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The Property Tax Incidence Debate and the Mix of State and Local Finance of Local Public Expenditures

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  • George R. Zodrow

    ()
    (Baker Institute for Public Policy, Rice University)

Abstract

Many states in the US have in recent years changed the mix of state and local revenue sources used to finance local public expenditures, especially primary and secondary education, with local property taxes being replaced by various sources of state tax revenue. This article examines the desirability of such a tax substitution, focusing on the implications of the long-standing debate between the “benefit tax” and “capital tax” views of the incidence of the tax. It also includes a discussion of some recent research that elaborates the capital tax view of the property tax.

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Bibliographic Info

Paper provided by Oxford University Centre for Business Taxation in its series Working Papers with number 0801.

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Date of creation: 2008
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Handle: RePEc:btx:wpaper:0801

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Keywords: Property tax incidence; capitalization; capital tax view; new view; benefit tax view; Texas tax reform; margin tax;

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  1. Gravelle Jane G & Smetters Kent A., 2006. "Does the Open Economy Assumption Really Mean That Labor Bears the Burden of a Capital Income Tax?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 6(1), pages 1-44, August.
  2. Zodrow, George R. & Mieszkowski, Peter M., 1986. "The new view of the property tax A reformulation," Regional Science and Urban Economics, Elsevier, vol. 16(3), pages 309-327, August.
  3. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  4. Wassmer, Robert W., 1993. "Property Taxation, Property Base, and Property Value: An Empirical Test of the 'New View'," National Tax Journal, National Tax Association, vol. 46(2), pages 135-59, June.
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  7. Wildasin, David E., 1989. "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," Journal of Urban Economics, Elsevier, vol. 25(2), pages 193-212, March.
  8. Bradford, David F., 1978. "Factor prices may be constant but factor returns are not," Economics Letters, Elsevier, vol. 1(3), pages 199-203.
  9. Rubinfeld, Daniel L., 1987. "The economics of the local public sector," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 11, pages 571-645 Elsevier.
  10. Caroline M. Hoxby, 1998. "All School Finance Equalizations Are Not Created Equal," NBER Working Papers 6792, National Bureau of Economic Research, Inc.
  11. Zodrow,George R. & Mieszkowski,Peter (ed.), 2002. "United States Tax Reform in the 21st Century," Cambridge Books, Cambridge University Press, number 9780521803830, October.
  12. Glaeser, Edward L, 1996. " The Incentive Effects of Property Taxes on Local Governments," Public Choice, Springer, vol. 89(1-2), pages 93-111, October.
  13. Caroline M. Hoxby & Ilyana Kuziemko, 2004. "Robin Hood and His Not-So-Merry Plan: Capitalization and the Self-Destruction of Texas' School Finance Equalization Plan," NBER Working Papers 10722, National Bureau of Economic Research, Inc.
  14. Fischel, William A., 2001. "Homevoters, Municipal Corporate Governance, and the Benefit View of the Property Tax," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 157-74, March.
  15. Mieszkowski, Peter, 1972. "The property tax: An excise tax or a profits tax?," Journal of Public Economics, Elsevier, vol. 1(1), pages 73-96, April.
  16. Kotlikoff, Laurence J. & Summers, Lawrence H., 1987. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 16, pages 1043-1092 Elsevier.
  17. Hoyt, William H., 1991. "Competitive jurisdictions, congestion, and the Henry George Theorem : When should property be taxed instead of land?," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 351-370, November.
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  21. Zodrow, George R., 2001. "The Property Tax as a Capital Tax: A Room with Three Views," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 139-56, March.
  22. Michael Keen & David Wildasin, 2004. "Pareto-Efficient International Taxation," American Economic Review, American Economic Association, vol. 94(1), pages 259-275, March.
  23. Zodrow, George R. & Mieszkowski, Peter, 1986. "Pigou, Tiebout, property taxation, and the underprovision of local public goods," Journal of Urban Economics, Elsevier, vol. 19(3), pages 356-370, May.
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  26. Mieszkowski, Peter & Zodrow, George R, 1989. "Taxation and the Tiebout Model: The Differential Effects of Head Taxes, Taxes on Land Rents, and Property Taxes," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1098-1146, September.
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  28. Carroll, Robert & Yinger, John, 1994. "Is the Property Tax a Benefit Tax? The Case of Rental Housing," National Tax Journal, National Tax Association, vol. 47(2), pages 295-316, June.
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Citations

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Cited by:
  1. Wildasin, David, 2009. "Fiscal Competition for Imperfectly-Mobile Labor and Capital: A Comparative Dynamic Analysis," IZA Discussion Papers 4463, Institute for the Study of Labor (IZA).
  2. Edoardo Di Porto & Federico Revelli, 2009. "Central command, local hazard and the race to the top," Working Papers 2009/26, Institut d'Economia de Barcelona (IEB).
  3. Athiphat Muthitacharoen & George R. Zodrow, 2008. "The Efficiency Costs of Local Property Tax," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0815, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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