Competition and Monopoly Power in Local Government: An Extension of Caplan (2001)

Caplan (2001) shows that because land is asource of immobile wealth, localgovernments can use the property tax toavoid competitive pressures of the Tieboutmodel, allowing them to deviate fromcitizens' preferences. In this comment Ishow that the property tax is not the onlytax local governments can use to avoidcompetitive pressure. Most taxes placed onproperty owners allow local governments toextract some rents despite perfect citizenmobility.