On the political economy of tax limits

Stephen Calabrese and Dennis Epple

No 2010/14, Working Papers from Institut d'Economia de Barcelona (IEB)

Abstract: We study the political economy of state limitations on the taxing powers of local governments, investigating the effects of such restriction on housing markets, community composition, and types of taxes and expenditures undertaken by local governments. We characterize equilibrium when voters choose values of multiple policy (tax and expenditure) instruments, finding that tax limitations have very substantial effects on housing prices and the composition of communities. Political support for tax limits comes from suburban voters and from a subset of central-city voters. Support for tax limits come even from residents of communities that are not constrained by the limits.

Keywords: Tax limits; redistribution; public goods; property tax; income tax; head tax (search for similar items in EconPapers)
JEL-codes: D72 D78 H30 H42 H72 H73 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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