Three Essays On Property And Land Taxation: The Differential Land Tax Across Sectors
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Many local governments levy land value taxes at di erent e ective rates on various de ned land uses. For example, the tax abatement policies of the United States lo- cal governments favor commercial-industrial land use over residential land use, while property tax classi cation systems like those in Minnesota and Cook County, IL tax commercial-industrial land use at higher e ective tax rates. Although in practice gov- ernments tax land values at di erent rates according to land uses, the economics litera- ture has examined only uniform land taxation. The rst component of this dissertation uses a static, three-factor general equilibrium model to examine the incidence of a land tax that di ers across land uses. Both analytical and numerical results suggest that land does not bear the entire tax burden, because, although land is immobile across jurisdictions, for any unit of land the type of use is not xed. The exibility of land uses implies that land bears the entire tax burden only when the land value tax is uniform across land uses. Under the most realistic assumption, land rents fall by only 0:35% when the land value tax increases by 1%. Instead, the di erential land tax is shifted forward, to consumers of housing. The second component uses an optimal tax model to examine how local governments select optimal tax rates on di erent land uses. My model suggests that it is optimal for local governments to tax di erent land uses at the same rate only in rare cases when land areas are equal and production technologies are identical across sectors. When housing prices are exogenous, the optimal tax rate is higher in the sector that has more inelastic demand for land. When housing prices are endogenous, it is optimal for local governments to tax housing land at a higher tax rate than non-housing land.
Optimal tax rate