2. • 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.
3. • Tangible goods
– Houses
– Durable goods
– Land
– Financial assets
• Cash, shares, bonds
• Insurance policies
• Pension rights
• Intangible goods
– Investment in education.
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
4. • Annual wealth taxes
– On people and/or companies
• Property tax
– Land and improvements
• Capital transfer tax
– Estates and gifts.
6. • 2 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).
7. 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.
8. • Benefit principle of taxation
• Incidence of a property tax
• Partial equilibrium analysis
• General equilibrium analysis.
9.
10.
11. 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.
12. • Unrealised capital income
• Burden on property owner
• Increases risk of farming
• Administration.
