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Economic Effects of Taxes on Land:

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  • Steven C. Bourassa

Abstract

. Land taxes may not be neutral in their economic impacts due to liquidity effects. Liquidity effects of land taxes may be in the form of holding cost effects or capitalization effects. Holding cost effects may occur when land is being withheld from development for non‐financial reasons, such as the direct benefits of landownership. Capitalization effects may occur when there are imperfections in capital markets which prevent the acquisition of land for otherwise viable projects. Contrary to the analysis by Bentick, no liquidity effects should be expected due to variations in streams of land rent generated by different hypothetical development projects for a given site. Bentick's analysis relies on a misunderstanding of the nature of land rent.

Suggested Citation

  • Steven C. Bourassa, 1992. "Economic Effects of Taxes on Land:," American Journal of Economics and Sociology, Wiley Blackwell, vol. 51(1), pages 109-113, January.
    • Handle: RePEc:bla:ajecsc:v:51:y:1992:i:1:p:109-113
    DOI: 10.1111/j.1536-7150.1992.tb02516.x
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    References listed on IDEAS

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    1. Bentick, Brian L, 1979. "The Impact of Taxation and Valuation Practices on the Timing and Efficiency of Land Use," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 859-868, August.
    2. Feldstein, Martin S, 1977. "The Surprising Incidence of a Tax on Pure Rent: A New Answer to an Old Question," Journal of Political Economy, University of Chicago Press, vol. 85(2), pages 349-360, April.
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    Cited by:

    1. Steven C. Bourassa, 1993. "The Rent Gap Debunked," Urban Studies, Urban Studies Journal Limited, vol. 30(10), pages 1731-1744, December.
    2. Robert Andrew Peters, 2006. "Lessons for Economic Reform Based on Pennsylvania’s Experiences with the Two‐Tiered Property Tax," American Journal of Economics and Sociology, Wiley Blackwell, vol. 65(3), pages 701-731, July.
    3. Gary Owen Garner, 2012. "The significance of financial barriers caused by holding costs in greenfield residential development," ERES eres2012_003, European Real Estate Society (ERES).

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