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
7.
See the thoughtful discussion and evidence in Inman ( 1979). As he notes, empirical studies that are based on a structural model of the demand for service quality and the technology are likely to generate more meaningful estimates of the degree of congestion than are reduced form studies. The problem with the reduced form approach is that the so-called 'congestion parameter' is really the product of a congestion effect and a scale effect.
8.
The focus here is on real estate taxes rather than taxes on personal property. Real estate includes land and structures. In the tax applies to both business property and to residential property. Residential property, both single family homes and rental property, accounts for slightly more than one-half of all assessed valuation.
9.
Developers are also able to play a significant role in rural areas, where many voters are farmers or otherwise connected with the owners of vacant land and where concern about jobs and economic growth may offset concerns about fiscal subsidies to new residents ( Fischel, 1992., p. 174).
10.
Hamilton relaxed this assumption about the infinite elasticity of supply in a subsequent paper ( Hamilton, 1976) but replaced it with another strong assumption, namely that the benefits from public services can be measured by local public spending. Ross and Yinger point out that this assumption requires unrealistically that both the income and price elasticities of demand for public services are equal to zero.
11.
A fourth potential distortion relates to the provision of local public services. In simple models, the use of a tax on mobile capital leads to underprovision of the public good. In more complicated models in which housing and public goods are complementary, the outcome could be either under- or over-provision (see Mieszkowski and Zodrow, 1989, p. 1121).
12.
In her 1973 study of the property tax, Ladd concluded that the differential burden on owner-occupied housing associated with the property tax was on average more than offset by the preferential treatment of owner-occupied housing under the federal income tax at that time.
13.
In fact, Brueckner shows that this result holds only for the standard situation in which the increase in the tax on land permits a reduction in the tax on improvements. It is not impossible for the perverse result to obtain, namely that the rise in the tax rate on land requires an increase in the tax on improvements in order to maintain revenue.

REFERENCES

Aaron, Henry J. ( 1975), Who Pays the Property Tax?: A New View, Washington, DC: Brookings Institute.

Arnott, Richard ( 1996), "Neutral property taxation", processed, Boston College, Department of Economics.

Arnott, R. and F. Lewis ( 1970), "The transition of land to urban use", Journal of Political Economy, 87, 161-70.

Bentick, Brian L. ( 1982), "A tax on land value may not be neutral", National Tax Journal, 35 ( 1), 113.

Brueckner, Jan K. ( 1986), "A modern analysis of the effects of site value taxation", National Tax Journal, 39 ( 1), 49-58.

Feldstein, Martin ( 1977), "The surprising incidence of a tax on pure rent:"a new answer to an old question, Journal of Political Economy, 85 ( 2), 349-60.

Fischel, William A. ( 1975), "Fiscal and environmental considerations in the location of firms in suburban communities", in E. S. Mills and W. E. Oates, Fiscal Zoning and Land Use, Lexington, Massachusetts: D.C. Heath.

Fischel, William A. ( 1992), "Communication:"property taxation and the Tiebout model: evidence for the benefit view from zoning and voting, Journal of Economic Literature, 30, 171-7.

-39-

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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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