Welfare Effects of Property Taxation

Löffler, Max and Sebastian Siegloch
Authors registered in the RePEc Author Service: Max Löffler

No 15927, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We investigate the welfare implications of property taxation. We develop a sufficient statistics approach within a spatial equilibrium framework that accounts for the distributional effects of tax changes at the household level. We show that equity effects are driven by price adjustments in the housing and labor markets, while efficiency enters via 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. Accounting for local public goods can partially neutralize the distributional effects of the tax if public good preferences are high.

Keywords: Property taxation; Welfare; Tax incidence; Local labor markets; Rental housing (search for similar items in EconPapers)
JEL-codes: H22 H41 H71 R13 R31 R38 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-eur, nep-geo, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Welfare Effects of Property Taxation (2024)
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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