Abstract
In Pennsylvania local property taxes are collected by elected officials, known as tax collectors, whose compensation varies widely in both structure and level across municipalities. This paper analyses the existence of a pay-performance relationship for these officials. Using data on the percentage of property taxes that are actually collected at the municipal level, the paper finds that as the compensation tax collectors receive goes up, they collect more in taxes. This relationship is however true only for collectors who are compensated on a commission basis and not for collectors compensated on the basis of a flat salary.
Acknowledgments
I thank Gerald Cross of the Pennsylvania Economy League for sharing survey data on compensation of tax collectors, Sharon Bogden of the Department of General Services of Pennsylvania and Rhonda R. Newton of the Pennsylvania Heritage Foundation for help in obtaining issues of the Pennsylvania Manual, Joan Youngman of the Lincoln Institute of Land Policy for providing data on escrow, and Maya Grimm, Lily Murray, and Jyotasna Yadav for research assistance. I also thank (without implicating) Nathan Anderson, Sebastien Bradley, Suzanne Clain, Joshua Hall, Andrew Hayashi, Björn Kauder, Christopher Kilby, Xiaoxiao Li, Mario Macis, Scott Masten, Paul Oyer, Justin Ross, Jagadeesh Sivadasan, and Jeffrey Wooldridge along with seminar participants at the University of Michigan, the American Economic Association Annual Meeting, the International Institute of Public Finance Annual Congress, the National Tax Association Conference, and the Society of Labor Economists Annual Meeting for comments. All links were current as of May 6th 2021. Results from additional specifications described in the text but not included in the paper are available in the Online Appendix.
References
Ariely, D., A. Bracha, and S. Meier. 2009. “Doing Good or Doing Well? Image Motivation and Monetary Incentives in Behaving Prosocially.” The American Economic Review 99 (1): 544–55. https://doi.org/10.1257/aer.99.1.544.Search in Google Scholar
Barro, R. 1973. “The Control of Politicians: An Economic Model.” Public Choice 14: 19–42. https://doi.org/10.1007/bf01718440.Search in Google Scholar
Becker, G. S., and G. J. Stigler. 1974. “Law Enforcement, Malfeasance, and Compensation of Enforcers.” The Journal of Legal Studies 3 (1): 1–18. https://doi.org/10.1086/467507.Search in Google Scholar
Besley, T. 2004. “Paying Politicians: Theory and Evidence.” Journal of the European Economic Association 2 (2-3): 193–215. https://doi.org/10.1162/154247604323067925.Search in Google Scholar
Besley, T., and S. Coate. 2003. “Elected versus Appointed Regulators: Theory and Evidence.” Journal of the European Economic Association 1 (5): 1176–206. https://doi.org/10.1162/154247603770383424.Search in Google Scholar
Braendle, T. 2015. “Does Remuneration Affect the Discipline and the Selection of Politicians? Evidence from Pay Harmonization in the European Parliament.” Public Choice 162 (1-2): 1–24. https://doi.org/10.1007/s11127-014-0184-0.Search in Google Scholar
Brennan, G., and J. M. Buchanan. 1980. The Power to Tax. Cambridge: Cambridge University Press.Search in Google Scholar
Di Tella, R., and Fisman, R. 2004. “Are Politicians Really Paid like Bureaucrats?” The Journal of Law and Economics 47 (2): 477–513. https://doi.org/10.1086/422983.Search in Google Scholar
Ferejohn, J. 1986. “Incumbent Performance and Electoral Control.” Public Choice 50 (1-3): 5–25. https://doi.org/10.1007/bf00124924.Search in Google Scholar
Ferraz, C., and F. Finan, “Motivating Politicians: The Impacts of Monetary Incentives on Quality and Performance,” In Working Paper, 2011.10.3386/w14906Search in Google Scholar
Ferry, J. 1991. Changes Planned for Tax Office. Philadelphia, PA: Philadelphia Inquirer.Search in Google Scholar
Fisman, R., N. Harmon, E. Kamenica, and I. Munk. 2015. “Labor Supply of Politicians.” Journal of the European Economic Association 13 (5): 871–905. https://doi.org/10.1111/jeea.12141.Search in Google Scholar
Gagliarducci, S., and T. Nannicini. 2013. “Do Better Paid Politicians Perform Better? Disentangling Incentives from Selection.” Journal of the European Economic Association 11 (2): 369–98. https://doi.org/10.1111/jeea.12002.Search in Google Scholar
Gneezy, U., and A. Rustichini. 2000. “Pay Enough or Don’t Pay at All.” Quarterly Journal of Economics 115 (3): 791–810. https://doi.org/10.1162/003355300554917.Search in Google Scholar
Hayashi, A. T. 2014. “The Legal Salience of Taxation.” University of Chicago Law Review 81 (4): 1443–507.10.2139/ssrn.2151867Search in Google Scholar
Holmstrom, B., and P. Milgrom. 1991. “Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design.” Journal of Law, Economics, and Organization 7 (Special Issue): 24–52. https://doi.org/10.1093/jleo/7.special_issue.24.Search in Google Scholar
