Local Property and State Income Taxes: The Role of Interjurisdictional Competition and Collusion
解释为何地方政府几乎只使用财产税，而州政府通过所得税资助的拨款和税率上限削弱地方财产税，基于新泽西数据的模拟表明零地方所得税是占优策略，合谋需州政府介入才能维持。
This paper addresses two long-standing positive questions in public finance: (i) Why is the property tax, despite widespread popular complaints against its fairness, the almost exclusive tax instrument used by local governments, and (ii) why do we consistently observe higher levels of governments (states) undermining local property tax systems through income tax-funded grants and state-imposed caps on local property tax rates? A new intuitive argument to explain question i is presented and tested in simulations using a computable general equilibrium model with parameters set to be consistent with New Jersey data. Both the intuitive argument and the simulation results indicate that setting local income tax rates to zero is a dominant strategy for community planners. When faced with popular sentiment against the property tax, community planners can collude and introduce local income taxes simultaneously to prevent adverse general equilibrium migration and price changes. Since zero income tax rates are dominant strategies, however, such an agreement is enforceable only if an outsider such as the state government steps in. The institution of state grants funded through a state income tax can play such an enforcement role.