Advertisement

Simulation of Tax Incidence and Redistribution Effects of the Tax Proposal

  • Yilin Hou
Chapter
Part of the Politics and Development of Contemporary China book series (PDCC)

Abstract

This chapter takes the forthcoming adoption of the real property tax in China as a natural social experiment, estimating the potential ability and willingness to pay the property tax by Chinese urban households and simulating the tax burden distribution and the redistribution effect of the tax under several exemption proposals. The chapter uses a publicly available survey data set to calculate ability-to-pay indexes and willingness-to-pay measures; then, based on the indexes and measures, it conducts simulations. The results show that under the tax scheme proposed by authors of this book, the broad-base, low-rate local property tax is affordable to the great majority of homeowners, that low-income families get more net benefit than high-income families, and that this tax design is horizontally and vertically equitable, thereby politically acceptable; it is also efficient and administratively feasible. We can conclude that this design will generate adequate revenue to provide public services.

References

  1. Ajzen, I., & Driver, B. L. (1992). Contingent value measurement: On the nature and meaning of willingness to pay. Journal of Consumer Psychology, 1(4), 297–316.CrossRefGoogle Scholar
  2. Almy, R. (2013). A global compendium and meta-analysis of property tax systems. Cambridge, MA: Lincoln Institute of Land Policy.Google Scholar
  3. An, T. F. (2015). Legal provisions for real property taxation and related policy recommendations. Local Public Finance Research 2, 4–6. 安体富.房地产税立法的法理依据与相关政策建议《地方财政研究》.Google Scholar
  4. An, T. F., & Wang, H. Y. (2005). On the development of real estate market and reform of the property tax. References on Economic Research, 2005(43), 19–27. 安体富、王海勇. 我国房地产市场发展和房地产税收制度改革研究《经济研究参考》第43期.Google Scholar
  5. Botelho, A., & Pinto, L. C. (2002). Hypothetical, real, and predicted real willingness to pay in open-ended surveys: Experimental results. Applied Economics Letters, 9(15), 993–996.CrossRefGoogle Scholar
  6. Buehler, A. G. (1945). Ability to pay. Tax Law Review, 1, 243–258.Google Scholar
  7. Cao, H. J., & Tian, L. M. (2012). Survey of public willingness to pay an environmental tax in Chia. Taxation Study, 2012(1), 91–92. 曹洪军、田民利. 关于我国征收环境税的公众意愿调查《税务研究》第1期.Google Scholar
  8. Chen, J., & Hao, Q. J. (2011). An evaluation of housing affordability in Shanghai 1995–2017. In J. Y. Y. Man, et al. (Eds.), Housing for the low income in China: Status quo and policy design (pp. 76–93). Beijing: Commercial Press. 陈杰、郝前进、Stephens.上海市住房可支付性评价 1995–2007. 载满燕云等主编《中国低收入住房:现状与政策设计》. 北京:商务印书馆, 76–93页.Google Scholar
  9. Cornia, G. C. (2012). Tax criteria. In G. C. Cornia, L. C. Walters, & W. J. McCluskey (Eds.), A primer on property tax: Administration and policy (pp. 207–227). Oxford: Blackwell Publishing Ltd..CrossRefGoogle Scholar
  10. Cornia, G. C., & Slade, B. A. (2006). Horizontal inequity in the property taxation of apartment, industrial, office, and retail properties. National Tax Journal, 59(1), 33–55.CrossRefGoogle Scholar
  11. Dempsey, B. W. (1946). Ability to pay. Quarterly Journal of Economics, 60(3), 351–364.CrossRefGoogle Scholar
  12. Dempsey, B. W. (2005). Ability to pay. Review of Social Economy, 63(3), 335–346.CrossRefGoogle Scholar
  13. Deng, Q. J. (2014). Review of property tax equity. Public Economics and Policy Research, 2014(2), 116–123. 邓菊秋. 房地产税税负公平性研究述评《公共经济与政策研究》第2期.Google Scholar
