From Revenue Assignment to Revenue Structure: Alternative Approaches to Property Taxation in a New Era of Tax Competition

• In Event: Future Challenges in Fiscal Federalism

Abstract

Abstract. Authors Joan Youngman, Lincoln Institute Land Policy and Endit Slack, University of Toronto. Observers have noted new interest in local property taxation as fiscal pressures rise on central governments and international tax competition increases the benefits of an immovable tax base. We discuss the core strengths and challenges of a property tax and issues “on the ground,” with an emphasis on the many alternative choices as to the tax base, rate, and administration. Tax bases can include real property, personal property, land alone, or land and buildings. Workable valuation methods can vary according to local capacity. Valuation methods can also determine the tax base, as with current use, highest and best use, and agricultural use. We consider an area base and a market value base to be two points on a continuum, with many intermediate examples. We discuss alternative approaches such as banding and “parcel taxes.” There is a similar range of choices with regard to the assignment of revenue and the distribution of administrative functions. Rate-setting choices include split-rate systems that tax land at a higher rate than buildings. We discuss progressivity and regressivity, appropriate exemptions and relief. We conclude by considering the potential of the property tax to serve as a value capture instrument and a means of wealth taxation.

Authors

• Joan Youngman, Lincoln Institute of Land Policy

• Enid Slack, University of Toronto