Property Tax Exportation and Its Effects on Local Business Establishments: The Case of Massachusetts Municipalities

This empirical study describes property tax exportation to business properties in Massachusetts and investigates its effects on the location of private establishments. The author uses panel econometric techniques on 351 incorporated municipalities from 2001 to 2006. The results suggest that the level and relative share of property tax levied on businesses have a negative impact on their establishments. The rise in the share of tax levy on businesses by 50 percentage points relative to their share of assessed value could result in 5 fewer business establishments and 60 fewer private goods-producing industry jobs. Preliminary analysis also indicates that such a tax-exporting policy may be desirable from a revenue perspective, but the substantial loss in business activity should be considered.