Who Pays the Property Tax?

A critical aspect of the property tax, but one that is rarely addressed in public debate, is its 'economic incidence,' or who actually bears the burden of the tax, as opposed to its statutory incidence, or who literally pays the tax.

1 minute read

April 27, 2006, 1:00 PM PDT

By Chris Steins @planetizen


"For example, a landlord might pay a property tax bill, but if some of the tax is offset with a rent increase, then the tenant bears that part of the tax burden. Not surprisingly, estimates of the economic incidence of taxes depend on the relative responsiveness of supply and demand to tax-induced price changes â€" factors that explain the extent to which consumers and businesses can change their behavior to avoid the tax.

The economic incidence of a tax is also affected by the phenomenon of “capitalization” â€" changes in asset prices that reflect the discounted present values of the economic effects of future tax and/or public expenditure changes. For example, an increase in property taxes, holding expenditures constant, might be capitalized into land or house values. The prices of these assets might fall by the present value of the projected increase in future taxes, whereas increases in expenditures, holding property taxes constant, might have offsetting effects.

...[T]he key issue is whether the zoning restrictions or other mechanisms stressed by proponents of the benefit tax view are sufficiently binding to preclude the long-run adjustments in housing capital predicted by the capital tax view. This issue promises to be a fertile topic for future research, which may help clarify the answer to the long-standing and critical question of who pays the residential property tax."

Thursday, April 20, 2006 in Lincoln Institute of Land Policy

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Use Code 25for25 at checkout for 25% off an annual plan!

Redlining map of Oakland and Berkeley.

Rethinking Redlining

For decades we have blamed 100-year-old maps for the patterns of spatial racial inequity that persist in American cities today. An esteemed researcher says: we’ve got it all wrong.

May 15, 2025 - Alan Mallach

Logo for Planetizen Federal Action Tracker with black and white image of U.S. Capitol with water ripple overlay.

Planetizen Federal Action Tracker

A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.

May 14, 2025 - Diana Ionescu

Rendering of California High-Speed Rail station with bullet train.

California High-Speed Rail's Plan to Right Itself

The railroad's new CEO thinks he can get the project back on track. The stars will need to align this summer.

May 19, 2025 - Benjamin Schneider

Passengers exiting the back door of a blue public bus.

Opinion: Make Buses More Like Sidewalks

Sidewalks are an intuitive, low-cost, and easily accessible mobility tool. Can local buses function in the same way?

45 minutes ago - Fast Company

Protest

How Cities Can Support Climate Adaptation

In the face of federal cuts to climate resilience funding, a panel at ULI’s Resilience Summit offered suggestions for maintaining managed retreat and other climate adaptation programs.

1 hour ago - Smart Cities Dive

Screenshot of University Transportation Centers website

Transportation Research Centers Lose Key Federal Funding

The federal University Transportation Center program funds critical transportation research and innovation at 35 consortia of colleges and universities.

2 hours ago - Streetsblog USA

Urban Design for Planners 1: Software Tools

This six-course series explores essential urban design concepts using open source software and equips planners with the tools they need to participate fully in the urban design process.

Planning for Universal Design

Learn the tools for implementing Universal Design in planning regulations.