IDEAS home Printed from https://ideas.repec.org/p/umc/wpaper/0505.html
   My bibliography  Save this paper

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

Author

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.

Suggested Citation

  • 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
    as

    Download full text from publisher

    File URL: https://drive.google.com/file/d/1ZTYubHGw8FKunDAXPBsFxnG5v3AVApAK/view?usp=sharing
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. W. J. Corlett & D. C. Hague, 1953. "Complementarity and the Excess Burden of Taxation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 21(1), pages 21-30.
    2. Rosen, Harvey S., 1985. "Housing subsidies: Effects on housing decisions, efficiency, and equity," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 1, chapter 7, pages 375-420, Elsevier.
    3. Gervais, Martin, 2002. "Housing taxation and capital accumulation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1461-1489, October.
    4. Helsley, Robert W. & Sullivan, Arthur M., 1991. "Urban subcenter formation," Regional Science and Urban Economics, Elsevier, vol. 21(2), pages 255-275, July.
    5. Dennis Epple & Holger Sieg, 1999. "Estimating Equilibrium Models of Local Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 645-681, August.
    6. Davis, Morris A. & Heathcote, Jonathan, 2007. "The price and quantity of residential land in the United States," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2595-2620, November.
    7. Alan J. Auerbach & James R. Hines Jr., 2001. "Perfect Taxation with Imperfect Competition," NBER Working Papers 8138, National Bureau of Economic Research, Inc.
    8. Joseph Gyourko & Todd Sinai, 2003. "The Spatial Distribution of Housing‐Related Ordinary Income Tax Benefits," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(4), pages 527-575, December.
    9. François Ortalo-Magné & Sven Rady, "undated". "Homeownership: Volatile Housing Prices, Low Labor Mobility and High Income Dispersion," Wisconsin-Madison CULER working papers 02-04, University of Wisconsin Center for Urban Land Economic Research.
    10. William Alonso, 1960. "A Theory Of The Urban Land Market," Papers in Regional Science, Wiley Blackwell, vol. 6(1), pages 149-157, January.
    11. Amy Ellen Schwartz (ed.), 2004. "City Taxes, City Spending," Books, Edward Elgar Publishing, number 3079, December.
    12. Brueckner, Jan K & Kim, Hyun-A, 2003. "Urban Sprawl and the Property Tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 10(1), pages 5-23, January.
    13. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July.
    14. repec:bla:scandj:v:80:y:1978:i:1:p:1-19 is not listed on IDEAS
    15. Sven Rady, 2002. "Homeownership: Low household mobility, volatile housing prices, high income dispersion," FMG Discussion Papers dp432, Financial Markets Group.
    16. Berkovec, James & Fullerton, Don, 1992. "A General Equilibrium Model of Housing, Taxes, and Portfolio Choice," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 390-429, April.
    17. repec:rus:hseeco:126976 is not listed on IDEAS
    18. Thorsnes, Paul, 1997. "Consistent Estimates of the Elasticity of Substitution between Land and Non-Land Inputs in the Production of Housing," Journal of Urban Economics, Elsevier, vol. 42(1), pages 98-108, July.
    19. Lawrence H. Goulder & Roberton C. Williams III, 2003. "The Substantial Bias from Ignoring General Equilibrium Effects in Estimating Excess Burden, and a Practical Solution," Journal of Political Economy, University of Chicago Press, vol. 111(4), pages 898-927, August.
    20. Rady, Sven & Ortalo-Magné, François, 2002. "Homeownership," Discussion Papers in Economics 28, University of Munich, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Albouy, 2009. "The Unequal Geographic Burden of Federal Taxation," Journal of Political Economy, University of Chicago Press, vol. 117(4), pages 635-667, August.
    2. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.
    3. Calabrese, Stephen & Epple, Dennis & Romano, Richard, 2023. "Majority choice of taxation and redistribution in a federation," Journal of Public Economics, Elsevier, vol. 217(C).
    4. Serena Fatica & Doris Prammer, 2018. "Housing and the Tax System: How Large Are the Distortions in the Euro Area?," Fiscal Studies, John Wiley & Sons, vol. 39(2), pages 299-342, June.
    5. Carlos Garriga, 2010. "The Role of Construction in the Housing Boom and Bust in Spain," Working Papers 2010-09, FEDEA.
    6. Teulings, Coen N. & Ossokina, Ioulia V. & de Groot, Henri L.F., 2018. "Land use, worker heterogeneity and welfare benefits of public goods," Journal of Urban Economics, Elsevier, vol. 103(C), pages 67-82.
    7. Brinkman, Jeffrey C., 2016. "Congestion, agglomeration, and the structure of cities," Journal of Urban Economics, Elsevier, vol. 94(C), pages 13-31.
    8. Olsen, Edgar O. & Zabel, Jeffrey E., 2015. "US Housing Policy," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 887-986, Elsevier.
    9. Miles, David & Sefton, James, 2017. "Houses across time and across place," CEPR Discussion Papers 12103, C.E.P.R. Discussion Papers.
    10. Morris A. Davis & Francois Ortalo-Magne, 2011. "Household Expenditures, Wages, Rents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(2), pages 248-261, April.
    11. Wenli Li & Edison Yu, 2020. "Real Estate Taxes and Home Value: Winners and Losers of TCJA," Working Papers 20-12, Federal Reserve Bank of Philadelphia.
    12. Diewert, Erwin & Shimizu, Chihiro, 2015. "Residential Property Price Indices For Tokyo," Macroeconomic Dynamics, Cambridge University Press, vol. 19(8), pages 1659-1714, December.
    13. Hirte, Georg & Tscharaktschiew, Stefan, 2018. "The impact of anti-congestion policies and the role of labor-supply margins," CEPIE Working Papers 04/18, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    14. Schünemann, Johannes & Trimborn, Timo, 2023. "Boosting taxes for boasting about houses? Status concerns in the housing market," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 120-143.
    15. Rutger-Jan Lange & Coen N. Teulings, 2021. "The option value of vacant land: Don't build when demand for housing is booming," Tinbergen Institute Discussion Papers 21-022/IV, Tinbergen Institute.
    16. David Albouy & Andrew Hanson, 2014. "Are Houses Too Big or In the Wrong Place? Tax Benefits to Housing and Inefficiencies in Location and Consumption," Tax Policy and the Economy, University of Chicago Press, vol. 28(1), pages 63-96.
    17. Finn E. Kydland & Peter Rupert & Roman Sustek, 2012. "Housing Dynamics over the Business Cycle," NBER Working Papers 18432, National Bureau of Economic Research, Inc.
    18. Määttänen, Niku & Terviö, Marko, 2014. "Income distribution and housing prices: An assignment model approach," Journal of Economic Theory, Elsevier, vol. 151(C), pages 381-410.
    19. Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2009. "Accounting For Changes In The Homeownership Rate," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 677-726, August.
    20. Dominique Prunetti & Alexandre Muzy & Eric Innocenti & Xavier Pieri, 2014. "Utility-based Multi-agent System with Spatial Interactions: The Case of Virtual Estate Development," Computational Economics, Springer;Society for Computational Economics, vol. 43(3), pages 271-299, March.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:umc:wpaper:0505. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chao Gu (email available below). General contact details of provider: https://edirc.repec.org/data/edumous.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.