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Income taxes, property values, and migration

  • Glazer, Amihai
  • Kanniainen, Vesa
  • Poutvaara, Panu

We consider the effects of income redistribution when people can migrate from one country to another, and when land within each country is heterogeneous. Taxes related to income can then affect property values, and can induce migration, which further affects property values. We show that under these conditions a utilitarian government should never equalize after-tax incomes. If migration is impossible, it may even transfer income from the poor to the rich, reducing the rents earned by absentee landlords. The redistributive tax on the rich may be higher or lower when the rich can migrate than when they cannot. A Rawlsian government in the absence of mobility will equalize after-tax incomes. Under mobility, Rawlsian governments cut their taxes if and only if the relative pre-tax income of the poor is sufficiently low.

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Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20449.

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Date of creation: 2008
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Publication status: Published in Journal of Public Economics 3-4 92(2008): pp. 915-923
Handle: RePEc:lmu:muenar:20449
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  2. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
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  17. Wildasin, David E. & Wilson, John Douglas, 1996. "Imperfect mobility and local government behaviour in an overlapping-generations model," Journal of Public Economics, Elsevier, vol. 60(2), pages 177-198, May.
  18. Wilson, John Douglas, 1999. "Theories of Tax Competition," National Tax Journal, National Tax Association, vol. 52(n. 2), pages 269-304, June.
  19. Goodspeed, Timothy J., 1989. "A re-examination of the use of ability to pay taxes by local governments," Journal of Public Economics, Elsevier, vol. 38(3), pages 319-342, April.
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