Göbel, Jürgen (2009): In search of an appropriate tax base for local Leviathans.
Download (203kB) | Preview
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.
|Item Type:||MPRA Paper|
|Original Title:||In search of an appropriate tax base for local Leviathans|
|Keywords:||Leviathan; tax base; exit option; sensitivity analysis|
|Subjects:||H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H21 - Efficiency ; Optimal Taxation
H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government
R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R51 - Finance in Urban and Rural Economies
|Depositing User:||Juergen Goebel|
|Date Deposited:||11. Mar 2009 02:20|
|Last Modified:||22. Feb 2013 22:33|
Arrow, Kenneth J. (1951): ”Social Choice and Individual Values,” New York, 1963.
Auerbach, Alan J. (1985): ”The Theory of Excess Burden and Optimal Taxation,” in: Auerbach, A. J./ Feldstein, M. (eds.): ”Handbook of Public Economics,” vol. 1, ch. 2, Elsevier Science Publishers.
Brennan, Geoffrey/ Buchanan, James M. (1977): ”Towards a Tax Constitution for Leviathan,” Journal of Public Economics, 8, 255-73.
Brennan, Geoffrey/ Buchanan, James M. (1978): ”Tax Instruments as Constraints on the Disposition of Public Revenues,” Journal of Public Economics, 9, 301-18.
Brennan, Geoffrey/ Buchanan, James M. (1979): ”The Logic of Tax Limits: Alternative Constitutional Constraints on the Power to Tax,” National Tax Journal, 32, suppl., 11-22.
Brennan, Geoffrey/ Buchanan, James M. (1980): ”The Power to Tax - Analytical foundations of a fiscal constitution,” Cambridge University Press.
Brueckner, Jan K. (1979): ”Property Values, Local Public Expenditure and Economic Efficiency,” Journal of Public Economics, 11, 223-45.
Brueckner, Jan K. (1983): ”Property Value Maximization and Public Sector Efficiency,” Journal of Urban Economics, 14, 1-15.
Buchanan, James M. (1965): ”An Economic Theory of Clubs,” Economica, 32, 1-14.
Buchanan, James M./ Goetz, Charles J. (1972): ”Efficiency Limits of Fiscal Mobility: An Assessment of the Tiebout Model,” Journal of Public Economics, 1, 25-43.
Bucovetsky, Sam/ Wilson, John D. (1991): ”Tax competition with two tax instruments,” Regional Science and Urban Economics,” 21, 333-50.
Caplan, Bryan (2001): ”Standing Tiebout on his head: Tax capitalization and the monopoly power of local governments,” Public Choice, 108, 101-22.
Diamond, Peter A./ Mirrlees, James A. (1971): ”Optimal Taxation and Public Production,” American Economic Review, 61, 8-27, 261-78.
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, 23, 585-610.
Epple, Dennis/ Zelenitz, Allan (1981): ”The Implications of Competition among Jurisdictions: Does Tiebout Need Politics?” Journal of Political Economy, 89, 1197-217.
Findlay, Ronald/ Wilson, John D. (1987): ”The Political Economy of Leviathan,” in: Razin, A./ Sadka, E. (eds.): ”Economic Policy in Theory and Practice,” London, 289-30.
Hamilton, Bruce W. (1975): ”Zoning and Property Taxation in a System of Local Governments,” Urban Studies, 12, 205-11.
Hamilton, Bruce W. (1976): ”Capitalization of intrajurisdictional differences in local tax prices,” American Economic Review, 66, 743-54.
Henderson, J. Vernon (1985): ”The Tiebout Model: Bring Back the Entrepreneurs,” Journal of Political Economy, 93, 248-64.
Henderson, J. Vernon (1995): ”Will homeowners impose property taxes?” Regional Science and Urban Economics, 25, 153-81.
Hettich, Walter/ Winer, Stanley L. (1997): ”The political economy of taxation,” in: Mueller, D. C. (ed.): ”Perspectives on Public Choice,” ch. 22, Cambridge University Press, 481-505.
Hoyt, William H. (1991): ”Competitive jurisdictions, congestion, and the Henry George Theorem - When should property be taxed instead of land?” Regional Science and Urban Economics, 21, 351-70.
Hoyt, William H. (1999): ”Leviathan, local government expenditures, and capitalization,” Regional Science and Urban Economics, 29, 155-71.
Mueller, Dennis C. (2003): ”Public Choice III,” Cambridge University Press.
Musgrave, Richard A. (1986): ”Public Finance in a Democratic Society,” vol. 1: ”Social Goods, Taxation and Fiscal Policy,” Harvester Press.
Musgrave, Richard A. (2000): ”Public Finance in a Democratic Society,” vol. 3: ”The Foundations of Taxation and Expenditure,” Edward Elgar.
Ramsey, Frank P. (1927): ”A Contribution to the Theory of Taxation,” Economic Journal, 37, 47-61.
Silberberg, Eugene (1990): ”The Structure of Economics - A Mathematical Analysis,” McGraw-Hill.
Smith, Adam (1776): ”An Inquiry into the Nature and Causes of theWealth of Nations,” Oxford University Press, 1993.
Sonstelie, Jon C./ Portney, Paul R. (1978): ”Profit Maximizing Communities and the Theory of Local Public Expenditures,” Journal of Urban Economics, 5, 263-77.
Tiebout, Charles M. (1956): ”A Pure Theory of Local Expenditures,” Journal of Political Economy, 64(5), 416-24.
Wilson, John D. (1997): ”Property taxation, congestion, and local public goods,” Journal of Public Economics, 64, 207-17.
Wilson, John D./ Gordon, Roger H. (2003): ”Expenditure Competition,” Journal of Public Economic Theory, 5(2), 399-417.