the excise tax effects of the property tax abstract this paper constructs a theory of how differences across regions in property tax rates affect product prices and factor prices for a model where labor and capital are perfectly mobile between regions it is shown that consumers residing in different regions face the same nontraded good prices even when property tax rates differ across regions

efficiency and equalization payments in a federal system of government a synthesis and extensions of recent results this paper investigates the rationale for a system of equalization transfers in a federal system of government the existing sources of inefficiency of resource allocation in economies with more than one level of government are synthesized in the framework of a simple decentralized multiprovince model with mobile factors of production the sources of inefficiency arise first because migrants respond at the margin to incorrect signals owing to the phenomena of rent sharing and fiscal exterality and second because of global rather than local inefficiencies the model is then extended to consider the role of the federal government in providing intergovernmental transfers in the face of such inefficiencies in addition to synthesizing the sources of inefficiency in federal models the equity arguments for equalization are briefly recounted efficacite et paiements de perequation dans un systeme federal de gouvernement synthese et extensions de certains resultats recents ce memoire examine la logique qui soustend un systeme de paiements de perequation dans un systeme fdderal de gouverement les auteurs utilisent un modele simple d un systeme multi provincial decentralise avec des facteurs de production mobiles pour definir les sources d inefficacite dans l allocation des ressources dans les dconomies qui possedent plus d un niveau de gouvernement ces inefficacites proviennent de ce que d abord ceux qui se deplacent le font en reponse a la marge a des signaux incorrects engendres par le partage de la rente sur la base de la residence et par les phenomenes d exteralites fiscales elles sont aussi le resultat d inefficacites globales plutot que locales dans le cadre de ce modele les auteurs analysent le role du gouvernement federal effectuant des transferts inter gouverementaux pour corriger ces inefficacites en plus de presenter une synthese des sources d inefficacite dans les regimes federaux les auteurs font un bref rappel en passant a l ensemble des arguments fondes sur l equite qu on utilise pour rationaliser les paiements de perequation this paper is a linear combination of two papers presented at the may 1982 meetings of the canadian economics association in halifax entitled the case for equalization payments by the authors and recent developments in the theory of regional economic policy in canada by boadway the authors are grateful for comments by the discussants jim johnson and baxter macdonald and by jack mintz brian scarfe gerard belanger david sewell tom courchene and the referees we are especially heavily indebted to dan usher for many stimulating comments and suggestions while the work was in progress some of the above persons will undoubtedly disagree with the emphasis we have chosen to put on various aspects of the analysis for policy purposes support for some of this work has been provided by the economic council of canada and is gratefully acknowledged canadian journal of economics revue canadienne d economique xv no 4 november novembre 1982 printed in canada imprimd au canada 0008 4085 82 0000 0613 01 50 1982 canadian economics association this content downloaded from 207 46 13 127 on wed 12 oct 2016 04 27 47 utc all use subject to http about jstor org terms 614 robin boadway and frank flatters

politics and efficiency of separating capital and ordinary government budgets we analyze a golden rule that separates capital and ordinary account budgets and allows a government to finance only capital items with debt many national governments followed this rule in the eighteenth and nineteenth centuries and most u s states do today we study an overlapping generations economy where majorities choose durable and nondurable public goods in each period when demographics imply even moderate departures from ricardian equivalence the golden rule substantially improves efficiency examples calibrated to u s demographics show greater improvements at the state level or with nineteenth century demographics than under current national demographics

on the capitalization of land improvement projects abstract a model of two cities is presented to provide sufficient conditions for the value of a capital improvement to be underestimated by the change in land rents

fiscal externality rent sharing and equalisation transfers in japan this article describes a quantitative analysis of japanese equalisation transfers based on the fiscal externality models of hartwick boadway and flatters in particular it examines whether the actual level of equalisation transfers matches the theoretically optimal level from the efficiency point of view although the purpose of interregional fiscal transfer is not necessarily in the pursuit of an efficient allocation of resources equalisation transfer surely affects it it is often said in japan that the equalisation transfer may distort efficiency too much and that it is one of the causes of serious fiscal conflict between the metropolitan area and local rural prefectures the quantitative results show that the actual amount of transfers from resource rich to resource poor prefectures was below the optimal level in the 1980s however the resource poor prefectures have received an excessive transfer after 1990 specifically the direction of the optimal transfer might change in the second half of t

