City Taxes, City Spending

City Taxes, City Spending

Essays in Honor of Dick Netzer

Studies in Fiscal Federalism and State–local Finance series

Edited by Amy Ellen Schwartz

An illustrious group of economists contribute to this volume honoring Dick Netzer, the public finance economist well-known for his research on state and local taxation, the provision of urban public services, and non-profit organizations. Following in his tradition, the contributors apply microeconomics to real world problems facing urban areas and use statistical analysis to gain insight into practical solutions.

Chapter 4: Land taxation in New York City: a general equilibrium analysis

Andrew F. Haughwout

Subjects: economics and finance, public finance, geography, cities, politics and public policy, public policy, urban and regional studies, cities


Andrew F. Haughwout* Few topics have so engaged public finance scholars, among them Dick Netzer, as the land value tax.1 Since at least Henry George (1879), economists have urged the efficiency of a land tax, particularly relative to the current primary local tax, that on property value. Over the years, the land value tax has served admirably as a lesson in humility for economists: despite its highly touted efficiency benefits, policy makers have virtually never adopted it. This dissonance between research and practice has been so persistent that it has itself become a major theme of economists’ recent discussions of the land tax (see, for example, the collection of papers in Netzer, 1998). This chapter explores the consequences of adopting a land value tax in New York City, the city that has also been among Netzer’s major intellectual projects of the last 40 years. New York, with its enormous public sector and complex local taxation system, is unique in the American federal system. Yet in other aspects, particularly its essentially complete openness to factor movements and trade, New York is like other local economies in the United States and elsewhere. This chapter develops and calibrates an equilibrium model of the New York City economy and provides simulations of the effects of adopting a land value tax in place of parts or all of the current local tax system. We believe that an application to a single municipality is instructive both as a contrast to the current...

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