Public Finance

Problem set #2

Due Sept. 18, 2017

20 points

Explain whether a high land-value tax is neutral, better than neutral, or worse than neutral.

If it is neutral, the tax has no impact on the economy.

If it is worse than neutral, it has a deadweight loss.

If it is better than neutral, it is better for the economy to tax land value even if the revenues are returned directly to the people rather than used to finance public goods.

Select one of the three answers, and justify it.