Jeune, Fred

During the past recession, house prices plummeted to record lows. However, empirical research shows that, on average, property tax revenues for local governments have not decreased. My paper will attempt to explain this paradox by arguing that an information asymmetry exists in the process used by local authorities to assess and tax private properties. I use Palm Beach County, FL as a case study to illustrate my hypothesis. This information asymmetry, characterized by the lack of transparency in the property assessment and taxation process, is exploited by local government to conceal its revenue-maximizing behavior. The analysis of this behavior, captured through the lens of the Leviathan model, allows us to uncover the moral hazard at play whereby local governments seek to maximize their revenues through ways obscure and elusive to the general public.