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The Property Tax as a Tax on Value: Deadweight Loss

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Author Info
Richard Arnott ()
Petia Petrova ()

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Abstract

Consider an atomistic developer who decides when and at what density to develop his land, under a property value tax system characterized by three time-invariant tax rates: τ V , the tax rate on pre-development land value; τ S , the tax rate on post-development residual site value; and τ K , the tax rate on structure value. Arnott (2005) identified the subset of property value tax systems that are neutral. This paper investigates the relative efficiency of four idealized, non-neutral property value tax systems [(i) “Canadian'' property tax system: τ V =0, τ S =τ K ; (ii) simple property tax system: τ V =τ S =τ K ; (iii) residual site value tax system: τ K =0,τ V =τ S ; (iv) two-rate property tax system: τ V =τ S > τ K > 0] under the assumption of a constant rental growth rate. Copyright Springer Science + Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s10797-006-4938-6
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Publisher Info
Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 13 (2006)
Issue (Month): 2 (May)
Pages: 241-266
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Handle: RePEc:kap:itaxpf:v:13:y:2006:i:2:p:241-266

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Related research
Keywords: property taxation; site value taxation; land taxation; deadweight loss;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bentick, Brian L, 1979. "The Impact of Taxation and Valuation Practices on the Timing and Efficiency of Land Use," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 859-68, August. [Downloadable!] (restricted)
  2. Richard Arnott & Petia Petrova, 2002. "The Property Tax as a Tax on Value: Deadweight Loss," Boston College Working Papers in Economics 532, Boston College Department of Economics. [Downloadable!]
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  3. Brueckner, Jan K., 1980. "A vintage model of urban growth," Journal of Urban Economics, Elsevier, vol. 8(3), pages 389-402, November. [Downloadable!] (restricted)
  4. Mieszkowski, Peter, 1972. "The property tax: An excise tax or a profits tax?," Journal of Public Economics, Elsevier, vol. 1(1), pages 73-96, April. [Downloadable!] (restricted)
  5. Wheaton, William C., 1982. "Urban residential growth under perfect foresight," Journal of Urban Economics, Elsevier, vol. 12(1), pages 1-21, July. [Downloadable!] (restricted)
  6. Arnott, Richard J. & MacKinnon, James G., 1977. "The effects of the property tax: A general equilibrium simulation," Journal of Urban Economics, Elsevier, vol. 4(4), pages 389-407, October. [Downloadable!] (restricted)
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  7. Richard Arnott, 1998. "Neutral Property Taxation," Boston College Working Papers in Economics 411., Boston College Department of Economics. [Downloadable!]
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  8. Arnott, Richard J., 1980. "A simple urban growth model with durable housing," Regional Science and Urban Economics, Elsevier, vol. 10(1), pages 53-76, March. [Downloadable!] (restricted)
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  9. Wheaton, William C., 1982. "Urban spatial development with durable but replaceable capital," Journal of Urban Economics, Elsevier, vol. 12(1), pages 53-67, July. [Downloadable!] (restricted)
  10. Anas, Alex, 1978. "Dynamics of urban residential growth," Journal of Urban Economics, Elsevier, vol. 5(1), pages 66-87, January. [Downloadable!] (restricted)
  11. Braid, Ralph M., 2001. "Spatial Growth and Redevelopment with Perfect Foresight and Durable Housing," Journal of Urban Economics, Elsevier, vol. 49(3), pages 425-452, May. [Downloadable!] (restricted)
  12. Arnott, Richard J & Lewis, Frank D, 1979. "The Transition of Land to Urban Use," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 161-69, February. [Downloadable!] (restricted)
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  13. Fujita, Masahisa, 1976. "Spatial patterns of urban growth: Optimum and market," Journal of Urban Economics, Elsevier, vol. 3(3), pages 209-241, July. [Downloadable!] (restricted)
  14. McDonald, John F., 1981. "Capital-land substitution in urban housing: A survey of empirical estimates," Journal of Urban Economics, Elsevier, vol. 9(2), pages 190-211, March. [Downloadable!] (restricted)
  15. Capozza, Dennis & Li, Yuming, 1994. "The Intensity and Timing of Investment: The Case of Land," American Economic Review, American Economic Association, vol. 84(4), pages 889-904, September. [Downloadable!] (restricted)
  16. Fujita, Masahisa, 1982. "Spatial patterns of residential development," Journal of Urban Economics, Elsevier, vol. 12(1), pages 22-52, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Athiphat Muthitacharoen & George R. Zodrow, 2008. "The Efficiency Costs of Local Property Tax," International Studies Program Working Paper Series, at AYSPS, GSU paper0815, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
  2. Richard Arnott & Petia Petrova, 2006. "The Property Tax as a Tax on Value: Deadweight Loss," International Tax and Public Finance, Springer, vol. 13(2), pages 241-266, May. [Downloadable!] (restricted)
    Other versions:
  3. Jyh-Bang Jou & Tan Lee, 2008. "Neutral Property Taxation Under Uncertainty," The Journal of Real Estate Finance and Economics, Springer, vol. 37(3), pages 211-231, October. [Downloadable!] (restricted)
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