Individual property tax to fund public transport

Evgenii V. Leontev, Yulia V. Leontyeva

Abstract


Efficient and reliable public transport is of prime concern to city dwellers. To function efficiently, public transport generally needs subsidies from the state or local government. Our goal was to design and develop an alternative model of property tax that would provide financing for public transport. It was hypothesised that if the market value of real estate depends on the proximity of public transport, property tax can be a reliable source of financing for public transport. Based on the hedonic pricing theory, we used multiple regression to measure the impact of public transport proximity on the value of residential property. The data on the market value of property and property tax was taken from statistical tax reporting forms of the Federal Tax Service. The data on various public transport infrastructure facilities was used from the specialized open registers. We tested our alternative model of property tax, using the case of the Ekaterinburg Metro and the Tram and Trolleybus Company, through regression analysis of 7,685 objects of residential property in the City of Ekaterinburg. It was found that the efficiency of the underground service is higher than that of the city’s tram network. On the average, the proximity of underground stations increases the value of housing by over 6%. As predictive estimation of the amount of tax determined by the proximity of public transport showed, the alternative model of property tax is sufficient to cover capital expenditures of the city’s public transport operators and could, therefore, contribute to further expansion and modernization of the transport network.

 

For citation

Leontev E.V., Leontyeva Yu.V. Individual property tax to fund public transport. Journal of Tax Reform. 2021;7(1):6–19. DOI: 10.15826/jtr.2021.7.1.087

 

Article info

Received January 10, 2021; Revised March 14, 2021; Accepted April 9, 2021


Keywords


property tax model, public transport, property tax, property value, metro, tram

References


De Viti de Marco A. First Principles of Public Finance. London: Jonathan Cape; 1936. 429 p. Available at: https://ia801601.us.archive.org/12/items/in.ernet.dli.2015.462768/2015.462768.First-Principles-Of-Public-Finance.pdf

Wicksell K. A New Principle of Just Taxation. In: Musgrave R.A., Peacock A.T. (eds) Classics in the Theory of Public Finance. London: Palgrave Macmillan; 1958, pp. 72–118. DOI: 10.1007/978-1-349-23426-4_6

Lindahl E. Just Taxation– A Positive Solution. In: Musgrave R.A., Peacock A.T. (eds) Classics in the Theory of Public Finance. London: Palgrave Macmillan; 1958, pp. 168–176. DOI: 10.1007/978-1-349-23426-4_11

Mazzola U. The formation of the prices of public goods. In: Musgrave R.A., Peacock A.T. (eds) Classics in the Theory of Public Finance. London: Palgrave Macmillan; 1958, pp. 37–47. DOI: 10.1007/978-1-349-23426-4_4

Enoch M., Potter S., Ison S. A Strategic approach to financing public transportthrough property values. Public Money and Management, 2005;25(3):147–154. DOI: 10.1111/j.1467-9302.2005.00467.x

Keid M.G. Rev.: Peacock, A. T. (Ed.). Income Re distribution and Social Policy: A Set of Studies. Pp. 296. London: Jonathan Cape, 1954. 25s. net. The Annals of the American Academy of Political and Social Science. 1954;295(1):165–165. DOI: 10.1177/000271625429500142

Tax Burdens and Benefits of Government Expenditures by Income Class, 1961 and 1965. Tax Foundation, INC. Research Publication No. 9. New York, 1967. Available at: https://taxfoundation.org/tax-burdens-and-benefits-government-expenditures-income-class-1961-and-1965/

Aaron H., McGuire M. Public Goods and Income Distribution. Econometrica. 1970:38(6):907–920. DOI: 10.2307/1909699

Van den Branden T. (ed.) Fair and efficient pricing in transport– the role of charges and taxes. Birmingham: Oscar Faber; 2000. Available at: https://thepep.unece.org/sites/default/files/2017-06/EU%20taxing%20transport.pdf

Enoch M.P., Nijkamp P., Potter S., Ubbels B. (eds) Unfare Solutions: local earmarked charges to fund public transport. London: Spon Press; 2004. 176 p. Available at: https://www.routledge.com/Unfare-Solutions-Local-Earmarked-Charges-to-Fund-Public-Transport/Enoch-Nijkamp-Potter-Ubbels/p/book/9780415652995

Atkinson A., Stiglitz E. Lectures on Public Economics Updated edition. 2nd ed. Princeton University Press; 2015. Available at: https://www.perlego.com/book/738020/lectures-on-public-economics-updated-edition-pdf

Leontyeva Yu., Mayburov I. Theoretical framework for building optimal transport taxation system. Journal of Tax Reform. 2016;2(3):193–207. DOI: 10.15826/jtr.2016.2.3.024

Mayburov I., Leontyeva Yu. Theoretical and methodological aspects of building optimal system of transport payments. Vestnik Sankt-Peterburgskogo Universiteta. Ekonomika = St Petersburg University Journal of Economic Studies. 2017;33(3):392–414. DOI: 10.21638/11701/spbu05.2017.303

