This preview shows page 1. Sign up to view the full content.
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....
View Full Document
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).
- Spring '08