Phuong Nguyen-Hoang and John Yinger

Abstract

The School Tax Relief Program, or STAR, in New York State provides state-funded exemptions from school property taxes. These exemptions appear on a homeowner’s property tax bill.  From 2007 to 2009, STAR supplemented these exemptions with rebates, which arrived in the form of a check in the mail.  The purpose of this paper is to determine whether these two algebraically equivalent but administratively distinct provisions led to different behavioral responses.  Drawing on the recent literature in behavioral economics, we explore the predicted impact of STAR on the demand for school quality based on the concepts of salience, complexity, and framing.  Our main results are (1) that, because of the way they are framed, the STAR rebates lead to a smaller price response than do the STAR exemptions and (2) that the administrative difference between these two provisions has little impact on the associated flypaper effects.