indirect distributional effects in benefit cost analysis of small projects small public projects perturb the equilibrium prices of many commodities generating small real income changes pecuniary externalities for many households the analy sis of this paper shows that even extremely small price changes on t he order of 1016 can have distributional effects that are far from n egligible e g 10 percent of project outlays it is shown that at least in some simple cases the benefit cost analyst can accommodate these effects without measuring the actual price changes if certain key empirical parameters such as demand and supply elasticities are known copyright 1988 by royal economic society

the implications of competition among jurisdictions does tiebout need politics the paper investigates whether compensation among local jurisdiction is by itself sufficient to ensure efficient provision of local public goods jurisdictions have fixed boundaries and each has an entrenched government with the power to tax and supply the public good residents can move costlessly among jurisdictions it is shown that competition among numerous jurisdictions is not sificient to guarantee public sector efficiency though residents can vote with their feet land is immobile hence governments can unsurp some land rents for their own ends increasing the number of jurisdictions limits but cannot completely eliminate the ability to exercise discretionary governmental power

a general equilibrium analysis of property tax incidence abstract mieszkowski s 1972 analysis of the new view of property tax incidence dealt with a model of an economy containing only one sector and three factors in which labor was immobile brueckner 1981 incorporated an equal utility condition into his general equilibrium analysis of property tax incidence to take worker mobility into account his model however did not have capital as an input factor and the benefits of public expenditure were ignored this paper extends previous research by using a general equilibrium model of an economy with two sectors three factors and multiple communities both capital and labor are assumed to be mobile and brueckner s labor mobility condition is modified to include public expenditure effects while the results of the analysis support the new view they qualify the original mieszkowski studies in many aspects the model also sheds light on tax incidence in no tax communities which was often ignored in earlier studies

capitalization and the theory of local public finance the tiebout literature is incomplete this paper argues because it has not fully accounted for the capitalization of local fiscal variables into house values the paper explains why capitalization arises why it persists in long run equilibrium how it affects both residential location and the outcome of local voting and why it interferes with the efficiency of a system of local governments the analysis which is based on the main tiebout assumptions plus a property tax combines a model of household bids in a housing market with a median voter model of local public service determination

competition and monopoly power in local government an extension of caplan 2001 caplan 2001 shows that because land is asource of immobile wealth localgovernments can use the property tax toavoid competitive pressures of the tieboutmodel allowing them to deviate fromcitizens preferences in this comment ishow that the property tax is not the onlytax local governments can use to avoidcompetitive pressure most taxes placed onproperty owners allow local governments toextract some rents despite perfect citizenmobility

quantities qualities and multiple public services in the tiebout model abstract this paper introduces a new more realistic characterization of local public services this characterization fits education parks and streets none of which are a pure samuelsonian good it is shown that tiebout s hypothesis holds for this new type of services provided correct user charges are adopted introducing several local services considerably affects the results the paper emphasizes the difference in tastes with regard to quality as opposed to quantity earlier literature is shown to apply to the role of quality and ignores the role of quantity the effect of the latter makes mixed communities more efficient than segregated ones it is shown that efficient allocation with mixed communities is an equilibrium in a costless mobility tiebout type setting

labor mobility and the incidence of the residential property tax abstract this paper analyzes the incidence of the residential property tax in an economy with two communities workers are perfectly mobile so that their utility levels are equal in the two communities in equilibrium the property tax is modeled as an ad valorem tax on housing services