  14. Development Research Center of the State Council (国务院发展研究中心). (2006). Explorations and recommendations on the types, rate structure, and revenue rights of the real property tax. China Development Observations, 2006(8), 17–19. 国务院发展研究中心课题组. 不动产税的税种、税率设计和税收归属的探讨与建议.《中国发展观察》第8期.Google Scholar
  15. Didier, T., & Lucie, S. (2008). Measuring consumer’s willingness to pay for organic and fair trade products. International Journal of Consumer Studies, 32(5), 479–490.CrossRefGoogle Scholar
  16. Ferber, R. (1962). Research on household behavior. American Economic Review, 52(1), 19–63.Google Scholar
  17. Ferreira, F. (2010). You can take it with you: Proposition 13 tax benefits, residential mobility, and willingness to pay for housing amenities. Journal of Public Economics, 94(9–10), 661–673.CrossRefGoogle Scholar
  18. Gao, P. Y. (2011). Property tax pilots to go further. Economy, 2011(12), 11. 高培勇. 房产税试点期待持续深化《经济》第12期.Google Scholar
  19. Goodspeed, T. J. (1989). A re-examination of the use of ability to pay taxes by local governments. Journal of Public Economics, 38(3), 319–342.CrossRefGoogle Scholar
  20. Gravelle, J. C. (2008). Empirical essays on the causes and consequences of tax policy: A look at families, labor, and property. Ann Arbor: ProQuest.Google Scholar
  21. Gu, C. (2011). Rethinking the property tax. Finance and Economy Studies, 2011(4), 91–97. 谷成. 房产税改革再思考《财经问题研究》第4期.Google Scholar
  22. Hamilton, B. W. (1975). Zoning and property taxation in a system of local governments. Urban Studies, 12, 205–211.CrossRefGoogle Scholar
  23. Hamilton, B. W. (1976a). Capitalization of intra-jurisdictional differences in local tax prices. American Economic Review, 66(5), 743–753.Google Scholar
  24. Hamilton, B. (1976b). The effects of property taxes and local public spending on property values: A theoretical comment. Journal of Political Economy, 84(3), 647–650.CrossRefGoogle Scholar
  25. He, J. (2013). A study of residential property tax in China. PhD dissertation, Northeastern University of Finance and Economics, Dalian. 何倩. 我国居民房地产税问题研究. 东北财经大学博士论文.Google Scholar
  26. Henderson, J. V. (1979). Theories of group, jurisdiction, and city size. Current issues in urban economics. Baltimore: The John Hopkins University Press.Google Scholar
  27. Hou, Y. L., & Ma, H. T. (2016). China’s local property tax: Principles of design and strategies for implementation. Public Finance Research, 2016(2), 65–78. 侯一麟、马海涛. 中国房地产税设计原理和实施策略分析《财政研究》第2期.Google Scholar
  28. Hou, Y. L., Ren, Q., & Zhang, P. (2014). The property tax in China: History, pilots, and prospects. New York: Springer.Google Scholar
  29. Hou, Y. L., Ren, Q., & Ma, H. T. (2016). Research on the scheme design of China’s local property tax (in Chinese). Beijing: Economic Science Press. 侯一麟、任强、马海涛.《中国房地产税税制要素设计研究》. 北京:科学出版社.Google Scholar
  30. Hu, H. S. (2011). A study of China’s property tax reform. Beijing: Economic Science Press. 胡洪曙《我国财产税改革研究》. 北京: 经济科学出版社.Google Scholar
  31. Ihlanfeldt, K. R. (1979). Incidence of the property tax on homeowners – Evidence from the panel study of income dynamics. National Tax Journal, 32(4), 535–541.Google Scholar
  32. Ihlanfeldt, K. R. (1981). An empirical-investigation of alternative approaches to estimating the equilibrium demand for housing. Journal of Urban Economics, 9(1), 97–105.CrossRefGoogle Scholar
  33. International Property Tax Institute. (2015). Survey prepared for the workshop on modernizing property taxation in CEE countries. Toronto.Google Scholar
  34. Ito, K., & Zhang, S. (2016). Willingness to pay for clean air: Evidence from air purifier markets in China. Amsterdam: Social Science Electronic Publishing.CrossRefGoogle Scholar
