Local Government Tax and Land Use Policies in the United States: Understanding the Links

By Helen F. Ladd; Lincoln Institute of Land Policy | Go to book overview

playing a game with some other community, C, in which communities B and C are both competing to attract their first firm in order to start themselves on the road to establishing agglomeration economies within their communities. These examples, simple as they are, capture important aspects of why communities engage in tax competition. Because of agglomeration economies, a relatively small tax subsidy to the first firm to locate in a particular community may result in many other firms choosing the same community, even if no subsidies (or only small subsidies) are offered to later firms. Thus communities have an incentive to subsidize early firms to locate within their borders in the hope of establishing agglomeration economies which will attract later firms. These effects were captured in the first and second scenarios just discussed and they showed that tax competition may either enhance or reduce efficiency. However, in the third scenario, tax competition prevents agglomeration economies from ever developing because competing communities that have few firms offer tax subsidies to attract their first firms. The resulting competition causes firms to spread out over multiple locations, even though they would all be better off if they concentrated in a few locations. Thus tax competition may prevent agglomeration economies from ever developing.


Notes
1.
See White ( 1988, 1996) and Wieand ( 1987) for further discussion.
2.
See Mills ( 1972) and Fujita and Ogawa ( 1982) for models which determine the optimal spatial location of firms and households in cities. White ( 1996) contains a review of this literature.

References

Fujita, M. and H. Ogawa ( 1982), "Multiple equilibria and structural transition of nonmonocentric urban configurations", Regional Science and Urban Economics, 12, 161-96.

Mills, E. S. ( 1972), Studies in the Structure of the Urban Economy, Baltimore, Maryland: Johns Hopkins University Press.

White, M. J. ( 1988), Urban commuting is not "wasteful, Journal of Political Economy, 96, 1097-1110.

White, M. J. ( 1996), "Urban areas with decentralized employment: theory and empirical work", in Paul Cheshire and Edwin S. Mills (eds), Handbook of Applied Urban Economics, Amsterdam: North-Holland.

Wieand, K. ( 1987), "An extension of the monocentric urban spatial equilibrium model to a multi-center setting: the case of the two-center city", Journal of Urban Economics, 21, 259-71.

-115-

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Local Government Tax and Land Use Policies in the United States: Understanding the Links
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures vii
  • Tables viii
  • List of Contributors x
  • Acknowledgements xiii
  • Lincoln Institute of Land Policy xiv
  • 1. Introduction 1
  • Notes 21
  • References 21
  • Part I - Interactions Between Tax and Land Policies 23
  • 2. Theoretical Controversies: Land and Property Taxation 25
  • Notes 38
  • References 39
  • Notes 48
  • References 48
  • References 53
  • 3. Land Use Regulation as a Fiscal Tool 55
  • Notes 72
  • References 72
  • Notes 80
  • References 81
  • 4. Effects of Taxes on Economic Activity 82
  • Notes 99
  • References 99
  • Notes 107
  • Notes 115
  • 5. Tax Policies to Promote Economic Development 116
  • Notes 128
  • References 129
  • Part II - Tax Policy as a Land Use Tool 131
  • 6. the Pittsburgh Experience with Land- Value Taxation 133
  • Notes 141
  • References 142
  • 7. Property Tax Treatment of Farmland: Does Tax Relief Delay Land Development? 144
  • Notes 157
  • References 159
  • 8. Incentives, Firm Location Decisions and Regional Economic Performance 168
  • Notes 180
  • References 180
  • 9. Tax Increment Financing as a Tool of Redevelopment 182
  • Notes 196
  • References 197
  • Part III - Fiscal and Distributional Impacts 199
  • 10. Fiscal Impacts of Business Development in the Chicago Suburbs 201
  • Notes 212
  • References 214
  • Appendix 215
  • 11. Who Pays Development Fees? 218
  • Notes 231
  • References 233
  • 12. Regional Tax Base Sharing: the Twin Cities Experience 234
  • Notes 251
  • References 253
  • Index 255
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