Housing as an asset and the effects of property taxation on the residential development process

A model of residential development is constructed recognizing the asset side of land and housing. The equilibrium process is characterized under the perfect foresight assumption, and the effects of a capital gains tax (both unanticipated and anticipated) and a tax on property values are examined.     

Fiscal news and macroeconomic volatility

This paper analyzes the contribution of anticipated capital and labor tax shocks to business cycle volatility in an estimated New Keynesian business cycle model. While fiscal policy accounts for about 15% of output variance at business cycle frequencies, this mostly derives from anticipated government spending shocks. Tax shocks, both anticipated and unanticipated, contribute little to the fluctuations of real variables. However, anticipated capital tax shocks do explain a sizable part of inflation fluctuations, accounting for up to 12% of its variance. In line with earlier studies, news shocks in total account for about 50% of output variance. Further decomposing this news effect, we find permanent total factor productivity news shocks to be most important. When looking at the federal level instead of total government, the importance of anticipated tax and spending shocks significantly increases, suggesting that fiscal policy at the subnational level typically counteracts the effects of federal fiscal policy shocks.     

Vertical externalities in cigarette taxation: Do tax revenues go up in smoke?

In federal systems, where tax bases are joint property, the tax policy of one level of government affects the tax base of the other. This paper examines the interdependence of US federal and state cigarette tax rates. Our results suggest that states may reduce their cigarette tax rate by as much as 48 cents per dollar increase in the federal tax rate. Thus, a federal tax hike may reduce the amount of generated state tax revenues both directly (the overall tax rate rises and the state tax base declines), and indirectly (the state tax rate declines).     

Use-Value Assessment Tax Expenditures in Urban Areas

Use-value assessment is the practice of valuing land for property tax purposes in its current use, rather than at its full market value. This practice is widespread in the U.S. and is intended to reduce the property tax burden on agricultural land near urban areas and slow the pace of land development. We examine the foregone property tax revenue, or tax expenditure, due to use-value assessment. Data sets for two case studies are employed in empirical estimation of spatial models of the difference between market value and use value, providing the analytic basis for estimates of tax expenditures.     

Political Economy of Property Tax Reform: Hawaii's Experiment with Split‐Rate Property Taxation

Economic theory suggests that switching from a general property tax to a split‐rate tax increases land use efficiency and stimulates urban core development while preserving the environment and reducing urban sprawl. Under split‐rate property taxation, land is typically taxed at a significantly higher rate than improvements. Beginning in 1965 Hawaii experimented with a statewide split‐rate property tax system to encourage economic growth and effect land reform. The experiment was ended in 1977. Following the transfer of property taxing powers to the counties in 1978, some counties brought back the split‐rate property tax at times. Since 2006, Kauai County has adopted the unusual practice of taxing improvements at a higher rate than land for most property classes. This article chronicles and explains the rationale behind Hawaii's state and county experiments with split‐rate property taxation.     

The impact of positive property tax differentials on the timing of development

To date, few empirical studies have focused on the location decision by residential developers in response to changes in the property tax. Based on a dynamic time-to-development model by Turnbull, this paper finds, using 17 years of parcel level data from Saint Louis County, Missouri, that higher than average tax rates increase the time-to-development for vacant parcels by between 4 and 11%, all else equal. Additionally this paper finds that the tax differential effect is cumulative, resulting in about a 20% increase in the time-to-development for the parcel facing the average number of years with a higher than average rate. These results support the analytical results by both Turnbull [Turnbull, G.K., 1988. The effects of local taxes and public services on residential development patterns. Journal of Regional Science, 28 (4), 541–562.] and McMillen [McMillen, D.P., 1990. The timing and duration of development tax rate increases. Journal of Urban Economics, 28, 1–18.] that the property tax can distort residential capital markets leading to inefficient urban growth, or sprawl.     

Agricultural Land Conversion and Inheritence Tax in Japan

In this paper we investigate theoretically the extent to which the development timing of agricultural land conversion would be hastened by the introduction of inheritence tax. We extend the optimal timing of wealth maximizing value use models by Scouras (1978), Anderson (1993) and Kanemoto (1996) to examine cases where tax rates vary according to land use with (i) almost no income and (ii) high income use, such as rental housing. We first model landowner's behavior within the life cycle dynamic optimization framework and then simulate the impact of inheritence tax on the optimal timing of development. Some notable predictions about optimal timing of development emerge from our numerical analysis: no inheritence tax effect is observed for landowners whose inheritence probability is less than 1% (that is, landowners in the age group 40 or below) and whose inheritence tax rate is less than 10%. However, the optimal timing of development drops to below one year for landowners whose inheritence probability is more than 18% and whose tax rate is 30%.     

