Standard models of tax incidence have no explicit public sector. For property taxes at least, this is not an innocent assumption. The local public sector is a tax-exempt sector into which capital can flow to potentially escape the burden of tax increases. Moreover, this taxexempt sector differs from typical tax-exempt sectors in incidence analysis. It grows directly with tax increases, while the taxable sectors shrink. Given this twist of reality, while at low tax rates tax increases may, for example, be borne by capital owners, at high rates the relative burden can shift increasingly to consumers.