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The Property Tax as a Tax on Value: Deadweight Loss

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  • Richard Arnott

    ()

  • Petia Petrova

    ()

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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Bibliographic 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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Web page: http://www.springerlink.com/link.asp?id=102915

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

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References

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  1. 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.
  2. Fujita, Masahisa, 1982. "Spatial patterns of residential development," Journal of Urban Economics, Elsevier, vol. 12(1), pages 22-52, July.
  3. Richard Arnott, 2005. "Neutral Property Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(1), pages 27-50, 02.
  4. 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.
  5. Amin Kaushik & Capozza Dennis R., 1993. "Sequential Development," Journal of Urban Economics, Elsevier, vol. 34(2), pages 142-158, September.
  6. 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.
  7. Richard Arnott & James G. MacKinnon, 1976. "The Effects of the Property Tax: A General Equilibrium Simulation," Working Papers 205, Queen's University, Department of Economics.
  8. Fujita, Masahisa, 1976. "Spatial patterns of urban growth: Optimum and market," Journal of Urban Economics, Elsevier, vol. 3(3), pages 209-241, July.
  9. 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.
  10. 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.
  11. Anas, Alex, 1978. "Dynamics of urban residential growth," Journal of Urban Economics, Elsevier, vol. 5(1), pages 66-87, January.
  12. Skouras, A, 1978. "The Non-Neutrality of Land Taxation," Public Finance = Finances publiques, , vol. 33(1-2), pages 113-34.
  13. 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.
  14. 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.
  15. Wheaton, William C., 1982. "Urban spatial development with durable but replaceable capital," Journal of Urban Economics, Elsevier, vol. 12(1), pages 53-67, July.
  16. Brueckner, Jan K., 1980. "A vintage model of urban growth," Journal of Urban Economics, Elsevier, vol. 8(3), pages 389-402, November.
  17. 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.
  18. Mills, David E., 2001. "Land value taxation," Regional Science and Urban Economics, Elsevier, vol. 31(6), pages 765-770, November.
  19. Wheaton, William C., 1982. "Urban residential growth under perfect foresight," Journal of Urban Economics, Elsevier, vol. 12(1), pages 1-21, July.
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Citations

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Cited by:
  1. Richard Arnott & Petia Petrova, 2002. "The Property Tax as a Tax on Value: Deadweight Loss," IDEP Working Papers 0203, Institut d'economie publique (IDEP), Marseille, France, revised Apr 2002.
  2. Teemu Lyytikäinen, 2007. "The Effect of Three-rate Property Taxation on Housing Construction," Discussion Papers 419, Government Institute for Economic Research Finland (VATT).
  3. Sims, Katharine R.E. & Schuetz, Jenny, 2009. "Local regulation and land-use change: The effects of wetlands bylaws in Massachusetts," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 409-421, July.
  4. Caren Sureth & Ralf Maiterth, 2008. "The impact of minimum taxation by an imputable wealth tax on capital budgeting and business strategy of German companies," Review of Managerial Science, Springer, vol. 2(2), pages 81-110, July.
  5. Athiphat Muthitacharoen & George R. Zodrow, 2008. "The Efficiency Costs of Local Property Tax," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0815, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  6. 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.

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