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The Property Tax as a Tax on Value: Deadweight Loss

  • Richard Arnott
  • Petia Petrova

Consider an atomistic developer who decides when and at what density to develop his land, under a property 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. 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 (Canadian property tax system, simple property tax system, residual site value tax system, and differentiated property tax system) under the assumption of a constant rental growth rate.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8913.

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Date of creation: Apr 2002
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Publication status: published as Arnott, Richard and Petia Petrova. "The Property Tax As A Tax On Value: Deadweight Loss," International Tax and Public Finance, 2006, v13(2-3,May), 241-266.
Handle: RePEc:nbr:nberwo:8913
Note: PE
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  1. 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.
  2. 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.
  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. Amin Kaushik & Capozza Dennis R., 1993. "Sequential Development," Journal of Urban Economics, Elsevier, vol. 34(2), pages 142-158, September.
  5. 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.
  6. Richard Arnott, 1998. "Neutral Property Taxation," Boston College Working Papers in Economics 411., Boston College Department of Economics.
  7. Wheaton, William C., 1982. "Urban residential growth under perfect foresight," Journal of Urban Economics, Elsevier, vol. 12(1), pages 1-21, July.
  8. Mills, David E., 2001. "Land value taxation," Regional Science and Urban Economics, Elsevier, vol. 31(6), pages 765-770, November.
  9. Skouras, A, 1978. "The Non-Neutrality of Land Taxation," Public Finance = Finances publiques, , vol. 33(1-2), pages 113-34.
  10. Wheaton, William C., 1982. "Urban spatial development with durable but replaceable capital," Journal of Urban Economics, Elsevier, vol. 12(1), pages 53-67, July.
  11. Anas, Alex, 1978. "Dynamics of urban residential growth," Journal of Urban Economics, Elsevier, vol. 5(1), pages 66-87, January.
  12. 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.
  13. Richard Arnott & Frank D. Lewis, 1977. "The Transition of Land to Urban Use," Working Papers 267, Queen's University, Department of Economics.
  14. 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.
  15. 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.
  16. 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.
  17. Brueckner, Jan K., 1980. "A vintage model of urban growth," Journal of Urban Economics, Elsevier, vol. 8(3), pages 389-402, November.
  18. Fujita, Masahisa, 1982. "Spatial patterns of residential development," Journal of Urban Economics, Elsevier, vol. 12(1), pages 22-52, July.
  19. Fujita, Masahisa, 1976. "Spatial patterns of urban growth: Optimum and market," Journal of Urban Economics, Elsevier, vol. 3(3), pages 209-241, July.
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