optimal fiscal policy for a state or local government abstract state and local government services are enjoyed by and taxes borne by two groups residents and non residents this paper addresses the question if state and local governments maximize their residents welfare and cannot distinguish between individual residents and non residents but know the aggregate characteristics of the two groups what set of taxes subsidies and public goods should they choose some of the results obtained are i even when all commodities are taxable and equity is ignored the existence of non resident consumption makes uniform taxation non optimal ii in some cases whether a commodity should be taxed or subsidized is independent of its own price elasticity iii central cities may be subsidized by suburban residents and iv the ability of state and local governments to redistribute is inversely proportional to the openness of the economy

agricultural settlement with joint production services abstract a theory of settlement planning focussing on village level production services is presented and settlement plans are compared the analysis draws on the modern theory of local public goods conditions for optimal level of services and optimum settlement size are derived together with rules of finance of collective operations the value of the right to settle is calculated for the cases considered

interjurisdictional capital mobility fiscal externality and a corrective subsidy abstract recent studies emphasize that local property taxation may result in inefficiently small amounts of local public spending this paper shows that the inefficiency can be traced to a fiscal externality when one jurisdiction increases its taxes it causes a flow of capital to other jurisdictions that increases their tax revenues the inefficiency can be corrected with a subsidy that internalizes the externality key empirical parameters determining the magnitude of the externality are identified illustrative calculations indicate that subsidy rates on the order of 40 might be required to achieve efficiency

property taxation congestion and local public goods abstract the residential property tax has been viewed as a congestion fee even if it distorts housing decisions this paper shows that the rule for a competitive jurisdiction s optimal public good supply may be written in a form in which no such role appears congestion costs enter the cost side of this rule in the same way that they enter when only a land tax is available the new rule is reconciled with an alternative rule in the literature which contains no congestion costs

taxation and the tiebout model the differential effects of head taxes taxes on land rents and property taxes on the theory of state and local public finance is the seminal paper by charles tiebout 1956 tiebout constructed a multijurisdictional model in which independent local governments offer a wide variety of expenditure and tax policies and perfectly mobile consumers reveal their preferences for local public goods through their choice of residential community he argued that under such circumstances local public service provision would be efficient the tiebout model has formed the basis of a vast number of subsequent articles in the state and local public finance literature and has also been very influential in urban and regional economics the efficiency properties of various tiebout type models of local public good provision have been examined and the role of politics in these models has been debated at length in this literature of more direct relevance to this paper however is the fact that although tiebout had little to say directly about taxation simply assuming the existence of head taxes subsequent analyses have used adaptations of this model to examine the effects of local head taxes land taxes and property taxes it is the literature on the efficiency and distributional effects of alternative local taxes that is the subject of this survey 1

tax competition uniform assessment and the benefit principle abstract in previous discussions it has been argued that tax competition between local governments results in a tax burden on business that is less than the cost of public services for business and in suboptimal levels of public expenditures for residents however this conclusion has never been substantiated by a full theoretical treatment here a theoretical model of tax competition is developed between metropolitan areas with labor perfectly immobile and two local public goods one for residents and one for business for plausible parameter values numerical solutions of the optimality conditions are computed by means of a nonlinear programming algorithm

forest tenure reform in china a choice experiment on farmers property rights preferences decentralization experiments are currently underway in the chinese forestry sector however researchers and policy makers tend to ignore a key question what do forest farmers really want from reform this paper addresses this question using a survey based choice experiment to investigate farmers preferences for various property rights attributes of a forestland contract we found that farmers are highly concerned with the types of rights provided by a contract reducing perceived risks of contract termination and introducing a priority right for the renewal of an existing contract significantly increases farmers marginal willingness to pay for a forest contract

the incidence of heterogeneous residential property taxes abstract in an economy with multiple tax jurisdictions the distribution of the burden of heterogeneous residential property taxes is shown to depend on the elasticity of demand for housing the elasticity of substitution between land and capital in housing production the elasticity of supply of land to individual tax jurisdictions and the degree of population mobility between tax jurisdictions it is demonstrated that the excise effects of the residential property tax may not cancel across jurisdictions and the average rate of tax may overstate or understate the burden on residential capital

