Mechanism And Empirical Study On The Impacts Of Real Estate Taxes On Housing Price

Real estate taxes policy is an effective instrument for real estate market regulation and socio-economic resources distribution. It provides revenues for local governments, and plays a very important role in the entire tax system. Real estate taxes policy has become a important tool for real estate market macro-control, along with the implementation of land supply and finance policies. In recent years, the discussions on housing prices and real estate taxes reform are increasing. How does real estate taxes policy affect housing price? What is the mechanism of real estate taxes affecting housing price? What are the characteristics of China real estate taxes effects on housing price? How does the China real estate taxes reform impact housing price and local public finance? This study aims to analyze these questions.This study mainly consists of five parts, including literature review, theoretical study, empirical study, international experience and real estate taxes reform effect discussion. Firstly, literature review examined the relative methods and theory about the impact of real estate taxes on housing price. Secondly, in the theoretical study, partial equilibrium analysis, Tiebout model, utility function and bid-rent function were employed to study the mechanism of real estate taxes' effects on housing price from the perspectives of general theoretical analysis, local public expenditure perspective and partial equilibrium framework. Thirdly, empirical study employed national level data, regional panel data and city level data to analyze the relationship between real estate taxes and housing price, by employing panel stationarity analysis, panel cointegraiotn test, panel error correction model, panel granger causality test and panel regression model. Fourthly, we adopted the national and district perspectives to analyze the real estate taxes reform experience Taiwan and other places. Finally, we discuss the impact of real estate taxes reform on housing price fluctuation and local public finance, and measure the financial gap after the reform.The main conclusions go as follow.(1) Real estate value would decrease for real estate capitalization and increase for local public service capitalization. How does real estate value change depends on the relationship among real estate taxes, local public expenditure and housing price.(2) Under consumer budget constraint, business tax and personal income tax would affect the consumption structure of house, public services and composite goods. The taxes would change the level of housing consumption and finally influence housing price.(3) The empirical study on national level data and regional panel reveal that China real estate taxes had negative impact on housing price, while local public expenditure would increase housing price.(4) The effects of real estate taxes on housing price are regionally different, which is more obvious in Middle China than West China. In East China the real estate taxes effects on housing price are not obvious. We also found that each kind of real estate tax's impact on housing price was different.(5) The effects of local public expenditure on housing price are dynamically and regionally different. We adopted the variables of traffic resources, educational resources, cultural resources, medical resources and the environment resources to analyze their impacts on housing price, and get the same conclusion.(6) The empirical study with the case of Hangzhou reveals the significant correlation between real estate taxes incentives and housing price fluctuation. We found that real estate transfer tax policy implemented in January 2004 has a significant impact on housing price.(7) International experience shows that whether the real estate taxes reform get the taxpayer's support, adhere to the "broad tax base, less categories of real estate taxes and low tax rates"direction, accurately deal with the relationship with public finance and establish effective real estate tax collection managements are very important factors for successful China real estate taxes reform.(8) Simulation study of the impact of China real estate taxes reform on housing price and local public expenditure shows that the reform would lead to housing price decrease and real estate taxes revenue increase. It also shows that different reform plans induces to different effects on housing price and local public finance.The policy implications are: (1) real estate taxes policy and pubic expenditure budget should be jointly used to control the real estate market development; (2) a reform on real estate taxes system is necessary. The tax burden in real estate circulation should be reduced, and property tax should be collected; (3) regional real estate taxes policies should be carried out; (4) measures to strengthen local financial regulation and real estate taxes collection management would contribute to a successful real estate taxes reform.