Browsing by Author "Nechyba, TJ"

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    Local property and state income taxes: The role of interjurisdictional competition and collusion
    (Journal of Political Economy, 1997-04-01) Nechyba, TJ
    This paper addresses two long-standing positive questions in public finance: (i) Why is the property tax, despite widespread popular complaints against its fairness, the almost exclusive tax instrument used by local governments, and (ii) why do we consistently observe higher levels of governments (states) undermining local property tax systems through income tax-funded grants and state-imposed caps on local property tax rates? A new intuitive argument to explain question i is presented and tested in simulations using a computable general equilibrium model with parameters set to be consistent with New Jersey data. Both the intuitive argument and the simulation results indicate that setting local income tax rates to zero is a dominant strategy for community planners. When faced with popular sentiment against the property tax, community planners can collude and introduce local income taxes simultaneously to prevent adverse general equilibrium migration and price changes. Since zero income tax rates are dominant strategies, however, such an agreement is enforceable only if an outsider such as the state government steps in. The institution of state grants funded through a state income tax can play such an enforcement role.
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    Mobility, targeting, and private-school vouchers
    (American Economic Review, 2000-03-01) Nechyba, TJ
    This paper uses general-equilibrium simulations to explore the role of residential mobility in shaping the impact of different private-school voucher policies. The simulations are derived from a three-district model of low-, middle-, and high-income school districts (calibrated to New York data) with housing stocks that vary within and across districts. In this model, it is demonstrated that school-district targeted vouchers are similar in their impact to nontargeted vouchers but vastly different from vouchers targeted to low-income households. Furthermore, strong migration effects are shown to significantly improve the likely equity consequences of voucher programs.