home owner residential property taxes and their burden on net personal wealth an empirical study for australia domestic residential property taxes can be viewed as a substitute for a tax on personal wealth this paper measures the formal distributional characteristics of residential property taxes in australia with respect to the net wealth of home owners and the net wealth of all households in the personal sector net wealth is estimated by a combination of investment income and survey methods the study emphasises three major findings first on controlling for stage in the life cycle the formal incidence of residential property taxes on home owners net wealth is clearly regressive with respect to the income of home owners secondly residential property taxes are a relatively high burden on young home owner households net personal wealth finally though tenants are not liable for residential property taxes in australia and the choice of owner occupation is income elastic the residential property tax burden on personal sector wealth is not distributed progressively

a test for allocative efficiency in the local public sector abstract this paper develops a test for pareto efficiency in the local public sectorusing the analytical result that aggregate property value is maximized at the public output level which satisfies the samuelson condition for efficiency by using cross section data it is possible to deduce whether a representative community provides its public goods in a property value maximizing and hence efficient fashion the empirical results show no systematic tendency to either under or over provide public goods in a sample of massachusetts communities

the distributional effects of pollution regulations do renters fully pay for cleaner air abstract changes in housing prices play an important role in determining the incidence of environmental regulations if the increase in value due to changes in environmental amenities is fully passed forward in the form of higher rental prices renters may receive no net benefit from the regulations to estimate the pass through of the value of an environmental amenity i exploit the reduction in suspended particulate matter pm 10 due to the 1990 clean air act amendments caaa using instrumental variables at varying levels of spatial aggregation i find that the 1990 caaa led to a significant increase in rents but the estimated percentage effect is about half as large as that of owner occupied housing values little of this difference is driven by income differences between renters and homeowners when stratifying by income and comparing the effect of the 1990 caaa on housing values and rents point estimates suggest that half of the increase in value is passed on to renters in the form of higher rents this suggests that pass through may be incomplete but landowners still capture much of the value of the air quality regulations

tax policy and consumer spending evidence from japanese fiscal experiments abstract this paper studies the extent to which the impact of tax policy on consumer spending differs between temporary and permanent as well as anticipated and unanticipated tax changes to discriminate between them we use institutional information such as legal distinction between temporary and permanent tax changes as well as timing of policy announcement and implementation we find that the impact of temporary changes is significantly smaller than the impact of permanent changes we also find that more than 80 percent of japanese consumers including those who distinguish between temporary and permanent tax changes respond to tax changes at the time of their implementation and not at the time of a policy announcement we suggest an interpretation that these consumers follow a near rational decision rule

clubs local public goods and transportation models a synthesis abstract clubs local public goods and transportation models are analyzed within a unified model the emphasis is on the derivation of optimal allocation pricing and the size of the sharing group we derive the conditions under which optimal prices will yield surplus or deficit as well as those under which competitive provision will be efficient given heterogeneous tastes we prove that segregation according to tastes is generally efficient although several cases where this result does not hold are also discussed we show that the existing literature is unnecessarily restrictive and that the unified approach suggested here considerably extends the existing analysis of clubs local public goods and the transportation problems

pigou tiebout property taxation and the underprovision of local public goods abstract pigou s proposition that the use of distorting taxes rather than neutral head taxes reduces public service levels is examined in this paper a simple model with a national system of competing local governments is utilized to demonstrate that the use of a distorting property tax on mobile capital decreases the level of residential public services the case where public services are an intermediate producer good is also considered

optimal property taxation in the presence of interregional capital mobility abstract a single region s optimal property tax policy is examined in a model with interregional capital mobility in this model property taxation is used to finance local public expenditures different tax rates may be imposed on property used to produce goods which are traded between regions and property used to produce nontraded goods e g residential property the key determinants of the difference between the optimal tax rates are identified and it is argued that there exists a bias towards relatively low tax rates on property used to produce traded goods the role of labor mobility is also investigated

