Intrajurisdictional capitalization and the incidence of the property tax

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dc.citation.firstpage57
dc.citation.lastpage66
dc.contributor.authorZodrow, George R.
dc.contributor.orgJames A. Baker III Institute for Public Policy
dc.date.accessioned2016-10-05T17:45:10Z
dc.date.available2016-10-05T17:45:10Z
dc.description.abstractTwo views dominate the debate about property tax incidence — the “capital tax” or “new” view, under which the tax distorts capital allocation and is borne primarily by capital owners, and the “benefit tax” view, under which the tax is an efficient user charge. Evidence of both interjurisdictional and intrajurisdictional capitalization of property taxes and public services has been argued to provide compelling evidence for the benefit tax view. This paper focuses on the latter — the intra-jurisdictional capitalization effects that underlie what is arguably the most plausible derivation of the benefit tax view of the property tax. The analysis provides a model in which the capital reallocations that characterize the capital tax view induce intrajurisdictional capitalization effects that are generally similar — indeed, in the benchmark case, identical — to those that arise under the benefit tax view, suggesting that empirical evidence supporting such capitalization effects cannot distinguish between the two views. In addition, the analysis shows that these capitalization effects imply that even under the stringent assumptions of the benefit view, the property tax is not a benefit tax for a property-tax-financed increase in local public services; rather, it only becomes a benefit tax for future home purchasers — after the modeled intrajurisdictional capitalization effects occur.
dc.identifier.citationZodrow, George R.. "Intrajurisdictional capitalization and the incidence of the property tax." <i>Regional Science and Urban Economics,</i> 45, (2014) Elsevier: 57-66. http://dx.doi.org/10.1016/j.regsciurbeco.2014.01.002.
dc.identifier.doihttp://dx.doi.org/10.1016/j.regsciurbeco.2014.01.002
dc.identifier.urihttps://hdl.handle.net/1911/91691
dc.language.isoeng
dc.relation.urihttp://www.bakerinstitute.org/research/intrajurisdictional-capitalization-and-incidence-property-tax/en_US
dc.subjectproperty tax incidence
dc.subjectintrajurisdictional capitalization
dc.subjectcapital tax view
dc.subjectnew view
dc.subjectbenefit tax view
dc.titleIntrajurisdictional capitalization and the incidence of the property tax
dc.type.publicationpost-print
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