Abstract
The paper investigates the effect of the property taxation reform introduced in Sweden after April 2997 on the market price of the affected properties (one-family houses). Inference is focused on discount rates, growth rates and the implied degree of tax capitalization. Stronger results for the capital compared to the rest of the country underline the importance of land scarcity for the degree of tax capitalization. The degree of tax capitalization is very sensitive to the real discount rate, which under full degree of tax capitalization reaches 4%. An increase in real discount rate from 3,5% to 4,5% nearly doubles the degree of tax capitalization.