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  Property Taxes and Dynamic Inefficiency: A Correction of a "Correction"

Hellwig, M. F. (2020). Property Taxes and Dynamic Inefficiency: A Correction of a "Correction". Economics Letters, 197: 109603.

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 Creators:
Hellwig, Martin F.1, Author              
Affiliations:
1Max Planck Institute for Research on Collective Goods, Max Planck Society, ou_2173688              

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Free keywords: Property taxes, dynamic inefficiency, overaccumulation of capital, land
 JEL: D9 - Intertemporal Choice
 JEL: E62 - Fiscal Policy
 JEL: H21 - Efficiency; Optimal Taxation
 Abstract: According to Homburg’s (2014) comment on Kim and Lee (1997), an ad-valorem property tax on land cannot cause dynamic ineffciency of equilibrium allocations in an overlapping-generations model unless the tax is "confiscatory", i.e., equal to or greater than land rents. With such a tax, Homburg claims, land would be intrinsically worthless and the market for land would be closed. The latter claims are invalid because, as a store of value, land can be traded at a positive price even if the net rate of return on land is negative.

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 Dates: 2020-10-08
 Publication Status: Published online
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 Rev. Type: Peer
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Title: Economics Letters
Source Genre: Journal
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Pages: - Volume / Issue: 197 Sequence Number: 109603 Start / End Page: - Identifier: -