The Property Tax as a Tax on Value: Deadweight Loss |
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Authors: | Richard Arnott Petia Petrova |
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Institution: | (1) Department of Economics, Boston College, Chestnut Hill, MA 02467, USA;(2) Workers Compensation Research Institute, 955 Massachusetts Avenue, Cambridge, MA, 02139 |
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Abstract: | Consider an atomistic developer who decides when and at what density to develop his land, under a property value tax system
characterized by three time-invariant tax rates: τV, the tax rate on pre-development land value; τS, the tax rate on post-development residual site value; and τK, the tax rate on structure value. Arnott (2005) identified the subset of property value tax systems that are neutral. This
paper investigates the relative efficiency of four idealized, non-neutral property value tax systems (i) “Canadian' property
tax system: τV = 0, τ S = τK; (ii) simple property tax system: τV = τ S = τK; (iii) residual site value tax system: τK = 0,τ V = τS; (iv) two-rate property tax system: τV = τ S > τK > 0] under the assumption of a constant rental growth rate.
JEL Code: H2 |
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Keywords: | property taxation site value taxation land taxation deadweight loss |
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