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The Immigration Debate: Studies on the Economic, Demographic, and Fiscal Effects of Immigration
To estimate property taxes paid by renters, we assume that taxes are capitalized in the value of rental property (Yinger, 1982) and that property taxes are passed on to renters by owners. If we conceptualize rent as payment for a stream of housing services, property taxes paid are equal to annual contract rent87 multiplied by [t/(t+i)], where t is the local equalized property tax rate and i is a discount rate, assumed in our calculation to be the average 30-year mortgage rate over the 1985–1995 period or 8 percent.88
Public Utility Gross Receipts Tax. The public utility gross receipts tax is levied on water, sewer, gas, electric, and power utilities in the state. We calculate the taxes remitted by households on an actual-use basis. We sum the ELECCOST, GASCOST, WATRCOST, and FUELCOST payments of households to arrive at total utility payments.89 We then apply the statutory tax rate, 7.5 percent to total utility payments to calculate the public utility tax paid by the household.
ACKNOWLEDGMENTS
This chapter is an expanded version of Deborah L. Garvey and Thomas J. Espenshade, "State and Local Fiscal Impacts of New Jersey's Immigrant and Native Households," in T.J. Espenshade, ed., Keys to Successful Immigration: Implications of the New Jersey Experience (Washington, D.C.: The Urban Insti-
87
Annual contract rent is defined as 12 times monthly contract rent. Monthly rent is reported as ranges in the categorical variable RENT1 in the 1990 census. We take the midpoint of each category as an estimate of monthly rent paid (Bureau of the Census, 1993:B-41).
88
We thank Robert Inman for suggesting the capitalized value approach to us. In earlier work, Espenshade and King (1994) used a different approach for estimating renters' property tax contributions. They based their calculations on New Jersey guidelines (State of New Jersey, 1990b; Public Law, 1990) and multiplied annual contract rent by 18 percent to approximate the fraction of rent payments that compensates owners for property taxes. This method and the capitalized value approach give identical results if the equalized tax rate is 1.76 percent and if the assumed discount rate is 8 percent.
89
These variables give households' annual payments for electricity, gas service, water, and home heating fuel, respectively (Bureau of the Census, 1993:B-48). We assign the mean utility cost of same-sized households to those households who reported paying utilities as part of their rent (GASCOST or WATRCOST or ELECCOST or FUELCOST = 1). Approximately 1 percent of households reported no energy consumption whatsoever (WATRCOST = FUELCOST = ELECCOST = 2). These households were assigned the mean value of same-sized households' energy expenditures.
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