An Analysis of the Macroeconomic Effects of Property Tax Reform

This study analyzed the macroeconomic effects of property tax reform using a two-sector general equilibrium model with heterogeneous households. This study found that increasing the property tax rate by 0.1 % points only for households owing homes with a value in the top 20% in the benchmark economy leads to the largest reduction in housing asset inequality compared to the benchmark economy. However, welfare decreased when the property tax rate is raised. In most cases, the welfare loss is lower when the excess tax revenue is distributed equally to all households through transfers, as opposed to using it for government spending.