Taxation on Land Value and Development When There Are Negative Externalities from Development
Resource
Journal of Real Estate Finance and Economics
Journal
The Journal of Real Estate Finance and Economics
Journal Volume
36
Journal Issue
1
Pages
103--120
Date Issued
2007-08
Author(s)
Abstract
This article employs a real options framework to investigate the design of taxation on both land value and development in a competitive real estate market. We assume that developed properties reduce open space, and thereby harm urban residents. However, ignoring this negative externality, landowners will develop properties sooner than is socially optimal. A regulator can correct this tendency by imposing a positive tax on development or a negative tax on land value. Alternatively, the regulator can implement both instruments simultaneously, in which case an increase in the tax rate on development will be accompanied by an increase in the tax rate on land value, and vice versa. © 2007 Springer Science+Business Media, LLC.
SDGs
Type
journal article