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Property Tax and Property Values: Evidence from the 2012 Italian Tax Reform

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Abstract

This paper assesses the extent to which property taxes are capitalized into property values, exploiting the 2012 Italian tax reform. Municipal-level variation in the level of the property tax rates is instrumented using the exogenous staggered timing of local elections. We show that the incumbent local governments with upcoming elections in 2013 shifted the composition of fiscal revenues towards lower property tax. Our 2SLS estimate shows that a one standard deviation increase in municipal-level property tax intensity leads to a 2.7% reduction of municipal property values in the year of the reform. We elicit information on the characteristics of the compliers and show that these municipalities feature inefficient public spending and low social capital. JEL Classification:

Suggested Citation

  • Tommaso Oliviero & Annalisa Scognamiglio, 2016. "Property Tax and Property Values: Evidence from the 2012 Italian Tax Reform," CSEF Working Papers 439, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 12 Mar 2018.
  • Handle: RePEc:sef:csefwp:439
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    Cited by:

    1. Isaiah Hull & Anna Grodecka-Messi, 2022. "Measuring the Impact of Taxes and Public Services on Property Values: A Double Machine Learning Approach," Papers 2203.14751, arXiv.org.
    2. Chengrui Xiao & Bo Zhou, 2023. "Property taxes and rental housing: Evidence from China," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(4), pages 931-958, July.
    3. Edoardo Di Porto & Tommaso Oliviero & Annalisa Tirozzi, 2021. "The economic effects of immovable property taxation: A review of the Italian experience," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2021(1), pages 25-43.

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    More about this item

    Keywords

    Real estate values; Property tax capitalization; Political budget cycle.;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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