Urban Sprawl and the Property Tax (Brueckner & Kim, 2003)
Brueckner & Kim's 2003 theoretical paper shows the conventional property tax has two opposing effects on city size, so its net effect on sprawl is ambiguous — and under low substitution the tax can actually encourage sprawl. Carried here as counter-evidence: the anti-sprawl case cannot rest on the p
Summary
"Urban Sprawl and the Property Tax" by Jan K. Brueckner (University of Illinois at Urbana-Champaign) and Hyun-A Kim (Korea Institute of Public Finance), International Tax and Public Finance 10(1), 2003, pp. 5–23, is the theoretical paper that pins down why the conventional property tax's effect on urban sprawl is ambiguous. It is carried on this wiki as counter-evidence to the simple proposition that taxing property restrains the spatial expansion of cities.[1]
The paper decomposes the property tax's effect on city size into two channels that push in opposite directions. Because a uniform property tax also taxes buildings, it discourages capital per unit of land, lowering density and pushing the city outward; but by raising the cost of housing it shrinks the dwelling each household consumes, which raises density and pulls the city inward. In the authors' words: "While the tax's depressing effect on improvements reduces population density, spurring the spatial expansion of cities, a countervailing effect from lower dwelling sizes may dominate, raising densities and making cities smaller."[1]
Which channel wins is not settled by theory alone — it depends on the elasticity of substitution between housing and other goods (σ). Under CES preferences with a high σ, the density-raising dwelling-size effect dominates and the tax makes cities smaller. But Brueckner & Kim's numerical work for the Leontief case (σ = 0) points the other way: "numerical results for the Leontief case (where σ is zero) suggest that the property tax encourages urban sprawl when substitution between housing and other goods is low."[1] Their headline caution is therefore the reverse of the anti-sprawl claim: "the distortions generated by the property tax may include inefficient spatial expansion of cities, suggesting the tax may belong on the list of causal factors identified by critics of urban sprawl."[1]
Why It Is Counter-Evidence — and Its Precise Scope
This is the theoretical basis for treating "property taxation reduces sprawl" as contested rather than established. The net sign is parameter-dependent, and one of the model's two cases has the property tax worsening sprawl. The wiki cites it alongside Song & Zenou (2006), who take up exactly this ambiguity and argue it resolves toward smaller cities in their model and data — but the resolution is theirs, not Brueckner & Kim's, and it is empirical rather than guaranteed by the theory.
Two scope points keep this from being read as a wholesale refutation of the LVT-reduces-sprawl case:
- It concerns the conventional property tax, which taxes improvements. The sprawl-increasing channel Brueckner & Kim identify — the "depressing effect on improvements" that lowers density — is precisely the tax on buildings that a land value tax or split-rate design removes. Their ambiguity is largely a property of the improvement-tax component, not of land taxation as such; if anything, the paper's mechanism is an argument for shifting the burden off buildings.
- It is a comparative-statics model, not an empirical estimate. It establishes that the sign is theoretically open under standard assumptions; it does not measure what real property taxes have done to real cities. The direct empirical work on split-rate density is separate — Banzhaf & Lavery (2010) and the Cho et al. (2013) simulation.
The "improvement effect" terminology the sprawl outcome page uses to distinguish the density channel from the dwelling-size channel traces to this paper's decomposition.
Bears On
- Outcome (challenges): LVT reduces urban sprawl — the theoretical ambiguity result; wired as counter-evidence, not support.
- Research: Song & Zenou (2006) — takes up this ambiguity and argues it resolves toward smaller cities · Brueckner (1986) — the split-rate capital-intensity model.
See Also
Sources
- Jan K. Brueckner & Hyun-A Kim (2003), "Urban Sprawl and the Property Tax," International Tax and Public Finance 10(1):5–23. DOI (publisher, paywalled) · free full-text PDF hosted by co-referencing scholar Matthew Turner at matthewturner.org — used for the two-opposing-effects decomposition, the CES-vs-Leontief conditionality, and the three abstract quotations (C-claims); directly fetched and read this pass from the free full-text PDF. The net effect on city size is ambiguous and, under low substitution, points toward more sprawl — the basis for carrying this paper as counter-evidence.