A taxing issue: the constraining effects of historical state capacity on European property taxes today

Abstract

ABSTRACT Property tax regimes in European states vary in design, yield and progressivity, but the sources of variation have been understudied. Through inductive process tracing of two diverse cases, the UK and Sweden, this paper explores the impact of the state’s capacity to value property. It finds that, in Sweden, routine and regular property valuation was historically institutionalized. This enabled a progressive property tax regime until house prices rose rapidly in the 1990s. Thereafter this capacity became a political liability: translating increasing prices into higher tax liability for typical homeowners, generating political resistance and incentivizing reform. In the UK, valuation capacity was never institutionalized enabling regressive nineteenth-century property taxes to become path dependent. Without routine valuations capturing increasing house prices, tax liabilities for ordinary homeowners remained stable, containing dissent and enabling a higher yield but regressive regime. In both cases, but via different pathways, property taxes under tax the rich.