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Optimal Commodity Taxation When Land and Structures Must Be Taxed at the Same Rate

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Abstract

We show that the optimal property tax rate rises with the ratio of land rents tostructure and land development costs. Californias high ratio of income to property taxrevenue and the distribution of Federal housing subsidies thus appear geographicallymisplaced. Proportional taxation of non-housing commodities is not optimal, evenwhen elasticities with respect to wages are identical. Absent externalities, the desirabilityof transportation taxes and anti-sprawl growth controls hinge on the relativeimportance of time versus money in commuting costs.

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  • Saku Aura & Thomas Davidoff, 2005. "Optimal Commodity Taxation When Land and Structures Must Be Taxed at the Same Rate," Working Papers 0505, Department of Economics, University of Missouri.
    • Handle: RePEc:umc:wpaper:0505
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    1. Kai Konrad & Stergios Skaperdas, 2012. "The market for protection and the origin of the state," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 50(2), pages 417-443, June.

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    More about this item

    Keywords

    Property Taxes; Henry George Theorem;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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