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Revisiting the Excise Tax Effects of the Property Tax

Listed author(s):
  • Athiphat Muthitacharoen


    (Tax Analysis Division, Congressional Budget Office, Washington, DC, USA)

  • George R. Zodrow

    (Baker Institute for Public Policy, Rice University, Houston, TX, USA
    Centre for Business Taxation, Oxford University, Oxford, UK)

The authors analyze the excise tax effects of a general property tax from the perspective of a small open economy facing a perfectly elastic supply of capital. The model differs from most that have appeared in the literature in the following ways: (1) the property tax is applied in a four-sector model with three taxed sectors—manufacturing, housing, and services, and a tax-exempt agricultural sector. Only manufacturing and agriculture produce tradable goods; (2) the analysis considers an “intermediate run†time frame in which labor is perfectly mobile across production sectors but fixed within the jurisdiction, while land is fixed in each sector; and (3) all production sectors use capital, labor, and land. The authors find that the excise tax effects are borne primarily by labor and land. The results also indicate that the degree of backward tax-shifting declines markedly in a longer run time frame in which labor is perfectly mobile across jurisdictions.

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Article provided by in its journal Public Finance Review.

Volume (Year): 40 (2012)
Issue (Month): 5 (September)
Pages: 555-583

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Handle: RePEc:sae:pubfin:v:40:y:2012:i:5:p:555-583
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