PROPERTY TAXES, MOBILITY, AND HOME OWNERSHIP

In contrast with the conventional property tax, which is based on curr ent market value, the acquisition-value property tax is based on the m arket value of the property at the time it was purchased. A switch to an acquisition-value tax (i) decreases household mobility, (ii) increa ses the likelihood of home ownership among infrequent movers at the ex pense of frequent movers, and (iii) attracts infrequent movers and rep els frequent movers. We use a simple simulation model to compute the e xcess burden of the acquisition-value tax. With a tax rate of 3%, the excess burden is about 4.5% of tax revenue. The transfer tax has much larger distortionary effects. (C) 1995 Academic Press, Inc.