  35. Jia, K. (2011). Property tax: American model and China’s choice. People’s Forum, 2011(3), 48–50. 贾康. 房产税改革: 美国模式和中国选择. 《人民论坛》第3期.Google Scholar
  36. Jia, K. (2015). Property tax is not far from us. Beijing: People’s Publishing House. 贾康.《房地产税离我们并不远》. 北京:人民出版社.Google Scholar
  37. Jiang, Z., & Gao, P. Y. (2014). Progressively promote personal property tax reform. Macroeconomic Research, 2014(6), 8–12. 蒋震、高培勇. 渐进式推进个人房产税改革.《宏观经济研究》第6期.Google Scholar
  38. Johannesson, M., Liljas, B., & O’Conor, R. M. (1997). Hypothetical versus real willingness to pay: Some experimental results. Applied Economics Letters, 4(3), 149–151.CrossRefGoogle Scholar
  39. Kain, J. F., & Quigley, J. M. (1972). Note on owners estimate of housing value. Journal of the American Statistical Association, 67(3), 803–806.CrossRefGoogle Scholar
  40. Kendrick, M. S. (1939). The ability-to-pay theory of taxation. American Economic Review, 29(1), 92–101.Google Scholar
  41. Lang, X. P. (2010). Do not learn from the US property tax. IT Times Weekly, 2010(18), 18. 郎咸平. 别学美国征房产税.《IT时代周刊》第18期.Google Scholar
  42. Liu, R. (2011). Lessons from an international comparison of property tax systems. Reform, 2011(3), 145–148. 刘蓉. 房产税税制的国际比较与启示《改革》第3期.Google Scholar
  43. Liu, S. X. (2013). Impact of resource tax and property tax on local public finance. References for Economic Research, 2013(7), 3–18. 刘尚希等. 资源税、房产税改革及对地方财政影响分析《经济研究参考》第21期.Google Scholar
  44. Liu, R., Zhang, W., & Chen, L. S. (2015). An estimate of the potential revenue capacity from non-exemption ratios of the property tax: Evidence from China Household Finance Survey. Finance and Trade Economics, 36(1), 54–64. 刘蓉、张巍、陈凌霜. 房地产税非减(豁)免比率的估计与潜在税收收入能力的测算: 基于中国家庭金融调查数据《财贸经济》第1期.Google Scholar
  45. Luzar, E. J., & Cosse, K. J. (1998). Willingness to pay or intention to pay: The attitude-behavior relationship in contingent valuation. Journal of Socio-Economics, 27(3), 427–444.CrossRefGoogle Scholar
  46. Ma, G. Q., & Li, J. (2011). Objectives and stages of the property tax reform. Reform, 2011(2), 130–132. 马国强、李晶. 房产税改革的目标与阶段性. 《改革》第2期.Google Scholar
  47. Man, J. Y. Y. (2011). Learning from international experience to improve China’s property tax. Foreign Taxation, 2011(5), 11–16. 满燕云. 借鉴国际经验完善我国房产税制.《涉外税务》第5期.Google Scholar
  48. Mark, J., & Carruthers, N. (1983). Property values as a measure of ability-to-pay: An empirical examination. Annals of Regional Science, 17(2), 45–59.CrossRefGoogle Scholar
  49. Martin, J. W. (1931). Ability to pay and the tax system in Dane County, Wisconsin. American Economic Review, 21(1), 172–172.Google Scholar
  50. Martin, J. W. (1933). Taxation and ability to pay in South Carolina. American Economic Review, 23(1), 161–161.Google Scholar
  51. Morgan, J. N. (1965). Housing and ability to pay. Econometrica, 33, 289–306.CrossRefGoogle Scholar
  52. Musgrave, R. A., & Musgrave, P. B. (1989). Public finance in theory and practice (5th ed.). New York: McGraw-Hill Book.Google Scholar
  53. Muth, R. F. (1960). The demand for non-farm housing. In A. C. Harberger (Ed.), The demand for durable goods (pp. 29–96). Chicago: University of Chicago Press.Google Scholar
  54. Neill, H. R., Cummings, R. G., Ganderton, P. T., Harrison, G. W., & Mcguckin, T. (1994). Hypothetical surveys and real economic commitments. Land Economics, 70(2), 145–154.CrossRefGoogle Scholar
  55. Netzer, D. (1966). Economics of the property tax. Washington, DC: Brookings Institution.Google Scholar
  56. Ni, H. R. (2011). Suggestions on China’s property tax reform. Foreign Taxation, 2011(2), 5–8. 倪红日. 对我国房地产税制改革的几点建议.《涉外税务》第2期.Google Scholar
