Show simple item record Nechyba, TJ 2010-03-09T15:43:16Z 1997-04-01
dc.identifier.citation Journal of Political Economy, 1997, 105 (2), pp. 351 - 384
dc.identifier.issn 0022-3808
dc.description.abstract 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.
dc.format.extent 351 - 384
dc.format.mimetype application/pdf
dc.language.iso en_US
dc.relation.ispartof Journal of Political Economy
dc.title Local property and state income taxes: The role of interjurisdictional competition and collusion
dc.type Journal Article
dc.department Economics
pubs.issue 2
pubs.organisational-group /Duke
pubs.organisational-group /Duke/Sanford School of Public Policy
pubs.organisational-group /Duke/Sanford School of Public Policy/Sanford School of Public Policy - Secondary Group
pubs.organisational-group /Duke/Trinity College of Arts & Sciences
pubs.organisational-group /Duke/Trinity College of Arts & Sciences/Economics
pubs.publication-status Published
pubs.volume 105

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