Is Property Tax a Benefit Tax? The Case of Japanese Regions (in Japanese)

Tomomi Miyazaki and Motohiro Sato

Economic Analysis, 2011, vol. 184, 101-118

Abstract: This paper examines whether or not the property tax in Japan functions as a benefit tax through the empirical investigation and simulation. The simulation given the current Japanese local public financial system reveals that while the property tax is a benefit tax for the residents (or the consumers of rental housing market), it is not so for the landlords (or the supplier of rental housing market). One of the reasons is that all of the local public services do not necessarily capitalize because the property tax revenue is not perfectly linked with public service under the current Japanese local tax system, which does not give local governments latitude on levying taxes. Therefore, we simulate the case which is assumed to have perfect linkage between local property tax revenue and public service. It is then established that the property tax becomes also a benefit tax for landlords if local governments are given the latitude on levying taxes. Moreover, comparing the results among regions, the property tax tends to function as a property tax in the urban area in both cases To sum up, the benefit view of property tax does not apply to landlords under the current system in Japan. The property tax, however, can turn to be a benefit tax once fiscal decentralization proceeds so that local governments are more fiscally responsible for own expenditures that generates clear linkage between the public services and the property tax burden.

Date: 2011
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