The median voter price effect and the fiscal illusion effect both operate to place
upward pressure on property tax rates and the level of local public expenditures. These
effects reduce the degree of tax relief achieved through a state
-
funded homestead
ex
emption. The objective of this study, however, is to evaluate whether this class of
exemption effectively delivers tax relief. While shifting the vertical alignment of the
responsibility for generating revenues from local governments to the state can be
a valid
policy objective, the states that have implemented state
-
funded exemptions did so to
relieve the property tax burden for the existing level of spending, not to subsidize further