Abstract
This paper studies the efficiency of land taxation in a system of jurisdictions with absentee ownership of land. The government of a jurisdiction exploits absentee owners and overtaxes land. Hence, even if land taxation does not distort the use of land, it distorts the allocation of resources between the private and public goods, creating an efficiency loss. If individuals choose their land ownership by trading it in the asset market, they do not necessarily choose an efficient ownership. The government of a jurisdiction also imposes an absentee owner surcharge, reducing the return to absentee ownership and eliminating absentee ownership. Surcharges thus improve the efficiency of land taxation in the long run.
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