Abstract
This paper delves into the connection between property taxation and population density. It is shown that the property tax's tendency to reduce the intensity of land development, which follows from its taxation of improvements, causes a city to expand spatially in order to accommodate its population.
Population Density Vs Taxation: An Introduction
Population density has become an important matter in the U.S. over the last few years. Long journeys, traffic congestion, and the fast disappearance of agricultural land have led many observers to conclude that American cities have expanded greatly.
Many economists hint that population growth is a natural result of several fundamental forces. These include expansion of the U.S. population in addition to the rise in household incomes, which stimulates the demand for land by encouraging consumption of larger houses. Besides, population expansion is a natural consequence of heavy investment in transportation infrastructure, which eases commuting and thus encourages suburban living.
Economists maintain that the process of urban growth cannot be faulted as wasteful unless the operation of the above fundamental forces is altered by market failure. The literature has, indeed, identified a number of market failures that cause such a distortion, potentially leading to excessive spatial expansion of cities. These include a failure to account for the social value of open space around cities, which may provide environmental benefits that are not taken into account in market transactions. Moreover, the negative externalities associated with freeway congestion make the social cost of commuting higher than the private cost.
Commuting thus appears artificially cheap to urban residents, so that commute trips are excessively long relative to the social optimum. Lastly, since housing developers are not required to pay for the full cost of the public infrastructure demanded by their projects, the cost of development under current fiscal arrangements is.........
