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Land Taxes and Revenue Needs as Communities Grow and

Author

Listed:
  • Suzi Kerr

    (Motu Economic & Public Policy Research)

  • Andrew Aitken

    (Motu Economic & Public Policy Research)

  • Arthur Grimes

    (Motu Economic & 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," Public Economics 0403001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwppe:0403001
    Note: Type of Document - pdf; prepared on word 2000; to print on pc;
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/pe/papers/0403/0403001.pdf
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    References listed on IDEAS

    as
    1. David C Mare & Peter Mawson & Jason Timmins, 2001. "Deprivation in New Zealand: Regional Patterns and Changes," Treasury Working Paper Series 01/09, New Zealand Treasury.
    2. Arthur Grimes & Suzi Kerr & Andrew Aitken, 2003. "Housing and Economic Adjustment," Working Papers 03_09, Motu Economic and Public Policy Research.
    3. Suzi Kerr & Jason Timmins, 2000. "Economic Geography and Spatial Statistics: Theory and Empirics of New Zealand Regions," Treasury Working Paper Series 00/11, New Zealand Treasury.
    4. Suzie Ballantyne & Simon Chapple & David C. Maré & Jason Timmins, 2003. "Movements Into and Out of Child Poverty in New Zealand: Results from the Linked Income Supplement," Working Papers 03_13, Motu Economic and Public Policy Research.
    5. Fisher, Ronald C., 1982. "Income and grant effects on local expenditure: The flypaper effect and other difficulties," Journal of Urban Economics, Elsevier, vol. 12(3), pages 324-345, November.
    6. Suzi Kerr & Dave Maré & William Power & Jason Timmins, 2001. "Internal Mobility in New Zealand," Treasury Working Paper Series 01/04, New Zealand Treasury.
    7. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    8. Jorgenson, Dale W & Yun, Kun-Young, 1990. "Tax Reform and U.S. Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 151-193, October.
    9. Gamkhar, Shama & Oates, Wallace E., 1996. "Asymmetries in the Response to Increases and Decreases in Intergovernmental Grants: Some Empirical Findings," National Tax Journal, National Tax Association, vol. 49(4), pages 501-12, December.
    10. Shama Gamkhar & Wallace Oates & Shama Gamkhar & Wallace Oates, 2004. "Asymmetries in the Response to Increases and Decreases in Intergovernmental Grants: Some Empirical Findings," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 15, pages 261-272, Edward Elgar Publishing.
    11. Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-360, April.
    12. W. Erwin Diewert & Denis A. Lawrence, 1996. "The Deadweight Costs of Taxation in New Zealand," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 658-673, April.
    13. Suzi Kerr & Megan Claridge & Dominic Milicich, 1998. "Devolution and the New Zealand Resource Management Act," Treasury Working Paper Series 98/07, New Zealand Treasury.
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    Cited by:

    1. 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.
    2. Steven Stillman & David C. Maré, 2008. "Housing Markets and Migration: Evidence from New Zealand," Working Papers 08_06, Motu Economic and Public Policy Research.
    3. 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.

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    More about this item

    Keywords

    New Zealand; local government; property taxes; land taxes;
    All these keywords.

    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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