Opposites attract: the effect of the federal income tax code on community composition

Article Abstract:

Property taxation is transferred from owners of small houses to owners of huge houses when houses in two homogenous but different communities are restructured as one heterogeneous community. The federal income tax code has three elements that explain how this shift increases aggregate property values in the heterogeneous community. In the first instance, the property tax can be deducted and the tax rate structure is progressive. In the second case, itemization is not performed by particular families. In the last case, different interest rates are used for the capitalization of future property taxes. These aspects facilitate the development of heterogeneous communities if the various family types demand similar degrees of public service. The incentive to create heterogeneous communities is reduced when the difference between federal income tax rates is cut. The distribution of income of new planned communities thus narrows after the 1986 Tax Reform Act.

Analysis, Taxation, Income tax, Property taxes, Community development, Property tax

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Household location and Tiebout: do families sort according to preferences for locational amenities?

Article Abstract:

C.M. Tiebout (1956) argued that consumers might demonstrate their true preferences for locally offered public goods under certain conditions. In particular, he suggested that the marginal benefits from the locational amenities are similar for households within geographically unique locations. To test this sorting, a new methodology was used to decipher if marginal benefits from locational amenities are alike for all families in a certain location. Cross-equation restrictions were imposed on hedonic regressions. The cross-equation restrictions were rejected, manifesting an inefficient sorting of households. However, the restrictions were backed up by data from the American Housing Survey for 1985 and 1989 although these are not enough to support efficient sorting.

Research, Economic aspects, Consumer preferences, Households, Economic geography, Homesites

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