Tax Housing or Land? Distributional Effects of Property Taxation in Germany

Rafael Barbosa and Simon Skipka

No 8039, CESifo Working Paper Series from CESifo

Abstract: Despite its theoretical merits, Land Value Taxation (LVT) is not a common policy instrument in most countries. One of the main reasons is uncertainty regarding its distributional impacts. This uncertainty has not been settled by the literature, due to a lack of appropriate data at the household level. We overcome this obstacle by the construction of a unique household level dataset for a sample of German homeowners in 2017. The data collected allows us to study the differences in distributions of land and property values and the resulting distributional effects of implementing a LVT compared to a standard property tax. Our results are as follows. First, we find revenue neutral LVT rates to be around 0.6% in our sample. Second, we find the share of land value in property value on average to be 33% with considerable household heterogeneity, both within and between regions. Third, we find a LVT to be equally progressive if implemented at the federal level, but less progressive if implemented at the regional level, since, although land values are more concentrated than property values, they are not as strongly correlated with income. Quantitatively a revenue-neutral reform from a standard property tax to a LVT at the regional level would increase the average tax burden of the lowest income quintile of homeowners by 25%.

Keywords: land; housing; land value taxation; property taxation; distributional assessment (search for similar items in EconPapers)
JEL-codes: H20 H71 R20 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-eur, nep-pbe, nep-pub and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_8039

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