Economists have long recognized that lags in property reassessment benefit
infrequent movers because it reduces their property taxes. But in addition
reassessment lags can influence the level of property taxes selected under
majority rule. I show that short delays in community-wide reassessment incr
ease property tax collections because it reduces the tax price for a majori
ty of voters. However, longer delays reduce property tax collections becaus
e the aggregate assessed base (and thus the tax yield) declines so much. I
formally characterize the cutoff between these regimes and show tax collect
ions are generally above their socially optimal level. This theory can help
explain why many people believe property taxes are excessive, and it also
suggests that the American system of taxing capital gains at realization, r
ather than on accrual, might result in excessive rates. I test this theory
on a sample of Pennsylvania municipalities in the Philadelphia suburbs. Thi
s is a suitable crucible for such an evaluation because community-wide reas
sessments are infrequently performed in Pennsylvania. It is not possible to
reject the theory's basic predictions, and numerical estimates suggest tha
t a 5-year delay in community-wide reassessment increases government revenu
es by 6%. However, reassessment delays do not impose statistically signific
ant social losses because they benefit infrequent movers. (C) 1999 Academic
Press.