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Land Taxes and Revenue Needs as Communities Grow and Decline: Evidence from New Zealand

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  • Kerr, Suzi
  • Aitken, Andrew
  • Grimes, Arthur

Abstract

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.

Suggested Citation

  • Kerr, Suzi & Aitken, Andrew & Grimes, Arthur, 2004. "Land Taxes and Revenue Needs as Communities Grow and Decline: Evidence from New Zealand," Motu Working Papers 292982, Motu Economic and Public Policy Research.
    • Handle: RePEc:ags:motuwp:292982
    DOI: 10.22004/ag.econ.292982
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    2. Grimes, Arthur & Kerr, Suzi & Aitken, Andrew, 2004. "Bi-Directional Impacts of Economic, Social and Environmental Changes and the New Zealand Housing Market," Motu Working Papers 292986, Motu Economic and Public Policy Research.
    3. Grimes, Arthur & Aitken, Andrew, 2004. "What’s the Beef with House Prices? Economic Shocks and Local Housing Markets," Motu Working Papers 292995, Motu Economic and Public Policy Research.
    4. David C. Maré & Michelle Poland, 2005. "Defining Geographic Communities," Motu Working Papers 05_09, Motu Economic and Public Policy Research.
    5. Mare, David, 2005. "Indirect Effects of Active Labour Market Policies," Motu Working Papers 292900, Motu Economic and Public Policy Research.
    6. Grimes, Arthur, 2005. "Regional and industry cycles in Australasia: Implications for a common currency," Journal of Asian Economics, Elsevier, vol. 16(3), pages 380-397, June.
    7. Stillman, Steven & Maré, David C., 2008. "Housing Markets and Migration: Evidence from New Zealand," Motu Working Papers 292651, Motu Economic and Public Policy Research.
    8. Arthur Grimes, 2006. "Intra & inter-regional industry shocks: A new metric with application to Australasian currency union," New Zealand Economic Papers, Taylor & Francis Journals, vol. 40(1), pages 23-44.

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    Keywords

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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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