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Individual property tax to fund public transport

Author

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  • Evgenii V. Leontev
  • Yulia V. Leontyeva

Abstract

Efficient and reliable public transport is of prime concern to city dwellers. To function efficiently, public transport generally needs subsidies from the state or local government. Our goal was to design and develop an alternative model of property tax that would provide financing for public transport. It was hypothesised that if the market value of real estate depends on the proximity of public transport, property tax can be a reliable source of financing for public transport. Based on the hedonic pricing theory, we used multiple regression to measure the impact of public transport proximity on the value of residential property. The data on the market value of property and property tax was taken from statistical tax reporting forms of the Federal Tax Service. The data on various public transport infrastructure facilities was used from the specialized open registers. We tested our alternative model of property tax, using the case of the Ekaterinburg Metro and the Tram and Trolleybus Company, through regression analysis of 7,685 objects of residential property in the City of Ekaterinburg. It was found that the efficiency of the underground service is higher than that of the city’s tram network. On the average, the proximity of underground stations increases the value of housing by over 6%. As predictive estimation of the amount of tax determined by the proximity of public transport showed, the alternative model of property tax is sufficient to cover capital expenditures of the city’s public transport operators and could, therefore, contribute to further expansion and modernization of the transport network.

Suggested Citation

  • Evgenii V. Leontev & Yulia V. Leontyeva, 2021. "Individual property tax to fund public transport," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 7(1), pages 6-19.
    • Handle: RePEc:aiy:jnljtr:v:7:y:2021:i:1:p:6-19
    DOI: http://dx.doi.org/10.15826/jtr.2021.7.1.087
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    References listed on IDEAS

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    1. Stephen Malpezzi, "undated". "Hedonic Pricing Models: A Selective and Applied Review," Wisconsin-Madison CULER working papers 02-05, University of Wisconsin Center for Urban Land Economic Research.
    2. Agnar Sandmo, 2011. "The Scale and Scope of Environmental Taxation," Chapters, in: Emilio Albi & Jorge Martinez-Vazquez (ed.), The Elgar Guide to Tax Systems, chapter 8, Edward Elgar Publishing.
    3. Aaron, Henry & McGuire, Martin, 1970. "Public Goods and Income Distribution," Econometrica, Econometric Society, vol. 38(6), pages 907-920, November.
    4. Anthony B. Atkinson & Joseph E. Stiglitz, 2015. "Lectures on Public Economics Updated edition," Economics Books, Princeton University Press, edition 2, number 10493.
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    1. Proque, Andressa Lemes & Betarelli Junior, Admir Antonio & Perobelli, Fernando Salgueiro, 2022. "Fuel tax, cross subsidy and transport: Assessing the effects on income and consumption distribution in Brazil," Research in Transportation Economics, Elsevier, vol. 95(C).

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