Protectionist Property Taxes

66 Pages Posted: 6 Mar 2020

See all articles by Andrew T. Hayashi

Andrew T. Hayashi

University of Virginia School of Law

Richard M. Hynes

University of Virginia School of Law

Date Written: March 5, 2020

Abstract

National restrictions on trade and immigration are the most salient illustrations of the current protectionist moment, but cities have played their part too, taxing foreign investors in local real estate and imposing second or vacant home taxes that indirectly burden foreign investment. Although these protectionist property taxes are new, they draw from an old well of suspicion about foreign ownership. We provide economic and historical context for the recent wave of protectionist property taxes and evaluate their legality under U.S. law. We conclude that taxes on second or vacant homes would likely survive constitutional challenge but facially protectionist property taxes probably would not. We then assess the policy merits of these taxes using an economic framework that highlights how law affects housing risk. We show that foreign real estate investment can reduce the riskiness of local housing markets, so that even if a city can get away with enacting a protectionist property tax, it is not typically a good idea. Government spending can better achieve policy goals such as affordable housing and neighborhood stability without running afoul of constitutional prohibitions.

Keywords: Tax, Discrimination, Law and Economics

Suggested Citation

Hayashi, Andrew T. and Hynes, Richard M., Protectionist Property Taxes (March 5, 2020). Virginia Public Law and Legal Theory Research Paper No. 2020-24; Virginia Law and Economics Research Paper No. 2020-02. Available at SSRN: https://ssrn.com/abstract=3549340 or http://dx.doi.org/10.2139/ssrn.3549340

Andrew T. Hayashi (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Richard M. Hynes

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States
434-924-3743 (Phone)

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