The Property Tax as a Progressive Tax

The passing of the legislation for the (Local?) Property Tax and the announcements from the Revenue Commissioners of how they intend to collect it have once again put this relatively minor issue towards the top of the public debate.

The now-abolished €100 Household Charge was expected to raise €160 million in 2012 from the 1.6 million liable properties.  In 2013, it is expected that the half-rate Property Tax will raise €250 million – an increase of €90 million.  This is an average annual increase of €56 per household or a little more than €1 a week.

Is the Property Tax progressive?  Without detailed household income and property valuations it is difficult to say but an broad overview of income by tenure status suggests it is.  This is a table from the 2009/10 Household Budget Survey.

[This is data up to 2010.  The recently released Survey on Income and Living Conditions put gross weekly household income at €1,015 in 2011, a 1.1% drop on the above figure.]

Owner-occupiers have higher incomes than other categories.  The group who own their home outright have an average annual gross household income (direct income plus state transfers) of nearly €47,000, while owner-occupiers with a mortgage had an average annual gross household income of €75,000.  If is, of course, the case that averages only provide a partial picture and a fuller insight into the distribution would be better.  Alas it is not available.

Households living in rental accommodation have lower gross incomes than owner-occupiers and are not legally liable for the Property Tax (though determining the economic incidence of the tax is difficult).

There are around 1.15 million owner-occupied homes in Ireland, roughly even divided between those who own their home outright and those who have a mortgage on their home.  There are around 450,000 households in rented accommodation with 150,000 renting from a local authority or voluntary body and the other 300,000 households renting from a private landlord.

Finally, here is an extract from a table in the SILC on disposable income (gross income after direct taxation) though it doesn’t break down home-owners into mortgaged/non-mortgaged households.