evaluating the efficiency and equity of federal fiscal equalization abstract theoretically federal transfers that make household location decisions efficient should ignore local cost differences subsidize positive externalities and offset differences in federal tax payments and local taxes levied on non residents but not local tax revenues from residents transfers that redistribute resources equitably across regions will likely target areas with individuals of low earnings potential or low real incomes applying these criteria empirically canadian equalization policy appears neither efficient nor equitable but exacerbates pre existing inefficiencies and underfunds minorities locational inefficiencies cost canada 0 41 of income annually and cause over funded provinces to have populations of 30 beyond their efficient long run levels

the timing of regional development abstract consider a country composed of regions of different qualities or endowments of amenities and natural resources for production and consumption initially only the highest quality regions are occupied as national population grows successively lower quality regions are occupied the equilibrium timing of occupation of uninhabited regions differs from the optimal timing typically being too late policies which would result in better timing are analyzed

a critique of tiebout s theory of local public expenditures the last section of this paper presents a rigorous version of tiebout s theory of local public goods it is shown that equilibria exist and are pareto optimal this rigorous theory follows closely the more rigorous part of tiebout s work this rigorous theory makes a number of very special assumptions which make local public goods essentially private the body of this paper presents a series of examples which show that if one tries to generalize the rigorous version of tiebout s theory in a number of interesting directions then equilibria may no longer exist or may not be pareto optimal the conclusion is that tiebout s idea does not lead to a satisfactory general theory of local public goods the goal of this paper is to point out that tiebout s notion of equilibrium with local governments does not have the nice properties of general competitive equilibrium except under very restrictive assumptions tiebout 39 suggested that there are competitive forces which tend to make local governments allocate resources in a pareto optimal fashion consumers choose to live in those towns with the mix of taxes and public goods they prefer local governments choose this mix so as to attract inhabitants this idea may seem intriguing for it suggests that the invisible hand solves an important part of samuelson s perplexing public goods problem 32 tiebout in fact makes an argument which is nearly rigorous i give a rigorous version of his argument at the end of the paper however in this rigorous version so many restrictive assumptions are made that public goods become essentially private in the body of the paper i give a series of examples with which i try to convince the reader that one is forced to adopt tiebout s restrictive assumptions the idea is that if one changes any of his assumptions then either equilibria may not exist or may not be pareto optimal my examples are presented in the context of a general class of tiebout models i consider several subclasses one of which is the special case considered by tiebout in each of the subclasses except that considered by tiebout i give a counterexample either to the existence of equilibrium or to its pareto optimality the subclasses are so chosen that the difficulties they reveal would be shared by any reasonable tiebout model which differed from his special case i believe that my examples controvert tiebout s suggestion 39 last paragraph that his theory compares favorably with competitive equilibrium theory most of the examples in this paper have already appeared in the literature i cite related work as i go along what is new here is that i assemble the examples in a unified argument

tax treatment of housing in a dynamic sequenced general equilibrium model this paper evaluates the efliciency effects of possible changes in the tax treatment of housing using a dynamic sequenced general equilibrium model based on canadian data for 1972 our model is similar in structure to that used by fullerton shoven and whalley fsw 1983 to analyze the impacts of a switch to a consumption tax in the united states except that we include two assets rather than one the motivation for the paper arises from existing literature on the treatment of housing under the income tax most of this literature emphasizes the non taxation of imputed income from owner occupied housing as a deviation from the haig simons concept of income and approaches taxation of housing as a static resource allocation issue this implicitly argues for the inclusion of imputed income in the income tax base and suggests that a welfare gain would result when viewed from a dynamic perspective one s perception of the appropriate tax treatment for housing correspondingly changes evaluated relative to a pure consumption tax rather than a pure income tax housing is appropriately treated if imputed income goes untaxed since the income stream to the asset is not further taxed once the asset has been purchased the intertemporal misallocation problem arises not with housing but from taxation of non housing capital income this issue is however more complex than this discussion indicates because of inter asset distortions arising from the differential tax treatment of housing

