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The Cost of Kelo: Are Property Taxes a Form of Public Use?

Author

Listed:
  • Thomas J. Miceli

    (University of Connecticut)

Abstract
This paper examines the economic implications of the definition of public use advanced by the Supreme Court in the case of Kelo v. New London. In its ruling, the Court asserted that the Fifth Amendment public use requirement is satisfied if the taking in question, even if for private ends, promises enhanced jobs and tax revenues for the community. The paper first reviews the law and economics of public use, and then argues that the Court’s justification creates the potential for an alliance between local governments and developers that will increase the risk of overuse of eminent domain. Underlying this risk is the unobservability of landowners’ subjective values, which requires local governments to rely on market value as the basis for property taxation.

Suggested Citation

  • Thomas J. Miceli, 2014. "The Cost of Kelo: Are Property Taxes a Form of Public Use?," Working papers 2014-35, University of Connecticut, Department of Economics.
    • Handle: RePEc:uct:uconnp:2014-35
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    References listed on IDEAS

    as
    1. Nosal, Ed, 2001. "The taking of land: market value compensation should be paid," Journal of Public Economics, Elsevier, vol. 82(3), pages 431-443, December.
    2. Thomas Miceli, 2011. "Free riders, holdouts, and public use: a tale of two externalities," Public Choice, Springer, vol. 148(1), pages 105-117, July.
    3. Thomas J. Miceli & Kathleen Segerson, 2012. "Land Assembly and the Holdout Problem Under Sequential Bargaining," American Law and Economics Review, American Law and Economics Association, vol. 14(2), pages 372-390.
    4. Hovenkamp, Herbert, 1991. "Legal Policy and the Endowment Effect," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 225-247, June.
    5. Florenz Plassmann & T. Nicolaus Tideman, 2008. "Accurate Valuation in the Absence of Markets," Public Finance Review, , vol. 36(3), pages 334-358, May.
    6. Cohen, Lloyd, 1991. "Holdouts and Free Riders," The Journal of Legal Studies, University of Chicago Press, vol. 20(2), pages 351-362, June.
    7. Lawrence Blume & Daniel L. Rubinfeld & Perry Shapiro, 1984. "The Taking of Land: When Should Compensation Be Paid?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(1), pages 71-92.
    8. Hermalin, Benjamin E, 1995. "An Economic Analysis of Takings," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 64-86, April.
    9. Flavio Menezes & Rohan Pitchford, 2004. "A model of seller holdout," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(2), pages 231-253, August.
    10. Miceli, Thomas J. & Segerson, Kathleen & Sirmans, C.F., 2008. "Tax Motivated Takings," National Tax Journal, National Tax Association;National Tax Journal, vol. 61(4), pages 579-591, December.
    11. Strange William C., 1995. "Information, Holdouts, and Land Assembly," Journal of Urban Economics, Elsevier, vol. 38(3), pages 317-332, November.
    12. Fischel, William A. & Shapiro, Perry, 1989. "A constitutional choice model of compensation for takings," International Review of Law and Economics, Elsevier, vol. 9(2), pages 115-128, December.
    13. Thomas J. Miceli & Kathleen Segerson, 2011. "Sequential Bargaining, Land Assembly, and the Holdout Problem," Working papers 2011-13, University of Connecticut, Department of Economics, revised Jan 2012.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Eminent domain; public use; just compensation; property taxes; subjective value;
    All these keywords.

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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