Welfare Effects of Property Taxation

Max Löffler, Sebastian Siegloch

Research output: Working paper / PreprintWorking paper


We analyze the welfare implications of property taxation. Using a sufficient statistics approach, we show that the tax incidence depends on how housing prices, labor and other types of incomes as well as public services respond to property tax changes. Empirically, we exploit the German institutional setting with 5,200 municipal tax reforms for identification. We find that higher taxes are fully passed on to rental prices after three years. The pass-through is lower when housing supply is inelastic. Combining reduced form estimates with our theoretical framework, we simulate the welfare effects of property taxes and show that they are regressive.
Original languageEnglish
PublisherCESifo Working Paper
Number of pages97
Publication statusPublished - Mar 2021

Publication series

SeriesCESifo Working Papers

JEL classifications

  • h22 - Taxation and Subsidies: Incidence
  • h41 - Public Goods
  • h71 - State and Local Taxation, Subsidies, and Revenue
  • r13 - General Equilibrium and Welfare Economic Analysis of Regional Economies
  • r31 - Housing Supply and Markets
  • r38 - "Production Analysis and Firm Location: Government Policy; Regulatory Policy"


  • property taxation
  • welfare
  • tax incidence
  • local labor markets
  • rental housing

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