County, Indiana is analyzed in this study.