Lecture Public economics (5th edition) - Chapter 13 define the wealth tax base, explain the merits and shortcomings of taxing personal net wealth, define the property tax base, describe property tax rating and assessment, explain the effect of property tax on equity using the benefit principle,... and a number of other contents.
• • • • • • • • • Define the wealth tax base Explain the merits and shortcomings of taxing personal net wealth Define the property tax base Describe property tax rating and assessment Explain the effect of property tax on equity using the benefit principle Analyse property tax incidence using partial and general equilibrium analysis Discuss the efficiency effects of a property tax Define a capital transfer tax Discuss the economic effects of capital transfer taxes Wealth is the value of accumulated savings, investment, gifts, and inheritances Or Personal wealth is the present value of a person’s expected real income Examples • Tangible goods – – – – Houses Durable goods Land Financial assets • Cash, shares, bonds • Insurance policies • Pension rights • Intangible goods – Investment in education • Annual wealth taxes – On people and/or companies • Property tax – Land and improvements • Capital transfer tax – Estates and gifts • • • Equity Efficiency Revenue and administration • types – Real property • Realty – Personal property • • • Furniture, motor vehicles, shares Impersonal tax Tax base – Land (farm, residential, commercial) – Capital invested in improvements (farm buildings, homes, business buildings) Urban tax • Site value rating • Flat rating • Composite rating Tax rates • Based on market value of property Assessment • Capital value system • Site value system • Market value system • • • • Benefit principle of taxation Incidence of a property tax Partial equilibrium analysis General equilibrium analysis Elements of selectivity: • Only immovable property is taxed • Tax base can include land or improvements • Tax bases & rates can differ between tax jurisdictions Effects of selective property taxation: • Decisions are influenced by tax differentials • Discourage investment • Encourage more efficient use of land • Perverse effects • • • • Unrealised capital income Burden on property owner Increases risk of farming Administration • • • • Inheritance tax Estate duty Donations Economic effects – Equity issues – Efficiency issues – Administrative issues ... Define the wealth tax base Explain the merits and shortcomings of taxing personal net wealth Define the property tax base Describe property tax rating and assessment Explain the effect of property... analysis Discuss the efficiency effects of a property tax Define a capital transfer tax Discuss the economic effects of capital transfer taxes Wealth is the value of accumulated savings, investment,... rates • Based on market value of property Assessment • Capital value system • Site value system • Market value system • • • • Benefit principle of taxation Incidence of a property tax Partial equilibrium