Property Tax: ESRI Conference Paper
This post was written by Tim Callan
A conference paper provides evidence relevant to some key choices in the design of a new property tax. While the paper does not recommend a specific blueprint, it draws on evidence from other countries as to “what works” and analyses the impact of different forms of property tax on a nationally representative sample of households.
Ronan Lyons post yesterday contained three main comments on the paper. Because some of these appear to have drawn primarily on an Irish Independent report that contained inaccuracies, rather than on the paper itself, it seemed best to issue this as a new post.
1. The first comment is that “there should be no exemptions from a property tax, only deferrals”. The SWITCH model is set up to analyse policy choices. As I see it, the level of an income exemption limit is a choice variable, and in this context, zero would be Ronan’s preferred option. Our research found a range of positive values in evidence in many countries. For example, the UK Council Tax Benefit effectively exempts those with incomes close to minimum social security levels. In Northern Ireland, they have set a higher income limit than in the rest of the UK. In our analysis we report income distribution impacts for the zero case, and also for levels at the State Contributory Pension and State Pension+25%. Our work points out the implications of the different choices. Making such a choice is a matter for public debate and government decision. Our paper aims to inform that choice.
2. The second comment is that “a property tax should most certainly not be related back to income”. I’m not sure what he has in mind here but it is important not to misunderstand our analysis. Apart from income exemption limits and some marginal relief above this (necessary to prevent 100%+ tax rates), the property tax bill we consider is simply a flat percentage of market value. We analyse what the outcome is in terms of how the burden is spread across the income distribution – this depends on how, in practice, property values and incomes are related, as well as on the effects of exemption limit provisions. These are questions of legitimate interest for research and policy.
3. Thirdly, it is stated that our paper asserts that Ireland has “no database on site values”: This is not what we said – it reflects an inaccuracy in the Irish Independent’s report. What we said is that “to our knowledge, there is no data source which combines information on site characteristics (location and size) and household incomes, so that it is not possible to provide a clear picture of how a Site Value Tax relates to ability to pay or its impact on the distribution of income”. If there is such a source, we would be glad to hear of it.