“Economic and Spatial Effects of Land Value Taxation in an Urban Area: An Urban Computable General Equilibrium Approach”, 2015-08-01 (; similar):
This paper studies the effects of switching from a capital property tax to a land value tax, using an urban computable general equilibrium model calibrated to the features of the Atlanta, Georgia, area.
Our model differs from prior simulation studies in that we assume that residents own a fixed amount of land rather than assuming an absentee landowner, we consider 3 income groups rather than just one, we consider cases in which housing capital is not completely mobile, and we allow for a labor-leisure choice.
…Our model differs from DiMasi’s in several ways: we consider both fixed and endogenous boundaries for the CBD and urban area; we consider both a LVT and a split rate tax; we assume that residents own a fixed amount of land, rather than assuming an absentee landowner; we consider 3 income groups rather than just one; we consider cases in which housing capital is not completely mobile; and we allow for a labor-leisure choice.
Unlike DiMasi, who found that a LVT was not fiscally viable, we find that a LVT can generate sufficient revenue to replace the property tax. For our benchmark model, we find that a revenue-neutral switch from a capital value property tax to a LVT, or a split-rate tax, results in a reduction in land rent and the tax exclusive price of housing. We find that the land rent gradient becomes flatter while the population density and housing capital gradients become steeper. Contrary to 2006, but consistent with 2010 we find that a LVT increases the size of the urban area when we allow the boundary to vary. When we allow for 3 income classes, we find that the switch to a LVT is income progressive. In addition, in a more realistic world where housing capital is durable, for the LVT reform, a higher LVT rate was required to secure the same tax revenue, but a higher real wage increase was achieved due to the reform. And the increase in welfare is much smaller when capital is immobile. Finally we find that a switch to a LVT increases welfare by 19.2% of tax revenue in the case of fixed urban boundaries and by 18.2% in the case of endogenous boundaries.