the general equilibrium effects of the residential property tax incidence and excess burden abstract an urban general equilibrium model is used to explore the efficiency effects and distributional consequences of the residential property tax in a model of a small open city the replacement of a nondistortionary land tax with the residential property tax reduces the land area density and population of the city the aggregate net return on land falls by an amount equal to 164 93 of total tax revenue in a model of a closed region when city q replaces the land tax with the residential property tax production and employment shift to other cities in the region the net return on land decreases in city q and increases in other cities in the region in aggregate landowners are made better off by the change in tax policy while residents are made worse off the excess burden of the property tax is computed as 6 5197 of tax revenue

an optimal taxation approach to fiscal federalism in a federal system of government each unit of government decides independently how much of each type of public good to provide and what types of taxes and which tax rates to use in funding the public goods in this paper we explore what types of problems can arise from this decentralized form of decision making in particular we describe systematically the types of externalities that one unit of government can create for nonresidents through both its public goods decisions and its taxation decisions the paper also explores briefly what the central government might do to lessen the costs of decentralized decision making

the scope for taxation and public expenditure in an open economy in this survey of some central issues of tax and expenditure policy in an open economy we consider the implications for policy of free although not necessarily perfect international mobility of commodities capital and labour we examine the issues both from a positive and a normative point of view trying to identify both the incidence and welfare effects of international mobility one general conclusion is that tax distortions may increase in magnitude in comparison with a closed economy but they may also increase in kind as when otherwise neutral taxes become distortionary because of factor mobility

land rents optimal taxation and local fiscal independence in an economy with local public goods abstract a general equilibrium model of an economy with cities farms and free migration of population is constructed the cities produce internationally traded goods via production functions subject to economies of scale they also produce housing and a local public good two areas are defined to be disjoint if households performing an economic activity in one area are not operating in the other an area is exclusive if it is disjoint to its complement the economic surplus of an area is then defined to be the value of the area s net export of goods and resources local efficiency of an area is defined to be a state in which its economic surplus attains its maximum value this state is proved to be a necessary condition for pareto optimality of the economy it is then proved that beside piguvian corrective taxes the only taxes necessary and sufficient to finance local government activities efficiently are taxes on land rents furthermore if jurisdiction of a local government is over an exclusive area no intervention of central government is necessary and local authorities can be fully autonomous if the economy can be divided into pairwise disjointed exclusive areas those areas are optimal jurisdictions in the sense that efficiency in the economy can be achieved with local authorities only

a three input model of the spatial effects of a central city wage tax abstract this paper considers the short run and long run spatial effects on wages employment and business capital as functions of location of a localized increase in wage tax rates the model is most applicable to a central city that has a higher wage tax rate than the surrounding suburbs the inclusion of land as a third input in production significantly reduces the long run effects of a central city wage tax on employment near the central city boundary as compared with a model in which labor and capital are the only two inputs the short run effects are significantly less than the long run effects

taxation and savings a neoclassical perspective this paper discusses recent neoclassical analyses of taxation and savings contrary to the popular view that fiscal policy has highly ambiguous impacts on savings neoclassical models admit a host of policies with clear and potentially quite powerful affects on the accumulation of wealth the paper considers four fundamental types of fiscal policies and compares their quantitative affect on savings the essential elements of these policies involve inter and intragenerational redistribution marginal and intra marginal taxation and the level of government consumption conventional accounting measures of taxes spending and deficits provide at best little guide to changes in underlying fiscal instruments and at worst precisely opposite indicators of the direction of such changes indeed the continued use of and concern with conventional fiscal measures is symptomatic of wide spread fiscal illusion these points are developed within the context of certainty models the paper also considers the role of fiscal policy in both mitigating and exacerbating economic risks facing the private sector since precaution is a major motivation for saving governments can greatly influence wealth accumulation either by using fiscal policy to pool private risks or by making fiscal policy itself highly uncertain this abstract was borrowed from another version of this item