Protecting lower-income owners, incentives to build and rent. A smarter way to tax real estate
A comprehensive proposal for reforming Czech real estate taxation. The core move is to split the property tax in two – a tax on land values (including built-up plots) and a separate tax on building values – and to shift most of the weight onto land, following the logic Milton Friedman laid out and the design Finland currently uses. Taxing land does not disincentivize construction, whereas taxing buildings does. The proposal pairs this with a taxpayer credit, an additional credit for pensioners and vulnerable households, and a tighter link between tax rates and actual market prices across eight regional price bands. Paired with PAQ’s earlier labor-tax reform, it would be fiscally neutral overall while leaving roughly 68 % of working households better off.
The study is also notable for what it fixes in the current Czech system: the existing property tax is degressive (owners of cheaper properties pay a higher effective rate than owners of the most valuable ones), almost ignores market prices, and offers no protection for vulnerable owners. The proposal is designed to rebalance all three of these at once, and additionally tightens the taxation of rental income to close a large optimization gap between the flat-rate and real-cost regimes.
My contribution was the foreign-literature research, focused on how systems that split land and building taxation work in practice – in particular the Finnish model and several American municipalities that use land-value taxation. I worked through the exemption structures those systems use to shield vulnerable owners, and gave input on how the Czech modeling could be constructed.
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