Property taxes and dynamic inefficiency : a orrection of a "correction"

Martin F. Hellwig

According to Homburg's (2014) comment on Kim and Lee (1997), an ad-valorem property tax on land cannot cause dynamic ineffi ciency 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.

MoreLess

Year of publication:	June 2020
Authors:	Hellwig, Martin
Publisher:	Bonn : Max Planck Institute for Research on Collective Goods
Subject:	Property taxes \| dynamic inefficiency \| overaccumulation of capital \| land \| Vermögensteuer \| Wealth tax \| Theorie \| Theory \| Grundsteuer \| Real property tax \| Effizienz \| Efficiency \| Overlapping Generations \| Overlapping generations