Taxing Property Transactions versus Taxing Property Ownership

Few studies have examined the use and effects of real property transfer taxes, especially in the U.S. This paper examines the variety of transfer tax programs currently in use in the U.S. and compares them to property taxes in terms of equity, efficiency, and revenue potential and stability. The next section examines the widespread use of property transfer taxes in the U.S. and other countries and compares them in terms of tax rates, tax base, tax authority, and use of revenues. In Section 3 we discuss the distributional impact of property transfer taxes including who ultimately bears the burden of the tax and whether the tax is regressive or progressive with respect to income. Section 4 looks at the efficiency effects of transfer taxes including the excess burden of the tax and its effect on household mobility. Section 5 examines the revenue potential of transfer taxes and their volatility, and Section 6 summarizes and concludes.