减税降费:机理、措施与微观成效

减税降费是深化供给侧结构性改革的重要举措,对于激发市场主体活力、促进经济发展具有重要意义。本文首先分析了减税降费的机理,接着分析了结构性减税与普惠性减税的具体措施,进而分析了减税降费的微观成效,最后提出建议:进一步降低增值税税率,并将食品和药品实行简易计税;打通增值税抵扣链条;进一步加大研发抵扣力度;进一步降低企业社保缴费比率等。     

The growth effects of anticipated versus unanticipated population aging

We analyze the effects of anticipated population aging within a general equilibrium R&D-based endogenous growth model with overlapping generations. In doing so we model aging as a rise of longevity and a simultaneous drop in fertility. In contrast to an unanticipated rise of longevity, consumers increase their savings and reduce their consumption long before the rise of longevity actually happens. This implies that individuals save more in anticipation of aging, which puts downward pressure on the interest rate and raises economic growth through an increase in R&D incentives. Irrespective of the anticipation effect, the economic change at impact is not smooth but still features a kink in consumption.     

我国财政政策对产业结构优化的时变效应

研究目标：财政政策对产业结构优化的时变性影响。研究方法：构建带有随机波动率的时变参数因子扩展向量自回归模型,进而通过三维脉冲响应展开时变性分析。研究发现：财政政策对产业结构优化确实产生了时变效应,在经济衰退时期,应该增加财政支出、提高投资性支出占比,结合小幅度减税、提高营业税和消费税占比;在经济平稳时期,应该减少税收、提高营业税占比、降低增值税占比,结合小幅度增加财政支出、提高投资性支出占比、降低一般公共服务支出占比;在经济高涨时期,应该增加财政支出、提高科技支出和投资性支出占比,结合小幅度减税、提高所得税占比、降低营业税占比。研究创新：应用时变参数计量模型研究了财政政策对产业结构优化的时变效应。研究价值：有助于重新认识财政政策与产业结构优化的关系。     

Executive Summary

Our assessment of the outlook for the UK economy over the next two years has not changed dramatically from February's forecast. Growth now appears to be stronger prior to the tax increases coming into force than we then anticipated. We have therefore revised upwards our forecast for GDP growth for this year to 3% and made a small upwards revision - to 2.3% - for 1995. Inflation is still forecast to remain historically low, with the annual increase in the RPI excluding mortgage interest keeping within the 4% target ceiling. However, underlying inflation is stuck in the 3-3.5% range for most of the forecast period and a rise in interest rates over the course of next year will be required to contain inflation. After peaking at 7.5% in early 1996, we then expect interest rates to fall back. Unemployment should continue to decline this year, though not at the rate seen over the last year, levelling off at around 2.5 million in 1995 and then falling again in late 1996 and 1997.     

Taxation for Low Cost Wood Fiber*

Abstract . If forest industry taxation is to be put on a sound economic basis, the Federal Government, the largest land owner, should pay the same taxes as any other landowner, so that the social and economic effects of taxation are realized. Specialists report that the form of the property tax preferred for the taxation of the property of the forest industry, under most circumstances, is land value taxation, not the property tax based on income realized at some point In the future which presumed the continued existence of virgin forests. This paper recognizes that the forest industry now is based on harvests of tree crops and proposes a further development of the land value taxation principle in the form of a forest tax composed of a land value tax combined with a tax on tree growth which increases as growth as a percentage of volume growth decreases with the tree's increasing age.     

Property taxes and the timing of urban land development

This paper develops an optimal timing model which extends our understanding of the effects which property taxes have on the timing of land development. Comparative static effects of changes in property tax rates are investigated and policy rules are developed for the use of differential pre- and post-development tax rates to affect the timing of development. Changes in the property tax rate are found to be non-neutral with respect to the timing of development in most cases, accelerating or delaying development depending upon specific market conditions.     

Effects of the property tax on operating and investment decisions of rental property owners : An empirical test

A model of landlord behavior presented in DeSalvo (1971) is combined with the bid curve of Rosen (1974) to yield the hypothesis that, in the stationary state, a reduction in the property tax rate will lead housing capital to rise unambiguously and housing's current input either to rise or fall. Since the theory only predicts the directions of change in the inputs, the magnitudes of these changes are estimated with the result that a ten percent reduction in the tax rate will lead capital to rise by 0.6 percent and the current input by 4.9 percent, both at the one percent significance level. Thus, if, as DeSalvo suggests, upgrading is defined as a rise in capital, the null hypothesis that upgrading will not occur with a fall in the property tax rate must be rejected at the one percent level.     

