Center for Policy Research
Property Tax Web Series
Welfare Effects of Property Taxation
Max Löffler, Sebastian Siegloch
October 2021
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Abstract
We analyze the welfare implications of property taxation. Using a sufficient statistics approach, we show that the tax incidence depends on how housing prices, labor and other types of incomes as well as public services respond to property tax changes.
Empirically, we exploit the German institutional setting with 5,200 municipal tax reforms for identification. We find that higher taxes are fully passed on to rental prices after three years. The pass-through is lower when housing supply is inelastic.
Combining reduced form estimates with our theoretical framework, we simulate the welfare effects of property taxes and show that they are regressive.
This paper was presented by Max Löffler on October 15, 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.