Revisiting property tax capitalization

Xueying Lyu

Regional Science and Urban Economics, 2024, vol. 108, issue C

Abstract: This paper investigates the extent of property tax capitalization in the context of a progressive property tax pilot in Shanghai. I utilize a difference-in-differences approach by comparing neighborhoods with different tax rates before and after the implementation of the property taxes. Neighborhoods with a 0.2 percentage point higher marginal property tax rate experience a roughly 2.73% decrease in housing prices relative to their counterparts. The result reflects that at least 71% of expected property tax liabilities are capitalized into housing prices in a year. These changes also imply a large wealth redistribution as large as 2.68 years of average disposable income across homeowners.

Keywords: Property taxes; Housing prices; Capitalization (search for similar items in EconPapers)
JEL-codes: D12 H71 R21 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:108:y:2024:i:c:s016604622400070x

DOI: 10.1016/j.regsciurbeco.2024.104039

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