In search of an appropriate tax base for local Leviathans
The impact of local fiscal policy depends on the choice of the tax base. In this paper, we take four criteria to evaluate tax bases, namely: efficiency, simplicity, flexibility, and fairness. The results of such an evaluation depend on how we describe the involved agents. We construct a two stage model of a local economy with three types of agents: Leviathans, households, and housing firms. Each Leviathan seeks to maximize the surplus of his local fiscal budget. Each household seeks to maximize its life-time utility from three types of goods: composite private goods, housing, and local public goods. Each housing firm seeks to maximize its profits. In this model, we analyze the characteristics of four distinct tax bases: land rent, housing capital rent, housing sales, and housing property. In particular, we analyze the responses of the households, the housing firms, and the housing prices on a change of a specific tax rate. The results are used to evaluate each tax base with respect to our four criteria.
|Date of creation:||28 Feb 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bruce W. Hamilton, 1975. "Zoning and Property Taxation in a System of Local Governments," Urban Studies, Urban Studies Journal Limited, vol. 12(2), pages 205-211, June.
- Vernon Henderson, J., 1995. "Will homeowners impose property taxes?," Regional Science and Urban Economics, Elsevier, vol. 25(2), pages 153-181, April.
- Brennan, Geoffrey & Buchanan, James M., 1978. "Tax instruments as constraints on the disposition of public revenues," Journal of Public Economics, Elsevier, vol. 9(3), pages 301-318, June.
- Hoyt, William H., 1999. "Leviathan, local government expenditures, and capitalization," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 155-171, March.
- Henderson, J Vernon, 1985. "The Tiebout Model: Bring Back the Entrepreneurs," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 248-64, April.
- Hettich, W. & Winer, S.L., 1993.
"The Political Economy of Taxation,"
8, Carleton - Business Administration.
- Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
- Hamilton, Bruce W, 1976. "Capitalization of Intrajurisdictional Differences in Local Tax Prices," American Economic Review, American Economic Association, vol. 66(5), pages 743-53, December.
- Buchanan, James M. & Goetz, Charles J., 1972. "Efficiency limits of fiscal mobility: An assessment of the tiebout model," Journal of Public Economics, Elsevier, vol. 1(1), pages 25-43, April.
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
- Auerbach, Alan J., 1985.
"The theory of excess burden and optimal taxation,"
Handbook of Public Economics,
in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 2, pages 61-127
- Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, November.
- Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
- Brueckner, Jan K., 1983. "Property value maximization and public sector efficiency," Journal of Urban Economics, Elsevier, vol. 14(1), pages 1-15, July.
- Roger H. Gordon & John D. Wilson, 2001.
NBER Working Papers
8189, National Bureau of Economic Research, Inc.
- Epple, Dennis & Filimon, Radu & Romer, Thomas, 1993. "Existence of voting and housing equilibrium in a system of communities with property taxes," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 585-610, November.
- Caplan, Bryan, 2001. "Standing Tiebout on His Head: Tax Capitalization and the Monopoly Power of Local Governments," Public Choice, Springer, vol. 108(1-2), pages 101-22, July.
- Sonstelie, Jon C. & Portney, Paul R., 1978. "Profit maximizing communities and the theory of local public expenditure," Journal of Urban Economics, Elsevier, vol. 5(2), pages 263-277, April.
- Epple, Dennis & Zelenitz, Allan, 1981. "The Implications of Competition among Jurisdictions: Does Tiebout Need Politics?," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1197-1217, December.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:13940. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.