Home-owner Residential Property Taxes and their Burden on Net Personal Wealth: An Empirical Study for Australia

Abstract

Domestic residential property taxes can be viewed as a substitute for a tax on personal wealth. This paper measures the formal distributional characteristics of residential property taxes in Australia with respect to the net wealth of home-owners, and the net wealth of all households in the personal sector. Net wealth is estimated by a combination of investment income and survey methods. The study emphasises three major findings. First, on controlling for stage in the life-cycle, the formal incidence of residential property taxes on home-owners' net wealth is clearly regressive with respect to the income of home-owners. Secondly, residential property taxes are a relatively high burden on young home-owner households' net personal wealth. Finally, though tenants are not liable for residential property taxes in Australia and the choice of owner-occupation is income-elastic, the residential property tax burden on personal-sector wealth is not distributed progressively.