The Revenue Adequacy of Site Value Taxation in a Ricardian System of Economic Growth

Michael Swint, Gerald W. Stone and Ralph T. Byrns

American Journal of Economics and Sociology, 1985, vol. 44, issue 1, 107-119

Abstract: Abstract. The federal administration has sought to reduce the growth of federal expenditures by shifting some government costs to state and local governments. An increased expenditure burden for the latter governments would require increased tax rates for existing types of taxes that have adverse impacts on economic incentives. Land taxes are considered as a source of revenue because of their efficiency aspects. Unfortunately this idea is all too often dismissed because of alleged revenue inadequacy. Thus an analysis is called for of the revenue adequacy of site value taxation in a Ricardian model of economic growth. The model allows analysis of revenue adequacy over time in an economic growth context that is suited for the long range tax‐expenditure planning horizon with which local governments are faced. When revenue needs are primarily dependent upon the population size, and the fisc is initially operating at a deficit, for a land tax to permit attainment of balance, per capita rents must be increasing over time. Also when the economy's public service demand is primarily dependent upon income, deficits will not occur if rental share exceeds the share of income devoted to public output. Not all income goes to fiscal output, so rent eventually exceeds expenditures.

Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ajecsc:v:44:y:1985:i:1:p:107-119

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