Distortion Minimizing Classified Land Taxation
Erik B. Johnson
Quinnipiac University - Lender School of Business
Montana State University - Bozeman - Department of Agricultural Economics and Economics
October 20, 2015
While there is a rich literature on both the spatial impact of taxation and the optimal composition of differential classified taxes, there is a paucity of research on the role of spatial land competition in the choice of these taxes. This paper analyzes the distortion minimizing choice of a classified land tax under differing types of spatial competition through the use of open or closed monocentric city models with absentee landowners or pubic landownership. A key result of this analysis is that optimal classified land taxes may be distortionary with public landownership; taxes result in changes in population, resident utility, and land usage. Comparing an open and closed city with absentee landowners, differential tax rates are set in a closed city, but it is never optimal to have differential tax rates in an open city.
Number of Pages in PDF File: 59
Keywords: Efficient Taxation, Spatial Competition, Local Public Finance, Land Tax
JEL Classification: R1, R5, H21, H3
Date posted: May 10, 2014 ; Last revised: October 22, 2015
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