About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


35 Const. Pol. Econ. 1 (2024)

handle is hein.journals/constpe35 and id is 1 raw text is: Constitutional Political Economy (2024) 35:1-21 https://doi.org/10.1007/s10602-023-09398-w ORIGINAL PAPER Natural amenities and Neo-Hobbesian local public finance Luke Petachl Accepted: 3 March 2023 / Published online: 15 March 2023 ŠThe Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2023 Abstract A revenue maximizing local government must obey a migration constraint when levying taxes. Using this insight, I develop a simple theory of taxation that sug- gests natural amenities are a key factor influencing local tax rates. Natural amenities confer rents to residents which governments and interest groups compete to extract. Revenue maximizing local tax rates are increasing in the level of natural amenities, increasing in moving costs, and decreasing in households' reservation utility. Using data on natural amenities and taxation for US counties, I find that local tax rates are in-fact increasing the level of natural amenities. Finally, I suggest an alternative interpretation of the tax revolts of the late 1970s. Rather than an attempt to con- strain Leviathan, local property tax reform (such as California's Proposition 13) and restrictions on housing supply are the outcome of competition over amenity rents in which property owners successfully capture a monopoly position at the expense of other social groups including renters and local government. Keywords Taxation - Public choice - Natural amenities - Land-use regulation- Constitutional political economy JEL Classification H21 - H71 - D72 1 Introduction In The Power to Tax, Brennan and Buchanan (1980) remark that locational rents- e.g., as a result of natural amenities-provide a potential surplus which a revenue maximizing local government will seek to exploit via high tax rates: [T]he gov- ernmental jurisdiction that is most 'favorably situated' in terms of the generation of locational rents...opens up the prospect for the relatively greater degree of fis- cal exploitation (p. 202). Given this acknowledgment, it is curious that Buchanan E Luke Petach luke.petach@belmont.edu Belmont University, Nashville, USA I_) Springer