A general equilibrium analysis of property tax incidence

Mieszkowski's (1972) analysis of the ‘new view’ of property tax incidence dealt with a model of an economy containing only one sector and three factors, in which labor was immobile. Brueckner (1981) incorporated an equal utility condition into his general equilibrium analysis of property tax incidence to take worker mobility into account. His model, however, did not have capital as an input factor and the benefits of public expenditure were ignored. This paper extends previous research by using a general equilibrium model of an economy with two sectors, three factors, and multiple communities. Both capital and labor are assumed to be mobile and Brueckner's labor mobility condition is modified to include public expenditure effects. While the results of the analysis support the ‘new view’, they qualify the original Mieszkowski studies in many aspects. The model also sheds light on tax incidence in no-tax communities, which was often ignored in earlier studies.