  57. Oates, W. E. (1969). The effects of property taxes and local public spending on property values: An empirical study of tax capitalization and the Tiebout hypothesis. Journal of Political Economy, 77(6), 957–971.CrossRefGoogle Scholar
  58. Oates, W. E. (1973). Effects of property taxes and local public spending on property values – Reply and yet further results. Journal of Political Economy, 81(4), 1004–1008.CrossRefGoogle Scholar
  59. Plotnick, R. (1981). A measure of horizontal inequity. Review of Economics and Statistics, 63(2), 283–288.CrossRefGoogle Scholar
  60. Prager, D. (2017). The most dangerous addiction of them all: Entitlements. Source: http://www.dennisprager.com/the-most-dangerous-addiction-of-them-all-entitlements/
  61. Qu, W. D., & Yan, Y. F. (2008). Defining the housing tax and an analysis of its tax burden: Evidence from Beijing. Journal of Central China Normal University – Humanities and Scocial Sciences, 47(6), 48–56. 曲卫东、延扬帆. 物业税内涵研究及税负测算分析: 以北京市为例. 《华中师范大学学报(人文社会科学版)》第6期.Google Scholar
  62. Richter, W. F. (1983). From ability to pay to concepts of equal sacrifice. Journal of Public Economics, 20(2), 211–229.CrossRefGoogle Scholar
  63. Ross, S., & Yinger, J. (1999). Sorting and voting: A review of the literature on urban public finance. In P. Cheshire & S. M. Edwin (Eds.), Handbook of regional and urban economics (Vol. 3, pp. 2001–2060). Amsterdam: Elsevier.Google Scholar
  64. Rubinfeld, D. L. (1987). The economics of the local public sector. In A. J. Auerbach & F. Martin (Eds.), Handbook of public economics (Vol. 2, pp. 571–645). Amsterdam: Elsevier.Google Scholar
  65. Sirmans, G. S., Diskin, B. A., & Friday, H. S. (1995). Vertical inequity in the taxation of real property. National Tax Journal, 48(1), 71–84.Google Scholar
  66. Sirmans, S. G., Gatzlaff, D. H., & Macpherson, D. A. (2008). Horizontal and vertical inequity in real property taxation. Journal of Real Estate Literature, 16(2), 167–180.Google Scholar
  67. Soule, D. M. (1967). Ability to pay taxation as discriminatory pricing of government services. Land Economics, 43(2), 219–222.CrossRefGoogle Scholar
  68. Spann, M., Skiera, B., & Schäfers, B. (2004). Measuring individual frictional costs and willingness-to-pay via name-your-own-price mechanisms. Journal of Interactive Marketing, 18(4), 22–36.CrossRefGoogle Scholar
  69. Su, H. (2014). An analysis of the willingness to pay the property tax by urban residents: Evidence from Chengdu and Ya’an. PhD dissertation of Sichuan Agricultural University. 苏华. 城镇居民对房产税征收的接受意愿分析: 基于成都市、雅安市的调查.Google Scholar
  70. Utz, S. (2001). Ability to pay. Whittier Law Review, 23, 867–950.Google Scholar
  71. Voelckner, B. F. (2006). An empirical comparison of methods measuring consumers’ willingness to pay. Marketing Letters, 17, 137–149.CrossRefGoogle Scholar
  72. Wallis, J. J. (2001). A history of the property tax in America. In W. E. Oates (Ed.), Property taxation and municipal government finance: Essays in honor of C. Lowell Harris. Cambridge, MA: Lincoln Institute of Land Policy.Google Scholar
  73. Wang, C. Y. (2006). On the rate structure of the property tax: The case of Zhejiang Province. Journal of Zhejiang Wanli College, 19(3), 92–95. 王春元. 我国房地产税税率设计分析—以浙江省为例.《浙江万里学院学报》第3期.Google Scholar
  74. Wertenbroch, K., & Skiera, B. (2013). Measuring consumers’ willingness to pay at the point of purchase. Journal of Marketing Research, 39(2), 228–241.CrossRefGoogle Scholar
  75. Wu, G. (2009). A study of Chinese urban residents’ ability to purchase a house: Evidence from 10 cities 2000–2008. Urban Development Research, 16(9), 20–25. 吴刚. 城市居民住房支付能力研究: 基于2000–2008我国10城市的经验数据《城市发展研究》第9期.Google Scholar
