Should land and capital be taxed at a uniform rate?
If jurisdictions are allowed to tax land and capital separately, they tax only land, because capital taxation distorts the allocation of mobile capital. To exploit absentee owners, however, jurisdictions tax land beyond the efficient level. As absentee ownership increases throughout the economy, land taxation results in greater inefficiency. To alleviate the inefficiency of overtaxing land, the higher-level government intervenes to require jurisdictions to tax both capital and land at a uniform rate, because the desire to attract capital lowers the tax rate. Uniform taxation of land and capital, or property taxation, thus may be more efficient than separate taxation.
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Volume (Year): 36 (2003)
Issue (Month): 2 (May)
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