Fertility responses to local taxation

• In Event: The Economics of Fertility: Fertility Responses to Taxation, Contraception, Safety Net, and Child Care

Abstract

This study asks how fertility is impacted when local governments leverage property taxation to fund public services. In the United States, property taxation is the primary revenue instrument for local governments and is central to financing child-focused public goods. Whereas there has been much discussion regarding how stronger public provision of education and childhood services can equalize opportunities among children, far less attention has been paid to how the property tax increases essential to financing these services affect fertility – the first private investment which shapes the size and composition of the population that ultimately benefit from these services. Following Becker (1981), fertility can be understood as a consumption behavior responding to household resources and the price of childrearing inputs, such as food and housing. Lower-income households face higher effective property-tax burdens relative to income, and part of the tax incidence is consistently passed on to renters through higher housing costs (ITEP 2024); hence, property taxation may dampen consumption behavior in low-SES families more negatively. If low-SES groups respond to property taxation by reducing or delaying childbearing at higher rates, the beneficiaries of property-tax-funded programs may increasingly skew toward wealthier families. To test this hypothesis, I apply a sharp regression discontinuity (RD) design exploiting close school tax referenda in Ohio (2010–2018) to study how property tax levies affect births, both aggregately and differentially across groups by education attainment (used as proxy for SES in this paper). I choose Ohio due to unique institutional features favorable to the study purpose: Ohio has a plethora of over 2,700 school tax referenda during the study period, about half of which were new property tax levy ballots; and House Bill 920, which caps real revenue growth from existing levies through automatic millage rollbacks, creating a tight mapping between referendum outcomes and changes in effective property tax liabilities, and thus enabling elasticity estimates with respect to marginal property tax liability, apart from ITT estimates of levy passage effects. As a first step, I estimate ITT effects of new levy passage, applying the RD model on first-differenced outcomes following the recently developed Difference-in-Discontinuity approach (Grembi et al. 2016), which controls for confounding selection bias which results in pre-treatment discontinuities. Preliminary results show the ITT effect of passing a new property tax levy on overall fertility is null; however, the overall null masks significant heterogeneity in fertility response by education attainment: fertility rate among women with high-school-or-below education falls by 37% in response to levy passage whereas that among those with college-or-above education increases by 24%.

Author

• Jiayuan Wang, University of Washington
  Presenting Author