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The Property Tax as a Tax on Value: Deadweight Loss

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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: tv, the tax rate on pre-development land value; ts, the tax rate on post development residual site value; and tk, 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: tv=0, ts=tk ; ii) simple property tax system: tv=ts=tk ; iii) residual site value tax system:; tk=0, tv=ts; iv) differentiated property tax system: tv=ts > tk > 0] under the assumption of a constant rental growth rate.

Suggested Citation

  • 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.
    • Handle: RePEc:iep:wpidep:0203
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    Cited by:

    1. Lyytikäinen, Teemu, 2007. "The Effect of Three-rate Property Taxation on Housing Construction," Discussion Papers 419, VATT Institute for Economic Research.
    2. Caren Sureth & Ralf Maiterth, 2006. "Wealth Tax As Alternative Minimum Tax ? - the Impact of Minimum Taxation on Business Structure and Strategy -," EcoMod2006 272100093, EcoMod.
    3. Ünsal Özdilek, 2011. "An overview of the enquiries on the issue of apportionment of value between land and improvements," Journal of Property Research, Taylor & Francis Journals, vol. 29(1), pages 69-84, April.
    4. Niemann, Rainer & Sureth-Sloane, Caren, 2015. "Investment effects of wealth taxes under uncertainty and irreversibility," arqus Discussion Papers in Quantitative Tax Research 192, arqus - Arbeitskreis Quantitative Steuerlehre.
    5. Richard Arnott, 2005. "Neutral Property Taxation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(1), pages 27-50, February.
    6. Peter Englund, 2003. "Taxing Residential Housing Capital," Urban Studies, Urban Studies Journal Limited, vol. 40(5-6), pages 937-952, May.
    7. Richard Arnott & Petia Petrova, 2006. "The Property Tax as a Tax on Value: Deadweight Loss," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 13(2), pages 241-266, May.
    8. Rainer Niemann & Caren Sureth-Sloane, 2019. "Investment timing effects of wealth taxes under uncertainty and irreversibility," Journal of Business Economics, Springer, vol. 89(4), pages 385-415, June.
    9. 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.
    10. Ünsal Özdilek, 2025. "From Soil to Servers: Persistent Neglect of Land Resources and Its Looming Repetition for Users in the Digital Age," Land, MDPI, vol. 14(2), pages 1-22, February.
    11. 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.
    12. Korytin, A.V. (Корытин, А.В.) & Shatalova, Svetlana Sergeevna (Шаталова, Светлана Сергеевна), 2016. "Improving the Mechanism of Taxation of Natural Persons Property [Совершенствование Механизма Налогообложения Недвижимости Физических Лиц]," Working Papers 2331, Russian Presidential Academy of National Economy and Public Administration.
    13. 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.
    14. Jeffrey I. Chapman & Robert J. Johnston & Timothy J. Tyrrell, 2009. "Implications of a Land Value Tax with Error in Assessed Values," Land Economics, University of Wisconsin Press, vol. 85(4), pages 576-586.
    15. Lyytikäinen, Teemu, 2009. "Three-rate property taxation and housing construction," Journal of Urban Economics, Elsevier, vol. 65(3), pages 305-313, May.
    16. Vejchodská, Eliška & Barreira, Ana Paula & Auziņš, Armands & Jürgenson, Evelin & Fowles, Steven & Maliene, Vida, 2022. "Bridging land value capture with land rent narratives," Land Use Policy, Elsevier, vol. 114(C).
    17. Rainer Niemann & Caren Sureth-Sloane, 2015. "Investment Effects of Wealth Taxes under Uncertainty and Irreversibility," CESifo Working Paper Series 5610, CESifo.
    18. 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.

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    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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