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The Property Tax as a Tax on Value: Deadweight Loss

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  • Richard Arnott

    ()
    (Boston College)

  • Petia Petrova

    ()
    (Boston College)

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: the tax rate on pre-development land value; the tax rate on post- development residual site value; and the tax rate on structure value. Arnott (2002) identified the subset of property value tax systems which are neutral. This paper investigates the relative efficiency of four idealized, non-neutral property value tax systems (i) Canadian property tax system; (ii) simple property tax system; (iii)residual site value tax system;( iv) differentiated property tax system under the assumption of a constant rental growth rate.

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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 532.

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Length: 41 pages
Date of creation: 02 Jan 2002
Date of revision:
Handle: RePEc:boc:bocoec:532

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

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References

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  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.
  2. Wheaton, William C., 1982. "Urban residential growth under perfect foresight," Journal of Urban Economics, Elsevier, vol. 12(1), pages 1-21, July.
  3. 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.
  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. Mills, David E., 2001. "Land value taxation," Regional Science and Urban Economics, Elsevier, vol. 31(6), pages 765-770, November.
  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. Fujita, Masahisa, 1976. "Spatial patterns of urban growth: Optimum and market," Journal of Urban Economics, Elsevier, vol. 3(3), pages 209-241, July.
  8. Richard Arnott, 1998. "Neutral Property Taxation," Boston College Working Papers in Economics 411., Boston College Department of Economics.
  9. 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.
  10. 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.
  11. Brueckner, Jan K., 1980. "A vintage model of urban growth," Journal of Urban Economics, Elsevier, vol. 8(3), pages 389-402, November.
  12. Richard Arnott & Frank D. Lewis, 1977. "The Transition of Land to Urban Use," Working Papers 267, Queen's University, Department of Economics.
  13. Fujita, Masahisa, 1982. "Spatial patterns of residential development," Journal of Urban Economics, Elsevier, vol. 12(1), pages 22-52, July.
  14. 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.
  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.
  16. Wheaton, William C., 1982. "Urban spatial development with durable but replaceable capital," Journal of Urban Economics, Elsevier, vol. 12(1), pages 53-67, July.
  17. Anas, Alex, 1978. "Dynamics of urban residential growth," Journal of Urban Economics, Elsevier, vol. 5(1), pages 66-87, January.
  18. Skouras, A, 1978. "The Non-Neutrality of Land Taxation," Public Finance = Finances publiques, , vol. 33(1-2), pages 113-34.
  19. Amin Kaushik & Capozza Dennis R., 1993. "Sequential Development," Journal of Urban Economics, Elsevier, vol. 34(2), pages 142-158, September.
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Citations

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Cited by:
  1. 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.
  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. 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.
  4. 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.
  5. 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.
  6. 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.

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