THE IMPACT OF PROPERTY TAXATION ON BUSINESS INVESTMENT IN ALBERTA

Alberta municipalities rely heavily on property taxes levied on residential and non-residential sectors to finance local public services. This paper investigates the effects of non-residential property tax rate on business investment using panel data from 17 Alberta cities over the 1998-2017 period....

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Bibliographic Details
Published in:The School of Public Policy publications (Online) 2021-03, Vol.14 (1)
Main Authors: Bev Dahlby, Ergete Ferede, Mukesh Khanal
Format: Article
Language:English
Online Access:Get full text
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Summary:Alberta municipalities rely heavily on property taxes levied on residential and non-residential sectors to finance local public services. This paper investigates the effects of non-residential property tax rate on business investment using panel data from 17 Alberta cities over the 1998-2017 period. We find that a one mill increase in the non-residential property tax rate is associated with a $49 decrease in commercial and industrial real capita investment. Based on this estimate, we calculate the marginal cost of public funds for the non-residential property tax, which range from 3.12 for Lethbridge to 1.21 for Leduc.  We also find that business taxes that are levied on the rental value of a business property have a negative impact on investment, while higher expenditures on municipal services do not have a significant effect on business investment.
ISSN:2560-8312
2560-8320