  76. Wu, J., Zheng, S. Q., Liu, H. Y., & Yang, Z. (2011). Urban residents’ ability to pay the property tax and the role of housing savings fund. In Y. Y. Man (Ed.), Housing for the low income in China: Status quo and policy design (pp. 94–116). Beijing: The Commercial Press. 吴璟、郑思齐、刘洪玉、杨赞. 中国城市居民住房纳税能力问题与住房公积金制度作用评价,载满燕云等主编《中国低收入住房:现状与政策设计》.Google Scholar
  77. Xia, S. M. (2011). Property tax: Can it redistribute income and contain housing price? Taxation Research, 2011(4), 19–25. 夏商末. 房产税能够调节收入分配不公和抑制房价上涨吗《税务研究》第4期.Google Scholar
  78. Xiang, S. Y., & Long, F. J. (2007). Chinese urban residents’ ability to purchase a house. Urban Development Research, 14(2), 29–33. 向肃一、龙奋杰. 中国城市居民住房支付能力研究.《城市发展研究》第2期.Google Scholar
  79. Xu, S. D. (2015). Caution with property tax legislation. Tsinghua Finance Review, 2015(10), 55–60. 许善达. 房地产税立法需要慎之又慎.《清华金融评论》第10期.Google Scholar
  80. Yang, D. Q., & He, C. L. (2009). Trust, willingness to pay and tax compliance: An empirical study using the probit model. Eastern China Economic Management, 23(11), 153–156. 杨得前、何春联. 信任、付税意愿与税收遵从: 基于probit模型的实证研究《华东经济管理》第11期.Google Scholar
  81. Yi, Z. B. (2013). Willingness of air passengers to pay for the carbon tax to mitigate climate change. Resources Science, 35(10), 1953–1958. 易志斌. 航空旅客为减缓气候变化支付碳税意愿研究《资源科学》第10期.Google Scholar
  82. Yinger, J. (1982). Capitalization and the theory of local public finance. Journal of Political Economy, 90(5), 917–943.CrossRefGoogle Scholar
  83. Yinger, J. (2009). Hedonic markets and explicit demands: Bid-function envelopes for public services, neighborhood amenities, and commuting costs. Center for Policy Research. Syracuse University. Paper 52. http://surface.syr.edu/cpr/52
  84. Yinger, J. (2015). Hedonic markets and sorting equilibria: Bid-function envelopes for public services and neighborhood amenities. Journal of Urban Economics, 86, 9–25.CrossRefGoogle Scholar
  85. Yinger, J., & Nguyen-Hoang, P. (2015). Hedonic vices: Fixing inferences about willingness to pay in recent house-value studies. Journal of Benefit-Cost Analysis, 7(2), 248–291.CrossRefGoogle Scholar
  86. Yu, Y. Y. (2007). An empirical study of property tax rate. PhD dissertation of Zhejiang University. 虞燕燕. 不动产税税率设定的实证研究. 浙江大学博士论文.Google Scholar
  87. Zhang, X. (2013). The impact of property tax reform on local finance. China State Finance, 2013(17), 20–21. 张学诞. 房地产税改革对地方财政的影响.《中国财政》第17期.Google Scholar
  88. Zhang, P., & Hou, Y. L. (2016a). China urban residents’ ability to pay the property tax and its regional differences. Journal of Public Administration, 9(2), 136–155. 张平、侯一麟. 中国城镇居民的房地产税缴纳能力与地区差异.《公共行政评论》第2期.Google Scholar
  89. Zhang, P., & Hou, Y. L. (2016b). Property tax: Ability-to-pay, incidence and redistribution effects. Economic Research, 2016(12), 118–132. 张平、侯一麟. 房地产税的纳税能力、税负分布及再分配效应.《经济研究》第12期.Google Scholar
  90. Zhang, P., & Hou, Y. L. (2017). Chinese urban residents’ willingness to pay the property tax: Theoretical framework and simulation of different exemption proposals. (working paper, in Chinese). Syracuse, New York: Center for Policy Research, Syracuse University.Google Scholar
  91. Zhang, B., Huang, X. J., Tang, J., & Cai, L. (2005). Simulation of tax rate on holding real property and analysis of its tax burden. China Land Sciences, 19(2), 52–56. 章波、黄贤金、唐健、蔡龙. 不动产保有税改革的税率推算及税负效果分析.《中国土地科学》第2期.Google Scholar
  92. Zhao, Y. H. (2014). Tax equity, willingness to pay and taxpayer compliance: An empirical study with the ordered probit model. Journal of Yunnan University of Finance and Economics, 2014(3), 50–59.Google Scholar

Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Yilin Hou
    • 1
  1. 1.The Maxwell SchoolSyracuse UniversitySyracuseUSA

Personalised recommendations