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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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Author Info
George R. Zodrow () (Baker Institute for Public Policy, Rice University)

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

Find related papers by JEL classification:
H10 - Public Economics - - Structure and Scope of Government - - - General
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, vol. 88(6), pages 1065-1091, June. [Downloadable!] (restricted)
  3. Krelove, R., 1993. "The persistence and inefficiency of property tax finance of local public expenditures," Journal of Public Economics, Elsevier, vol. 51(3), pages 415-435, July. [Downloadable!] (restricted)
  4. Sullivan, Arthur M., 1984. "The general equilibrium effects of the industrial property tax: Incidence and excess burden," Regional Science and Urban Economics, Elsevier, vol. 14(4), pages 547-563, November. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
    Other versions:
  6. Flatters, Frank & Henderson, Vernon & Mieszkowski, Peter, 1974. "Public goods, efficiency, and regional fiscal equalization," Journal of Public Economics, Elsevier, vol. 3(2), pages 99-112, May. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
  8. Bradford, David F., 1978. "Factor prices may be constant but factor returns are not," Economics Letters, Elsevier, vol. 1(3), pages 199-203. [Downloadable!] (restricted)
  9. George Zodrow, 2003. "Tax Competition and Tax Coordination in the European Union," Asia-Pacific Financial Markets, Springer, vol. 10(6), pages 651-671, November. [Downloadable!] (restricted)
    Other versions:
  10. 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. [Downloadable!] (restricted)
  11. Caroline M. Hoxby, 2001. "All School Finance Equalizations Are Not Created Equal," The Quarterly Journal of Economics, MIT Press, vol. 116(4), pages 1189-1231, November. [Downloadable!] (restricted)
    Other versions:
  12. Hamilton, Bruce W, 1976. "Capitalization of Intrajurisdictional Differences in Local Tax Prices," American Economic Review, American Economic Association, vol. 66(5), pages 743-53, December. [Downloadable!] (restricted)
  13. Michael Keen & David Wildasin, 2004. "Pareto-Efficient International Taxation," American Economic Review, American Economic Association, vol. 94(1), pages 259-275, March. [Downloadable!]
  14. 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. [Downloadable!] (restricted)
    Other versions:
    • Laurence J. Kotlikoff & Lawrence H. Summers, 1988. "Tax Incidence," NBER Working Papers 1864, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. 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. [Downloadable!] (restricted)
  16. 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. [Downloadable!] (restricted)
  17. 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. [Downloadable!] (restricted)
  18. 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. [Downloadable!] (restricted)
  19. Wilson, John D., 1986. "A theory of interregional tax competition," Journal of Urban Economics, Elsevier, vol. 19(3), pages 296-315, May. [Downloadable!] (restricted)
  20. Glaeser, Edward L, 1996. " The Incentive Effects of Property Taxes on Local Governments," Public Choice, Springer, vol. 89(1-2), pages 93-111, October.
    Other versions:
  21. Jane Gravelle & Kent Smetters, 2006. "Does the Open Economy Assumption Really Mean That Labor Bears the Burden of a Capital Income Tax?," Advances in Economic Analysis & Policy, Berkeley Electronic Press, vol. 6(1), pages 1548-1548. [Downloadable!] (restricted)
  22. Slemrod, Joel, 1990. "Optimal Taxation and Optimal Tax Systems," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 157-78, Winter. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. David E. Wildasin, 2009. "Fiscal Competition for Imperfectly-Mobile Labor and Capital: A Comparative Dynamic Analysis," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Athiphat Muthitacharoen & George R. Zodrow, 2008. "The Efficiency Costs of Local Property Tax," International Studies Program Working Paper Series, at AYSPS, GSU paper0815, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
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