OECD Economics Department Working Papers
Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.
The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.
The stabilisation properties of immovable property taxation
Evidence from OECD countries
This paper contributes to the scarce literature on the macroeconomic effects of property taxes, in particular on the relationships between property taxes, house prices and the wider economy. The paper first estimates a fiscal reaction function which analysis the reaction of property tax revenues to house prices. It then analyses a house price reaction function looking at the relation of how house prices react to changes in property taxes. For a set of OECD countries, the results suggest that property taxes tend to be a-cyclical or slightly pro-cyclical. They provide a stable revenue source for sub-central governments but do not stabilise the economy. The results also suggest that an increase in property tax revenues or in the tax revenue-to-GDP share slows down house price increases and that higher property taxation tends to reduce house price volatility.
Keywords: stabilisation, immovable property tax, housing market
E32: Macroeconomics and Monetary Economics / Prices, Business Fluctuations, and Cycles / Business Fluctuations; Cycles;
H50: Public Economics / National Government Expenditures and Related Policies / National Government Expenditures and Related Policies: General;
H60: Public Economics / National Budget, Deficit, and Debt / National Budget, Deficit, and Debt: General