Distributional, tax rate, and revenue implications of property tax homestead exemptions

Abstract This paper provides a non‐technical exposition of what homestead exemptions accomplish. When homestead exemptions are not capitalized, they may result in increased tax rates. It is possible that the tax rate increases so much that eliminating exemptions could even lower the tax payment of a taxpayer who previously claimed an exemption. When we allow for full capitalization of both exemptions and tax rate changes, those who get the exemptions have no gain because the appreciation of their parcels increases their tax bill enough so that their tax payment is the same as it would have been without the exemption.