Local governments are responsible for setting tax rates which will best satisfy residents. The tax rates are used to produce tax revenues, which, in turn, fund the local public good provision. This local taxation may result in unintended consequences, as a result of the impact of the changes on the local tax base. This dissertation examines (1) how optimal taxing decisions at the local level may be subject to land constraints and heterogenous residents, (2) the impact of a tax change on jurisdictional composition, and (3) the local tax effect of a change at a vertically differentiated level of government. The first chapter utilizes a theoretical model of differential taxation, where local governments are forced to levy a differential property tax across land use types. The differential tax is shown to be inefficient in urban areas. In rural areas, the efficiency results of the differential tax are show to be sensitive to tax base size and the bid rent functions of the land use types. Emprically, one of the assumptions of the theoretical model, household mobility, is tested. It is shown that changes in local property tax rates affect the growth rates of a tax exporting base. If this effect is not taken into consideration by local governments, the tax-price of the public goods provision may be underestimated. The effects of local taxation are not isolated to the jurisdiction in which the taxes are imposed. The taxing decisions of one level of government are empircally shown to have an effect on other levels of government which share the same tax base, through an income effect. This research examines the effect of an exogenous change in school tax rates in Michigan as a result of Proposal A (1994). The dataset is unique since it uses state mandated changes on local tax levels. As a result, many issues which are empircally difficult to solve in the existing literature are accounted for.For example, Anderson (2006) provides empirical evidence that expenditure levels are endogenously determined by the presence of a vacation home tax base. In his study of the vacation home market in Minnesota, he finds that a one- percentanbsp;...
|Title||:||Three Essays on Local Public Finance|
|Publisher||:||ProQuest - 2008|