Center for Policy Research
Property Tax Web Series
Tax Housing or Land? Distributional Effects of Property Taxation in Germany
Rafael Barbosa, Simon Skipka
April 2022
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Abstract
Despite its theoretical merits, Land Value Taxation (LVT) is not a common policy instrument. One of the main reasons is uncertainty regarding its distributional impacts. Using a general equilibrium model with heterogeneous agents calibrated to an unique household level dataset of German homeowners in 2017, we assess the distributional effects of replacing a housing tax with a LVT. Our data shows the share of land value in property value to be 33%, on average, with considerable household heterogeneity, both within and across regions, and within income levels.
Land values are more concentrated than property values, but, within regions, not as strongly correlated with income, making it less progressive than a standard property tax for homeowners. Results from the model show the introduction of a LVT increases residential investment substantially, reducing housing rents and benefiting renters. It also leads to migration from urban regions, promoting regional convergence. Landowners with high land holdings lose, in general, but most other landowners across income levels benefit, especially in non-urban regions. Overall, introduction of an LVT increases welfare, despite a minor regressive tendency in urban regions for homeowners.
This paper was presented by Rafael Barbosa on April 29, 2022 as part of the 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.