Farrell S. Financing European Transport Infrastructure. London: Palgrave Macmillan; 1999. DOI: 10.1057/9780230502291

Buehler R., Pucher J. Making public transport financially sustainable. Transport Policy. 2011;18(1):126–138. DOI: 10.1016/j.tranpol.2010.07.002

Austin D., Dinan T. Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes. Journal of Environmental Economics and Management. 2005;50(3):562–582. DOI: 10.1016/j.jeem.2005.05.001

Tanishita M., Kashima S., Hayes W.J. Impact analysis of car-related taxes on fuel consumption in Japan. Journal of Transport Economics and Policy 2003;37(2):133–155. Available at: https://www.researchgate.net/publication/46557303

Sandmo A. The scale and scope of environmental taxation. In: E. Albi, J. Martinez-Vazquez (eds). The Elgar Guide to Tax Systems. Edward Elgar Publishing; 2011 Chapter 8.

White P.R. Allocation of funds to public transport investment and operating support. Transportation. 1978;7:225–242. DOI: 10.1007/BF00184641

Ubbels B., Nijkamp P. Unconventional funding of urban public transport. Transportation Research Part D: Transport and Environment. 2002;7(5):317–329 DOI: 10.1016/S1361-9209(01)00027-X

Vigrass J.W., Smith A.K. Light rail in Britain and France: Study in contrasts, with some similarities. Transportation Research Record. 2005;1930(1):79–87. DOI: 10.1177/0361198105193000110

Owen J.K., Bergerud C., Criss B. L. A’s $40B transportation program: Success of a program management information system. AACE International Transactions. 2012;2:990–1010.

Pucher J. Back on track: eight steps to rejuvenate transport in Canada. Alternatives Journal. 1998;24(1):26–34.

Jalon M., Sanchez de Lara M., Gelashvili V. Explanatory factors for public transportation financing needs in Spain. Journal of Advanced Transportation. 2019:1837628. DOI: 10.1155/2019/1837628

Dye R.F., Merriman D.F. The effects of tax increment financing on economic development. Journal of Urban Economics. 2000;47(2):306–328 DOI: 10.1006/juec.1999.2149

Man J.Y., Rosentraub M.S. Tax increment financing: Municipal adoption and effects on property value growth. Public Finance Review. 1998;26(6):523–547. DOI: 10.1177/109114219802600601

Clark G.L., O’Connor К. The informational content of financial products and the spatial structure of the global finance industry. In: Cox K.R. (ed.) Spaces of globalization: reasserting the power of the local. New York: Guilford Press; 1997, pp. 89–114. Available at: https://ora.ox.ac.uk/objects/uuid:b4eaf96d-6133-4fc7-ba5d-0af11bd2c994

Weber R. Selling city futures: The financialization of urban redevelopment policy. Economic Geography. 2010;86(3):251–274. DOI: 10.1111/j.1944-8287.2010.01077.x

Smolka M.O., Furtado F. Mobilising land value increments for urban development: learning from the Latin America experience. IDS Bulletin. 2002;33(3):84–89. DOI: 10.1111/j.1759-5436.2002.tb00027.x

Cocconcelli L., Medda F.R. Boom and bust in the Estonian real estate market and the role of land tax as a buffer. Land Use Policy. 2013;30(1):392–400. DOI: 10.1016/j.landusepol.2012.04.007

Bourassa S.C. Land value taxation and new housing development in Pittsburgh. Growth and Change. 1987;18(4):44–56. DOI: 10.1111/j.1468-2257.1987.tb00087.x

Malpezzi S. Hedonic pricing models: a selective and applied review. In: T. O’Sullivan, K. Gibb (eds) Housing economics and public policy. Wiley; 2002, pp. 67–89. DOI: 10.1002/9780470690680.ch5

Freeman A.M. Hedonic prices, property values and measuring environmental benefits: A survey of the issues. Scandinavian Journal of Economics. 1979;81(2):154–171. DOI: 10.2307/3439957

Ridker R.G., Henning J.A. The determinants of residential property values with special reference to air pollution. The Review of Economics and Statistics. 1967;49(2):246–257. DOI: 10.2307/1928231

Chin T.L., Chau K.W. A critical review of literature on the hedonic price model. International Journal for Housing Science and Its Applications. 2003;27(2):145–165. Available at: https://ssrn.com/abstract=2073594

Leontev E.V., Mayburov I.A. Assessment of the impact of public transport accessibility on the value of urban residential real estate. Journal of Applied Economic Research. 2021;20(1):62–83. DOI: 10.15826/vestnik.2021.20.1.003




Copyright (c) 2021 Evgenii V. Leontev, Yulia V. Leontyeva

eLibrary logoeLibrary logo  DOAJ logo ERIH PLUS logo 

© Journal of Tax Reform : ISSN 2414-9497 (online), ISSN 2412-8872 (print)