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An Analysis of the Effects of Vehicle Property Taxes on Vehicle Demand

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  • Craft, Erik D.
  • Schmidt, Robert M.

Abstract

Vehicle personal property taxes recently existed in 31 states. Using data collected during the phaseout of the tax in Virginia, we analyze the effect of differing tax rates on the personal vehicle count and value data in 134 locales. We find that each increase in the effective property tax of one percentage point leads to a reduction in vehicular capital of over 5 percent. This result implies that the average dollar of tax revenue caused a deadweight loss of about 25 cents. Our results also provide cost and redistribution lessons for policymakers considering the enactment or elimination of a vehicle property tax.

Suggested Citation

  • Craft, Erik D. & Schmidt, Robert M., 2005. "An Analysis of the Effects of Vehicle Property Taxes on Vehicle Demand," National Tax Journal, National Tax Association;National Tax Journal, vol. 58(4), pages 697-720, December.
    • Handle: RePEc:ntj:journl:v:58:y:2005:i:4:p:697-720
    DOI: 10.17310/ntj.2005.4.05
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    Cited by:

    1. Jos Ommeren & Eva Gutiérrez-i-Puigarnau, 2013. "Distortionary company car taxation: deadweight losses through increased car ownership," Empirical Economics, Springer, vol. 45(3), pages 1189-1204, December.
    2. Eva Gutiérrez-i-Puigarnau & Jos van Ommeren, 2007. "Welfare Effects of Distortionary Company Car Taxation," Tinbergen Institute Discussion Papers 07-060/3, Tinbergen Institute, revised 20 Mar 2009.
    3. Rainer Niemann & Caren Sureth-Sloane, 2019. "Investment timing effects of wealth taxes under uncertainty and irreversibility," Journal of Business Economics, Springer, vol. 89(4), pages 385-415, June.

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