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This paper measures tax multipliers using the property tax, which is the closest
real-world counterpart to a lump-sum tax. This allows us to test for Ricardian
equivalence and to isolate the demand-side component of tax multipliers. For
identification, we use more than 100 exogenous property tax changes in advanced
economies isolated through the narrative record, as well as structural VAR approaches
that include more than 1,000 tax changes. We find, using both types of
methods—independently—that tax multipliers are between 2 and 3, in line with
a growing consensus in the literature. This contradicts Ricardian equivalence,
and questions models that predict large tax multipliers only for distortionary tax
changes. The effects are persistent, which implies that aggregate demand shocks
can have long-term effects.
