Deck 20: Taxes on Wealth and Property

Question 1

Property tax in Canada is predominately a provincial tax.

A)True
B)False
C)Uncertain

Answer 1

False

Question 2

In the traditional view, evidence suggests the structures part of the property tax is probably

A)progressive.
B)regressive.
C)neither regressive nor progressive.
D)zero.

Answer 2

neither regressive nor progressive.

Question 3

The three views of the property tax are not mutually exclusive alternatives; each may be valid in different contexts.

A)True
B)False
C)Uncertain

Answer 3

True

Question 4

In the traditional view, the property tax on structures creates inefficiency by discouraging new construction and repairs to the existing stock of buildings.

A)True
B)False
C)Uncertain

Question 5

The property tax receives criticism because

A)it is highly visible.
B)it is perceived as regressive.
C)it is levied on an estimated value.
D)all of these answers are correct.

Question 6

Taxes on have not been used in Canada.

A)net wealth
B)capital
C)wages
D)real property

Question 7

The new view is that property tax is a(n)

A)uniform tax.
B)capital tax.
C)user fee.
D)excise tax on land and structures.

Question 8

The new view of the property tax uses a standard partial equilibrium framework.

A)True
B)False
C)Uncertain

Question 9

Statistics Canada estimated that the top 10 percent of wealth holders owned of wealth in Canada in 2012.

A)48 percent
B)71 percent
C)10 percent
D)99 percent

Question 10

Property tax as a user fee implies that

A)tax revenue is zero.
B)the burden is borne by landowners.
C)the burden is borne by owners of capital.
D)the property tax creates no excess burden.

Question 11

In the traditional view, the supply curve of structures is

A)perfectly vertical.
B)perfectly horizontal.
C)upward sloping.
D)downward sloping.

Question 12

Assessment ratios differ systematically for different types of property.

A)True
B)False
C)Uncertain

Question 13

The assessed value of a home is

A)always lower than its market value.
B)the annual rate of deprecation of a home because of use.
C)an annual 6% increase in the value of a home.
D)the value that the jurisdiction uses to assign taxes.

Question 14

An estate tax reflects the market value of a property.

A)True
B)False
C)Uncertain

Question 15

There is no federal property tax in Canada.

A)True
B)False
C)Uncertain

Question 16

The traditional view is that property tax is a(n)

A)uniform tax.
B)capital tax.
C)user fee.
D)excise tax on land and structures.

Question 17

In the traditional view, the property tax that falls on structures shifts the entire burden to the

A)government.
B)bank.
C)landowners.
D)tenants.

Question 18

In the traditional view, the burden of the property tax that falls on land that cannot be varied falls completely on the landowner.

A)True
B)False
C)Uncertain

Question 19

The assessment ratio is

A)the tax liability to the tax rate.
B)the ratio of assessed value to market value.
C)the sale value at death to the market value.
D)always lower than the market ratio.

Question 20

An example of a stock variable is

A)consumption.
B)sales.
C)wealth.
D)income.

Question 21

In the new view, the general effect of the tax is to lower the return to capital, which tends to be regressive in its impact on the income distribution.

A)True
B)False
C)Uncertain

Question 22

Refer to the figure below. Suppose that the supply of land is constant at L acres, and rent per acre is
$400. In addition, the before-tax demand for land can be characterized by the equation P = 500 - 2L, where L is the acres of land and P is the rent.
(A)What is the constant supply of land (L)in the market?
(B)If the after-tax demand curve, , can be written as P = 400 - 4L, what is , and how much tax revenue is generated?

Question 23

Property taxes are not very popular. People might dislike other taxes just as much, but feel powerless to change them. If the assessed value of the property does not rise or, in fact, declines, then this should be followed by decreases in tax rates. This, however, is not welcomed by property owners, either. Why?

Question 24

In the new view, assuming property tax can be approximated as a uniform tax, the burden falls entirely on owners of capital.

A)True
B)False
C)Uncertain

Question 25

Refer to the figure below. Suppose that the supply curve is constant at $10. Suppose further that the before-tax demand curve DB can be written as B = 20 - P/2, where B is the number of structures per year and P is the price.
(A)Find B0.
(B)Suppose that the after-tax demand curve, , can be written as B = 20 - P. Find B1 and .

Question 26

Some cities have a relatively high residential property tax, while others have a low residential property tax. Give an explanation for this.

Question 27

Bob and Doug both own properties with market value $550,000. Bob's property value is assessed at
$620,000 while Doug's is assessed at $670,000. Suppose they face the same statutory tax rate of 1.5 percent. What are the effective tax rates faced by bob and Doug? Why would statutory tax rates differ from the effective tax rates?