Essays in Honor of Dick Netzer
- Studies in Fiscal Federalism and State–local Finance series
Edited by Amy Ellen Schwartz
Chapter 4: Land taxation in New York City: a general equilibrium analysis
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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