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Property Tax Incidence in a Multijurisdictional Neoclassical Model

Author

Listed:
  • Karl E. Case

    (Wellesley College)

  • James H. Grant

    (Lewis and Clark College)

Abstract

This article presents a simple long-run multijurisdictional neoclassical model that is used to simulate the incidence of a residential property tax in a semi-open metropolitan area. Housing is produced using capital and land, and households consume housing and a composite good Capital and the composite are in perfectly elastic supply. In the model, a fixed number of households sort themselves across 25 jurisdictions. First, a uniform tax is imposed in all jurisdictions. Next, the tax is raised in one single jurisdiction. The excise effects of raising the tax turn out to be surprisingly large. In the long run, a 25% increase in the tax rate only generates 6.6% more revenue for the taxing jurisdiction. Explicit excess burdens are calculated using the indirect utility approach.

Suggested Citation

  • Karl E. Case & James H. Grant, 1991. "Property Tax Incidence in a Multijurisdictional Neoclassical Model," Public Finance Review, , vol. 19(4), pages 379-392, October.
  • Handle: RePEc:sae:pubfin:v:19:y:1991:i:4:p:379-392
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    Cited by:

    1. Yan Song & Yves Zenou, 2009. "How Do Differences In Property Taxes Within Cities Affect Urban Sprawl?," Journal of Regional Science, Wiley Blackwell, vol. 49(5), pages 801-831.
    2. Bradbury, Katharine L. & Mayer, Christopher J. & Case, Karl E., 2001. "Property tax limits, local fiscal behavior, and property values: evidence from Massachusetts under Proposition," Journal of Public Economics, Elsevier, vol. 80(2), pages 287-311, May.
    3. Song, Yan & Zenou, Yves, 2008. "How Differences in Property Taxes within Cities Affect Urban Sprawl?," Working Paper Series 754, Research Institute of Industrial Economics.
    4. Song, Yan & Zenou, Yves, 2006. "Property tax and urban sprawl: Theory and implications for US cities," Journal of Urban Economics, Elsevier, vol. 60(3), pages 519-534, November.
    5. Case, Karl E. & Mayer, Christopher J., 1996. "Housing price dynamics within a metropolitan area," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 387-407, June.
    6. Cho, Seong-Hoon & Kim, Seung Gyu & Roberts, Roland K., 2009. "Measuring the Effects of a Land Value Tax on Land Development," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46760, Southern Agricultural Economics Association.

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