The Impact of Local Tax Policy on Urban Economic Development

摘要

The bulletin explores the effects of local tax policy on urban economic development. The paper is practitioner-oriented and addresses the question of how local officials might best think through the advisability of adjusting local taxes to stimulate community job formation. The considerations relevant to evaluating the costs and benefits of proposed tax policy changes are set forth in Section II. Section III reviews local tax policy reforms used to influence urban economic change, including property tax incentives, tax increment financing, general tax reductions, metropolitan tax base sharing and structural changes in the local tax code, including reduction of the nonresidential component of the property tax, and the possibility of substituting land value taxation as an alternative to the property tax levy. Section IV reviews the existing literature on the effects of taxation on industrial location, and the evidence surrounding the fiscal and job generation impacts of specific local tax reforms. Section V proposes a research agenda to improve existing knowledge about how to use local tax policy to enhance city economies. Sections VI and VII provide additional information resources and a selected bibliography.