In search of an appropriate tax base for local Leviathans

Jürgen Göbel
Authors registered in the RePEc Author Service: Juergen Goebel ()

MPRA Paper from University Library of Munich, Germany

Abstract: The impact of local fiscal policy depends on the choice of the tax base. In this paper, we take four criteria to evaluate tax bases, namely: efficiency, simplicity, flexibility, and fairness. The results of such an evaluation depend on how we describe the involved agents. We construct a two stage model of a local economy with three types of agents: Leviathans, households, and housing firms. Each Leviathan seeks to maximize the surplus of his local fiscal budget. Each household seeks to maximize its life-time utility from three types of goods: composite private goods, housing, and local public goods. Each housing firm seeks to maximize its profits. In this model, we analyze the characteristics of four distinct tax bases: land rent, housing capital rent, housing sales, and housing property. In particular, we analyze the responses of the households, the housing firms, and the housing prices on a change of a specific tax rate. The results are used to evaluate each tax base with respect to our four criteria.

Keywords: Leviathan; tax base; exit option; sensitivity analysis (search for similar items in EconPapers)
JEL-codes: H11 H21 R51 (search for similar items in EconPapers)
Date: 2009-02-28
New Economics Papers: this item is included in nep-pbe and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:13940

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