Center for Policy Research
Property Tax Web Series
Optimal Property Taxation
Kasper Kragh-Sørensen
September 2021
Related:
Abstract
What is the optimal tax rate on residential housing? In this paper, I consider both the distributional effects and the long-lived transitional dynamics following a change in the property tax rate.
To this end, I employ a life-cycle model calibrated to the U.S. economy, where asset holdings and labor productivity vary across households, and tax reforms lead to changes in house prices, wages, and the interest rate. The main result is that the optimal property tax is substantially higher than today.
However, while a higher property tax is beneficial on average, almost all current homeowners are negatively affected. Time-varying policies show that there is hope of finding politically feasible policies that entail higher property taxes in the long run.
This paper was presented by Kasper Kragh-Sørensen on September 17, 2021 as part of the 2021-2022 Syracuse Webinar Series on Property Tax Administration and Design.
This Syracuse-Chicago Webinar Series on Property Tax Administration and Design aims to gather insight and scholarship through domestic and international comparative studies with common threads to help reform and improve property tax administration and design in the U.S. and other countries facing similar problems.
For questions about the webinars, please contact Zia Jackson. For questions about this paper, please contact the author or authors.