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Revisiting property tax capitalization

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  • Lyu, Xueying

Abstract

This paper investigates the extent of property tax capitalization in the context of a progressive property tax pilot in Shanghai. I utilize a difference-in-differences approach by comparing neighborhoods with different tax rates before and after the implementation of the property taxes. Neighborhoods with a 0.2 percentage point higher marginal property tax rate experience a roughly 2.73% decrease in housing prices relative to their counterparts. The result reflects that at least 71% of expected property tax liabilities are capitalized into housing prices in a year. These changes also imply a large wealth redistribution as large as 2.68 years of average disposable income across homeowners.

Suggested Citation

  • Lyu, Xueying, 2024. "Revisiting property tax capitalization," Regional Science and Urban Economics, Elsevier, vol. 108(C).
    • Handle: RePEc:eee:regeco:v:108:y:2024:i:c:s016604622400070x
    DOI: 10.1016/j.regsciurbeco.2024.104039
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    More about this item

    Keywords

    Property taxes; Housing prices; Capitalization;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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