We analyze the incidence and the welfare implications of property
taxation. We suggest a novel theoretical perspective by introducing property taxes in
a spatial equilibrium model, where workers and firms are mobile but have locationspecific
preferences, and where tax revenues finance local public goods. The model
predicts that welfare effects of property taxation depend on four reduced-form
elasticities. We estimate these elasticities using an event-study design and exploiting
the institutional setting of municipal property taxation in Germany with more than
31,000 tax reforms in the years between 1992�2017. Our results imply that renters
bear one fifth, firm owners about one third, and land owners more than 40 percent
of the welfare loss of property tax increases.
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