Welfare Effects of Property Taxation

Max Löffler and Sebastian Siegloch ()
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Sebastian Siegloch: University of Cologne

No 331, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: We investigate the welfare implications of property taxation. We apply a sufficient statistics approach that accounts for the distributional effects of tax changes at the household level within a spatial equilibrium framework. We show that equity effects are driven by price adjustments in the housing and labor markets, while efficiency is determined by changes in public goods. Using microdata and exploiting 5,500 municipal property tax changes in Germany, where assessed housing values remain constant, we find that 83 percent of the tax burden is passed through to rental prices, with modest labor market effects. Simulations of the welfare effects of property taxes reveal that the price effects of property tax hikes are regressive. Despite the low efficiency costs of the tax, it becomes distributionally neutral only if public good preferences are very high.

Keywords: property taxation; welfare; tax incidence; local labormarkets; rental housing (search for similar items in EconPapers)
JEL-codes: H22 H41 H71 R13 R31 R38 (search for similar items in EconPapers)
Pages: 95 pages
Date: 2024-07
New Economics Papers: this item is included in nep-eur, nep-pbe, nep-pub and nep-ure
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https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_331_2024.pdf First version, 2024 (application/pdf)

Related works:
Working Paper: Welfare Effects of Property Taxation (2021)
Working Paper: Welfare Effects of Property Taxation (2021)
Working Paper: Welfare Effects of Property Taxation (2021)
Working Paper: Welfare effects of property taxation (2021)
Working Paper: Property Taxation, Local Labor Markets and Rental Housing (2015)
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