Renter illusion: fact or fiction?
The renter illusion hypothesis holds that renters underestimate their property tax burden and therefore support excessive levels of local expenditure. A number of studies have reached results that are consistent with the hypothesis. But so far empirical investigations have proceeded from the assumption that renter illusion is a fact and have investigated the implications of this fact. No-one has investigated renter illusion as such. In other areas of fiscal illusion, survey analyses of voter perceptions have yielded considerable insight into the validity of illusionary hypotheses. This paper follows this method and investigates a representative sample of 1000 Danish renters' and home-owners' perception of the local property tax system. The evidence raises doubts about the renter illusion hypothesis. The survey findings are corroborated by an analysis of property taxation in Danish municipalities.