econ 4.16 - -Present Value= annual rate/discount...

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4/16/2008 Match up policy jurisdictuion of optimal level of prviding service Gov access to source of revenue->Tax instrument Fiscal Adequacy Tax Instrument Defined by: Base Rate Structure Evaluated in terms of Incidence-who actually pays for? Excess Burden Avoidability Income Elasticity-Revenue grow as the econ grows? Or not? Income tax- some stores get out of their states to avoid paying income tax Property tax- Harder to avoid paying tax because people cannot run away with building Base (of the property tax): Dollar value (Assesses market value) of some building Schools, library, non-profit company are not taxed Assessment Ratio = (Assessed Value/Market Value) Ex) 125,000/250,000 AD Valorem 1. Incidence- who ever has to legal property must send their check Netzer’s analysis (PICTURE): Incidence on tax, which shoulder does it fall to? Capitalized present value of the stream of sight gradients
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Unformatted text preview: -Present Value= annual rate/discount rate=1000/.05=sell market value for 20,000 dollar In well functioning market, $20,000 will be the final price Property tax=$400 If you buy a property, you get $1000-$400=$600 and Property tax of 5%, so $600/.05=$12,000 Person who owns the property at the time tax is imposed, sight value property is stuck The act of imposing tax on Sight Value, the burden of the tax falls Part of the tax gets capitalized because you are buying the tax liability too Residential tax- (PICTURE) Aaron argues when there are lots of communities that have property tax (PICTURE) Rate of Returen on all capital is lower. The burden of tax of real estates falls in the shoulders of all owners of capital and the tax becomes progressive....
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This note was uploaded on 05/01/2008 for the course ECON 230 taught by Professor Randy during the Spring '08 term at UMass (Amherst).

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