Suzi Kerr (Motu Economic & Public Policy Research) Andrew Aitken (Motu Economic & Public Policy Research) Arthur Grimes (Motu Economic & Public Policy Research)
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New Zealand is unusual in that nearly 60% of local services are funded from property taxes. These are a mixture of land taxes, capital value taxes, annual rental value taxes and uniform general charges. We explore the efficiency and equity of this system at both national and local levels. We find that the national property tax base is large relative to spending needs but that the variance in per capita tax bases across territorial local authorities is probably greater than is efficient or equitable. We find that land taxes are more progressive than capital value taxes. Our research also addresses local authorities’ ability to provide services as their property tax base changes as a result of external economic shocks. We consider the occurrence of and responses to “fiscal stress” in a system of local government that is heavily dependent on property taxation. We provide some examples of the wide range of actual responses by local councils faced with similar population changes. Finally, we offer some tentative conclusions and implications both for New Zealand local public finance and for the use of property taxes, and particularly land taxes, more broadly.
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Paper provided by EconWPA in its series Public Economics with number
0403001.
Find related papers by JEL classification: H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
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