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

Author

Listed:
  • Suzi Kerr

    () (Motu Economic and Public Policy Research)

  • Andrew Aitken

    () (Motu Economic and Public Policy Research)

  • Arthur Grimes

    () (Motu Economic and Public Policy Research)

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

  • Suzi Kerr & Andrew Aitken & Arthur Grimes, 2004. "Land Taxes and Revenue Needs as Communities Grow and Decline: Evidence from New Zealand," Working Papers 04_01, Motu Economic and Public Policy Research.
  • Handle: RePEc:mtu:wpaper:04_01
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    Citations

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    Cited by:

    1. Arthur Grimes & Andrew Aitken, 2004. "What's the Beef with House Prices? Economic Shocks and Local Housing Markets," Working Papers 04_08, Motu Economic and Public Policy Research.
    2. 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.
    3. Arthur Grimes & Suzi Kerr & Andrew Aitken, 2004. "Bi-Directions Impacts of Economic, Social and Environmental Changes and the New Zealand Housing Market," Working Papers 04_09, Motu Economic and Public Policy Research.
    4. David C. Maré, 2005. "Indirect Effects of Active Labour Market Policies," Working Papers 05_01, Motu Economic and Public Policy Research.
    5. Steven Stillman & David C. Maré, 2008. "Housing Markets and Migration: Evidence from New Zealand," Working Papers 08_06, Motu Economic and Public Policy Research.
    6. Arthur Grimes, 2005. "Intra & Inter-Regional Industry Shocks: A New Metric with an Application to Australasian Currency Union," Macroeconomics 0509019, EconWPA.
    7. Michelle Poland & David C Maré, 2005. "Defining Geographic Communities," Urban/Regional 0509016, EconWPA.

    More about this item

    Keywords

    New Zealand; local government; property taxes; land taxes;

    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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