A Primer on Property Tax

William J. McCluskey is Reader in Real Estate and Valuation at the University of Ulster, where he received his Ph.D. in Real Estate Valuation in 1999. He has held various international positions including Visiting Professor of Real Estate at the University of Lodz, Poland, Professor of Property Studies at Lincoln University, Christchurch, New Zealand and is currently Visiting Professor in Real Estate at University of Technology, Malaysia. His main professional and academic interests are in the fields of real estate valuation, developing automated valuation methods and property tax policy. In addition, he has been an invited instructor in real estate at the African Tax Institute and the Lincoln Institute of Land Policy: China Programme. He is a faculty member of the Lincoln Institute of Land Policy and founding board member of the International Property Tax Institute.

'The chapters in this book explore in detail the choices regarding both the structure and administration of the property tax, drawing on the extensive knowledge the authors have acquired in studying property taxes around the world. The chapters provide a wide-ranging treatment of the design choices and administrative tasks, both in terms of the breadth of design options and administrative tasks covered and the depth of the discussion. The authors describe the range of design choices, discuss the associated issues and the advantages and disadvantages for each, and present the criteria to help choose among the options.'

About the Contributors xi Foreword by David L. Sjoquist xvii Introduction xxv 1 Property Tax: A Situation Analysis and Overview 1 Harry Kitchen Introduction 1 Role for property taxes 2 Importance of the property tax 3 Choice of tax base 3 Issues in assessment 6 Issues with property tax rates 15 Incidence of the property tax 26 Politics of the property tax 33 Future for the property tax 35 Summary 35 References 37 2 Value-Based Approaches to Property Taxation 41 Riel Franzsen and William J. McCluskey Introduction 41 Overview of property tax bases 42 Value-based approaches 45 Concept of market value 54 Traditional valuation methods 59 Conclusions 63 References 64 3 The Politics of the Property Tax 69 Enid Slack Introduction 69 Unique characteristics of the property tax 70 Principles for designing the property tax 73 Characteristics of the property tax 73 Property tax revolts, tax limitations and tax relief 79 The politics of property tax reform 81 The property tax as a local tax 83 Conclusion 86 References 87 4 Administration of Local Taxes: An International Review of Practices and Issues for Enhancing Fiscal Autonomy 89 John L. Mikesell Introduction 89 Central administration 91 Independent local administration 98 The special case of property taxes 106 Conclusion 119 References 121 5 Establishing a Tax Rate 125 Kurt Zorn Introduction 125 What level of government should set the property tax rate? 126 Types of tax rates 131 Determining the tax rate 133 Who sets the rate? 134 Rate setting in practice 135 Conclusions 138 References 138 6 Property Tax Collection and Enforcement 141 Roy Kelly Introduction 141 Policy and administrative determinants of property tax revenues 142 Definition of model variables 143 Common reasons for low rates of collection and enforcement 149 Designing an effective property tax collection system 153 Enforcing against noncompliance 161 Summary thoughts 168 References 170 7 The Tax Everyone Loves to Hate: Principles of Property Tax Reform 173 Jay K. Rosengard Introduction 173 Primary rationale for reform 174 Fundamental principles of reform 176 Strategic choices in reform 178 Policy pitfalls of reform 183 Conclusion 184 References 185 8 Legal Issues in Property Tax Administration 187 Frances Plimmer Introduction 187 Tax policy 188 Property taxation 192 Uniformity/equity/fairness/treatment of taxpayers 198 Conclusions 204 References 205 9 Tax Criteria: The Design and Policy Advantages of a Property Tax 207 Gary C. Cornia Introduction 207 Independent and autonomous revenues 209 Adequate and stable revenue 211 Hedging the revenue bets 212 How broad is the tax base? 212 Financial support for infrastructure 214 Capturing the increased value resulting from public infrastructure 214 Immobile base 215 Benefit tax 216 Ability to pay taxes 217 Ease of compliance 218 Ease and cost of administration 219 Transparent taxes 219 Political acceptability 221 Subnational tax systems and horizontal inequity 221 Advantages of the property tax 222 Disadvantages of the property tax 225 Conclusion 226 References 226 10 Estimating Property Tax Revenue Potential 229 Lawrence C. Walters Introduction 229 Fiscal capacity and fiscal effort 231 Fiscal capacity 231 Estimating aggregate property value 232 Property tax capacity and effort in the OECD 235 Adjusting for undeveloped land 238 Estimating local revenue potential 244 Conclusion 246 References 246 11 Taxing Public Leasehold Land in Transition Countries 249 Yu-Hung Hong Introduction 249 Public leasehold systems 250 Land ownership and taxation 251 Land rent, property tax and tax incidence 256 Valuing public leasehold for tax purposes 260 Conclusions 261 References 263 12 Property Tax and Informal Property: The Challenge of Third World Cities 265 Martim Smolka and Claudia M. De Cesare Introduction 265 The phenomenon of informal land occupations 266 Property tax performance in cities with extensive informality 271 The property tax as a tool for reducing informality 278 Conclusion 283 References 284 13 Non-market Value and Hybrid Approaches to Property Taxation 287 William J. McCluskey and Riel Franzsen Introduction 287 Non-market valuation approaches 287 Other non-value approaches 293 Hybrid alternatives that use a form of value as the basis for the property tax 293 Flat-rate taxes 301 Conclusions 303 References 303 14 Computer Assisted Mass Appraisal and the Property Tax 307 William J. McCluskey, Peadar Davis, Michael McCord, David McIlhatton and Martin Haran Introduction 307 Concepts of CAMA and quality control issues 309 Mass appraisal techniques 315 Case study: MRA modelling 326 Conclusions 333 References 334 15 Geographic Information Systems and the Importance of Location: Integrating Property and Place for Better Informed Decision Making 339 David McIlhatton, Michael McCord, Peadar Davis and Martin Haran Introduction 339 Conclusions 355 References 356 Index 359