Studies in Fiscal Federalism and State–local Finance series
Edited by Dick Netzer
Chapter 7: Land use regulations and the property tax: costÂ…benefit analyses
7. Land use regulations and the property tax: cost–beneﬁt analyses John F. McDonald 1 INTRODUCTION The purpose of this chapter is to develop theoretical analyses of several land use and property taxation policies that are employed by local governments. The goals of each model presented are twofold: to gain understanding of the eﬀects of policies as they operate in the relevant markets, and to formulate reasonably simple methods for cost–beneﬁt analyses of these policies. Numerical examples or empirical results are employed to illustrate the possible use of each model. The chapter begins with an examination of zoning. Zoning ordinances allocate land to uses and regulate the intensity of land use. The ﬁrst model examines the allocation of a parcel of land to a particular use by land use zoning. The parcel in question is subject to property taxation, and it is assumed that there is unemployed labor residing in the jurisdiction. The next section continues the examination of zoning by studying the eﬀects of land use intensity regulations. This section is followed by a study of the eﬀects of changes in property taxation (the tax on land and structures) on the intensity of land use. Earlier versions of these models were published in McDonald (1979;1983; 2001). McDonald (1983) discussed property tax changes applied only to capital or land. The next model covered in the chapter examines the property tax and the size of the tax base at the local jurisdiction level. The...
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