Three-rate property taxation and housing construction

This paper examines the effect of property taxation on housing construction. In 2001, Finnish municipalities were allowed to levy an extra property tax on undeveloped land zoned for housing. Municipalities that adopted the new tax instrument have a three-rate tax property tax system with different tax rates on land before development, land after development and buildings. The remaining municipalities have a two-rate system with a uniform land tax and a building tax. A theoretical model of decisions by landowners suggests that the pre-development land tax ought to lead to faster development, but also the density of development may be affected. In the two-rate system land tax is neutral. The empirical results suggest that landowners respond to the tax incentives. Municipalities that adopted the three-rate property tax system saw an increase in single-family housing starts of roughly 12 percent.     

An analysis of default risk in the Home Equity Conversion Mortgage (HECM) program

While reverse mortgages are intended as a tool to enable financial security for older homeowners, in 2014, nearly 12 percent of reverse mortgage borrowers in the federally insured Home Equity Conversion Mortgage (HECM) program were in default on their property taxes or homeowners insurance. Unlike the traditional mortgage market, there were no risk-based underwriting guidelines for HECMs through 2014. In response to the relatively high default rate, a variety of policy responses were implemented, including establishing underwriting guidelines. However, there is a lack of data and analysis to inform such criteria. Our analysis follows 30,000 seniors counseled for reverse mortgages between 2006 and 2011. The data includes comprehensive financial and credit report attributes, not typically available in analyses of reverse mortgage borrowers. Using a bivariate probit model that accounts for selection, we estimate the likelihood of tax and insurance default. Financial characteristics that increase default risk include the percentage of funds withdrawn in the first month of the loan, a lower credit score, higher property tax to income ratio, low or no unused revolving credit, and a history of being past due on mortgage payments or having a tax lien on the property. Our estimate of the elasticity of default with respect to credit scores is similar to that for closed-end home equity loans, but higher than that for HELOCs. We simulate the effects of alternative underwriting criteria and policy changes on the probability of take-up and default. Reductions in the default rate with a minimal effect on participation can be achieved by requiring that participants with low credit scores set aside some of their HECM funds for future property tax and insurance payments, a form of escrowing.     

Property Tax and Housing Returns

This paper evaluates the effects of property tax on housing. While land tax and capital gains tax are widely used for curbing hoarding of land and speculation, its effectiveness is inconclusive. The imposition of a capital gains tax will impair the liquidity of property transaction, lower the rate of return on property investment, and reduce revenue from land sales which represents an important tax resource for the communities. This paper shows that a capital gains tax is capitalized into housing prices. Individuals tend to postpone the purchase of houses because of transaction taxes. Using an impulse response function, we show that a transaction tax has a dynamic negative impact on housing returns. While this paper focuses on Hong kong, for the purpose of comparison Singapore and Taiwan are also discussed.     

Steuern und Risikobereitschaft in Modellen irreversibler Investitionen

This paper provides an overview of the literature on the influence of taxation on investment behavior under uncertainty, especially under the real options paradigm. We analyze the impact of taxation on risk-taking under irreversibility. Extending the existing literature we integrate a simple tax system into a real option model. Under irreversibility and risk neutrality, raising the tax rate can either increase or reduce risk-taking. Referring to combinations of volatility and tax rate it is possible to identify conditions for an unambiguous influence of taxes on risk-taking. Numerical simulations indicate that raising the tax rate increases risk-taking under low volatility. Implementing a final withholding tax on capital income tends to reduce risky investment. Our findings confirm the well-known results under certainty and extend them with respect to uncertainty, irreversibility, and risk-taking.     

Community Classification and Growth in Effective Property Tax Rates: A Case Study of Rate Divergence in 39 Rhode Island Towns

Abstract . A multiple regression analysis of cross-sectional data for 39 Rhode Island towns indicates that variation in the level of effective property tax rates among communities can be substantially explained. The determinants are a community's population density, median family income, real property per capita, and the ratio of commercial to total property tax, revenue. Population density serves as a criterion for judging the “cityness” (1) of a community, that is, its degree of urbanization. A positive relationship exists between population density and effective property tax rate. Communities with the highest population density tend to have the highest tax rates. This relationship is shown in each analyzed year. Covariance analysis applied to the regression coefficients for the various years reveals a significant change in the population density coefficient. This coefficient change indicates a divergence in effective property tax rates among city, suburban, and rural communities.     

Seasonal Homes and the Local Property Tax: Evidence from New York State

This study examines the growth of seasonal (i.e., second or vacation) homes and their impact on local property tax rates using evidence from towns and villages in New York State between 1990 and 2000. We find that a greater concentration of seasonal homes in a municipality is associated with a lower effective property tax rate in towns, and a higher rate in small and rural villages. An alternative measure of tax burden, property taxes as a percentage of median household income, is not related to the presence of seasonal homes in towns but is positively related in small and rural villages. Our findings for towns contradict the findings of an earlier study by Fritz (1982 ) that found that an increase in town property allocated to vacation homes was significantly associated with an increasing property tax rate, although our findings for villages supports his findings.