Khan, A. Q., A. I. Khwaja, and B. A. Olken. 2016. “Tax Farming Redux: Experimental Evidence on Performance Pay for Tax Collectors.” Quarterly Journal of Economics 131 (1): 219–71. https://doi.org/10.1093/qje/qjv042.Search in Google Scholar
Legislative Budget and Finance Committee. 2011. Pennsylvania’s Current Real Property Tax Collection System. http://lbfc.legis.state.pa.us/Resources/Documents/Reports/400.pdf.Search in Google Scholar
Makowsky, M., and S. Sanders. 2013. “Political Costs and Fiscal Benefits: The Political Economy of Residential Property Value Assessment under Proposition 212$2\frac{1}{2}$.” Economics Letters 120 (3): 359–63. https://doi.org/10.1016/j.econlet.2013.05.010.Search in Google Scholar
Mikesell, J. L., and C. Liu. 2011. “Property Tax Stability: A Tax System Model of Base and Revenue Dynamics through the Great Recession and Beyond.” Public Finance and Management 13 (4): 310–34.10.1177/152397211301300403Search in Google Scholar
Mocan, N. H., and D. T. Altindag. 2013. “Salaries and Work Effort: An Analysis of the European Union Parliamentarians.” Economic Journal 123 (573): 1130–67. https://doi.org/10.1111/ecoj.12056.Search in Google Scholar
Parrillo, N. R. 2013. Against the Profit Motive: The Salary Revolution in American Government, 1780–1940. New Haven, CT: Yale University Press.10.12987/yale/9780300176582.001.0001Search in Google Scholar
Ross, M. J. 2011. “Assessor Incentives and Property Assessment.” Southern Economic Journal 77 (3): 776–94. https://doi.org/10.4284/sej.2011.77.3.776.Search in Google Scholar
Shapiro, C., and J. Stiglitz. 1984. “Equilibrium Unemployment as a Worker Discipline Device.” The American Economic Review 74 (3): 433–44.10.1017/CBO9780511559594.004Search in Google Scholar
Stone, W. J., S. A. Fulton, C. D. Maestas, and L. Sandy Maisel. 2010. “Incumbency Reconsidered: Prospects, Strategic Retirement, and Incumbent Quality in U.S. House Elections.” The Journal of Politics 72 (1): 178–90. https://doi.org/10.1017/s0022381609990557.Search in Google Scholar
Whalley, A. 2013. “Elected versus Appointed Policy Makers: Evidence from City Treasurers.” The Journal of Law and Economics 56 (1): 39–81. https://doi.org/10.1086/668696.Search in Google Scholar
White, E. N. 2004. “From Privatized to Government-Administered Tax Collection: Tax Farming in Eighteenth-Century France.” The Economic History Review 57 (4): 636–63. https://doi.org/10.1111/j.1468-0289.2004.00291.x.Search in Google Scholar
Wooldridge, J. M. 2002. Econometric Analysis of Cross Section and Panel Data. Cambridge, MA: MIT Press.Search in Google Scholar
Zelle, K. 2019. “Part-Time Government.” Ohio State Law Journal 80 (5): 987–1053.Search in Google Scholar
Supplementary Material
The online version of this article offers supplementary material (https://doi.org/10.1515/bejeap-2020-0008).
© 2021 Walter de Gruyter GmbH, Berlin/Boston
Articles in the same Issue
- Frontmatter
- Research Articles
- Media Capture and Bias in the Market for News
- Adaptation and Loss Aversion in the Relationship Between GDP and Subjective Well-Being
- Racial Disparity in COVID-19 Deaths: Seeking Economic Roots with Census Data
- Can Targeted Child Benefits Affect Fertility? Evidence from a Natural Experiment
- Does the Strength of Incentives Matter for Elected Officials? A Look at Tax Collectors
- Setting the Budget for Targeted Research Projects
- Can Unconditional In-Kind Transfers Keep Children Out of Work and in School? Evidence from Indonesia
- Anti-Mafia Law Enforcement and Lending in Mafia Lands. Evidence from Judicial Administration in Italy
- The Gender Wage Gap among Ph.D. Holders: Evidence from Italy
- Letters
- Political Budget Cycle, Tax Collection, and Yardstick Competition
- Impacts of Jobs Requiring Close Physical Proximity and High Interaction with the Public on U.S. Industry Employment Change During the Early Stages of the COVID-19 Pandemic
- Quality, Location and Collusion under Spatial Price Discrimination
Articles in the same Issue
- Frontmatter
- Research Articles
- Media Capture and Bias in the Market for News
- Adaptation and Loss Aversion in the Relationship Between GDP and Subjective Well-Being
- Racial Disparity in COVID-19 Deaths: Seeking Economic Roots with Census Data
- Can Targeted Child Benefits Affect Fertility? Evidence from a Natural Experiment
- Does the Strength of Incentives Matter for Elected Officials? A Look at Tax Collectors
- Setting the Budget for Targeted Research Projects
- Can Unconditional In-Kind Transfers Keep Children Out of Work and in School? Evidence from Indonesia
- Anti-Mafia Law Enforcement and Lending in Mafia Lands. Evidence from Judicial Administration in Italy
- The Gender Wage Gap among Ph.D. Holders: Evidence from Italy
- Letters
- Political Budget Cycle, Tax Collection, and Yardstick Competition
- Impacts of Jobs Requiring Close Physical Proximity and High Interaction with the Public on U.S. Industry Employment Change During the Early Stages of the COVID-19 Pandemic
- Quality, Location and Collusion under Spatial Price Discrimination