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An Analysis of Constrained Property Taxes in a Simple Optimal Tax Model

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  • Saku Aura
  • Thomas Davidoff

Abstract

We analyze an economy in which desirable land is inelastically supplied. A single government sets taxes on labor income, real property, and other commodities subject to the constraint that pure land rents and elastically supplied land development and structures are taxed at a common rate. The optimal property tax rate rises with the ratio of pure rents to structure and land development costs. Taxing non-housing commodities at a common rate is not optimal, even when their demand elasticities with respect to wages are identical. (JEL codes: H21, R13) Copyright The Author 2012. Published by Oxford University Press on behalf of Ifo Institute, Munich. All rights reserved. For permissions, please email: journals.permissions@oup.com, Oxford University Press.

Suggested Citation

  • Saku Aura & Thomas Davidoff, 2012. "An Analysis of Constrained Property Taxes in a Simple Optimal Tax Model," CESifo Economic Studies, CESifo Group, vol. 58(3), pages 525-543, September.
    • Handle: RePEc:oup:cesifo:v:58:y:2012:i:3:p:525-543
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifs030
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    Cited by:

    1. Rafael Barbosa & Simon Skipka, 2019. "Tax Housing or Land? Distributional Effects of Property Taxation in Germany," CESifo Working Paper Series 8039, CESifo.

    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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