Variations in public services and tax rates among communities may cause property values to vary, a concept referred to by economists as capitalization. The purpose of this booklet is to describe and evaluate the implications of capitalization primarily for school finance changes and secondarily for property tax changes. Section 1 describes the conditions necessary for capitalization and the process of capitalization itself. Section 2 presents several theories discussed in the literature and several studies that have measured the magnitude of capitalization. Section 3 analyzes both the short- and long-term capitalization effects of specific changes in state aid with attention to aid for public schools. The appendix offers an annotated bibliography. (Author/LD)