Sacha Dray, Camille Landais, & Stefanie Stantcheva: Wealth and Property Taxation in the United States (April 19, 2022)

Sacha Dray, Camille Landais, and Stefanie Stantcheva have made available for download their article, “Wealth and Property Taxation in the United States”. The abstract is as follows:

We study the history and geography of wealth accumulation in the US, using newly collected historical property tax records since the early 1800s. The property tax in the US was a comprehensive tax on all kinds of properties (real estate, personal property, and financial wealth), making it one of the first “wealth taxes.” Our new data allows us to reconstruct wealth series at the city, county, and state levels over time and to study the ef- fects of property taxes on property values, migration, and investment. We first document the long-term evolution of household wealth in the US since the early 1800s, offering new fine-grained and high-frequency estimates of household wealth over a long period of time. The US had significantly lower wealth than Europe and only caught up with Europe after WW1, despite GDP per capita having been larger than that of France or the UK since the late 1870s. Second, we study the spatial allocation of wealth in the US over the long run. The geography of wealth is highly persistent and factors related to geography and demo- graphics correlate strongly with wealth at the city, county, and state levels. Finally, we study the role of the property tax (i.e., a “wealth tax”) on wealth accumulation, using the large variation in property tax rates across more than 300 municipalities. We find an im- plied elasticity of capital income with respect to the net-of-tax rate on income of about .70 after 10 years. This elasticity can be broken down into an (extensive) elasticity of migration of about .26 and an (intensive) elasticity of per capita income of about .44. The intensive margin elasticity appears to be driven in part by reporting and avoidance responses, but also by significant capitalization of property taxes in local real estate prices.

Click here to see the full article: “Wealth and Property Taxation in the United States”

Posted by Mallory Wentz, Associate Editor, Wealth Strategies Journal.

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