C H A P T E R T W E N T Y - O N E Property and Land Taxation INTRODUCTION Local governments in the United States and elsewhere rely heavily on property taxation to finance their expenditures. This state of affairs is not surprising, because the property tax enjoys several advantages over other taxes. | A Companion to Urban Economics Edited by Richard J. Arnott Daniel P. McMillen Copyright 2006 by Blackwell Publishing Ltd I CHAPTER TWENTY-ONE Property and Land Taxation John Douglas Wilson Introduction Local governments in the United States and elsewhere rely heavily on property taxation to finance their expenditures. This state of affairs is not surprising because the property tax enjoys several advantages over other taxes. The tax base is relatively easy to calculate since it lies within the jurisdiction imposing the tax. Although the infrequent sales of some properties make them difficult to value information obtained from property inspections can be employed to compute the tax base. In contrast collecting an income tax from residents often requires information on income earned outside the jurisdiction and sales taxes are similarly disadvantaged. As a local tax base property may also be less sensitive than income to taxation due to the durability of a jurisdiction s housing stock see Nechyba 1997 . Property taxes rank relatively low as a percentage of a country s total tax revenue rarely rising above 10 percent in OECD countries. This value is slightly above 10 percent in the USA which is significantly higher than the percent unweighted average from OECD countries and the percent unweighted average for the European Union OECD 2001 . The property tax is more important at the local level in most of these countries although there are wide variations. Local governments in the USA raise about three-fourths of their tax revenue from the property tax but this value is less than 10 percent in Nordic countries while rising above 90 percent in New Zealand the United Kingdom Australia and Ireland Söderström 1998 . The theoretical models in the present chapter identify important cases in which independent local governments choose to give property taxes a prominent role but many central governments strongly control or influence the expenditure and .
