Effects of Revenue Distribution and Income Distribution on the Impacts of Local Taxation

Abstract

A computable equilibrium model of city government tax policy is constructed and analyzed for the impacts of taxes on all land and on capital, with four patterns of distribution of the tax revenue. Workers' utilities are exogenous. Choices of tax base and of tax distribution policy affect the extent of tax-exporting and the efficiency of tax collection, as does the distribution of landownership. Local land taxation is more efficient than local capital taxation, regardless of landownership patterns. A non-Tiebout theory of local government is implicit in the model, and interaction of government structure and choice of policies merits further study.