Takings and Tax Revenue: Fiscal Impacts of Eminent Domain
-
Carrie B. Kerekes
Abstract
In the landmark 2005 Kelo case, the Supreme Court ruled that eminent domain takings for private development constituted permissible “public use” because of their potential to produce higher revenue. This paper provides the first examination of that relationship between eminent domain activity and state and local revenue. We find virtually no evidence of a positive relationship between the number of eminent domain takings for private use (such as the one that led to the Kelo decision) and the level of revenue. We find some limited evidence of a negative relationship between eminent domain and future revenue growth.
Appendix
Correlation coefficients.
| Eminent domain condemnations | Eminent domain condemnations per housing unit | Eminent domain condemnations per capita | |
| Lagged change in st. & loc. own- | –0.082 | –0.020 | –0.017 |
| source gen. rev. (% of pers. inc.) | 0.434 | 0.849 | 0.875 |
| Lagged change in state and local | –0.100 | –0.007 | 0.000 |
| tax revenue (% of pers. Inc.) | 0.337 | 0.949 | 0.998 |
Data sources.
| Variable | Source |
| Total eminent domain condemnations, 1998–2002 & June 2005–June 2006 | Berliner (2003), Berliner (2006) |
| Eminent domain condemnations per housing unit, 1998–2002 & June 2005–June 2006 | Berliner (2003), Berliner (2006), and US Census Bureau |
| Eminent domain condemnations per capita, 1998–2002 & June 2005–June 2006 | Berliner (2003), Berliner (2006), and US Census Bureau |
| Eminent domain power binary variable | Turnbull and Salvino (2009) |
| State and local general revenue from own sources, as a percentage of personal income, 2004 & 2008 | US Census Bureau |
| State and local tax revenue, as a percentage of personal income, 2004 & 2008 | US Census Bureau |
| Revenue decentralization (local general revenue from own sources, as a percentage of state & local general revenue from own sources), 2004 & 2008 | US Census Bureau |
| Expenditure decentralization (local direct general expenditure, as a percentage of state & local direct general expenditure), 2004 & 2008 | US Census Bureau |
| Total number of local governments of all types, 2002 & 2007 | Census of Governments, US Census Bureau |
| Local intergovernmental revenue from state government, as a percentage of state total expenditure, 2004 & 2008 | US Census Bureau |
| Urban share of population (%), 2000 & 2005 est.* (*average of 2000 & 2010) | US Census Bureau |
| State population, 2004 & 2008 | US Census Bureau |
| Real median household income (2012 dollars), 2004 & 2008 | US Census Bureau |
| Percentage of population aged 18–64, 2004 & 2008 | US Census Bureau |
| Real per capita gross domestic product (millions of chained 2005 $), 2004 & 2008 | Bureau of Economic Analysis |
| Unemployment rate (%), 2004 & 2008 | Bureau of Labor Statistics |
| Confederate state dummy variable | Turnbull and Salvino (2009) |
| Northeast, Midwest, South, and West region dummy variables | US Census Bureau |
| Lawyers per 1,000 population, 2000 & 2006–2010 | US Census Bureau, Equal Employment Opportunity Data File, and American Community Survey |
| Income skewness (median household income divided by average household income), 1999 & 2005 | US Census Bureau, Census 2000 Summary File 3, and American Community Survey |
| State-government-owned portion of total state land area (%), 1995 | National Wilderness Institute |
Summary statistics.
| Variable | Obs. | Mean | Std. Dev. | Min. | Max. |
| Total eminent domain condemnations, 1998–2002 & June 2005–June 2006 | 94 | 169.777 | 398.853 | 0 | 2,625 |
| Eminent domain condemnations per housing unit, 1998–2002 & June 2005–June 2006 | 94 | 65.378 | 147.971 | 0 | 963.108 |
| Eminent domain condemnations per capita, 1998–2002 & June 2005–June 2006 | 94 | 28.182 | 65.215 | 0 | 424.711 |
| Eminent domain power binary variable | 94 | 0.149 | 0.358 | 0 | 1 |
| State and local general revenue from own sources, as a percentage of personal income, 2004 & 2008 | 94 | 15.40% | 1.81% | 11.2% | 23.3% |
| State and local tax revenue, as a percentage of personal income, 2004 & 2008 | 94 | 10.31% | 1.22% | 8.0% | 14.6% |
| Change in state and local general revenue from own sources, as a percentage of personal income, 2004–2007 & 2008–2011 | 94 | 0.31% | 6.68% | −13.0% | 11.8% |
| Change in state and local tax revenue, as a percentage of personal income, 2004–2007 & 2008–2011 | 94 | −0.32% | 7.26% | −15.9% | 17.4% |
| Lagged change in state and local general revenue from own sources, as a percentage of personal income, 1995–1998 & 2002–2005 | 94 | 0.94% | 5.31% | −10.2% | 13.1% |
| Lagged change in state and local tax revenue, as a percentage of personal income, 1995–1998 & 2002–2005 | 94 | 1.26% | 6.08% | −11.6% | 16.9% |
| Revenue decentralization (local general revenue from own sources, as a percentage of state & local general revenue from own sources), 2004 & 2008 | 94 | 40.59% | 8.92% | 7.7% | 57.6% |
| Expenditure decentralization (local direct general expenditure, as a percentage of state & local direct general expenditure), 2004 & 2008 | 94 | 51.89% | 8.03% | 33.3% | 70.1% |
| Total number of local governments of all types, 2002 & 2007 | 94 | 1,868 | 1,495 | 118 | 6,994 |
| Number of local governments of all types, per 100,000 residents, 2002 & 2007 | 94 | 57.043 | 72.094 | 4.528 | 431.313 |
| Local intergovernmental revenue from state government, as a percentage of state total expenditure, 2004 & 2008 | 94 | 24.34% | 5.54% | 15.3% | 43.4% |
| Urban share of population (%), 2000 & 2005 est.* (*average of 2000 & 2010) | 94 | 71.857 | 14.906 | 38.180 | 94.697 |
| State population (1,000s), 2004 & 2008 | 94 | 6,142 | 6,716 | 506.529 | 36,600 |
| Real median household income (2012 dollars), 2004 & 2008 | 94 | $53,305 | $7,749 | $38,867 | $70,571 |
| Percentage of population aged 18–64, 2004 & 2008 | 94 | 62.83% | 1.20% | 60.0% | 65.3% |
| Real per capita gross domestic product (millions of chained 2005 $), 2004 & 2008 | 94 | $40,481 | $7,068 | $27,686 | $62,706 |
| Unemployment rate (%), 2004 & 2008 | 94 | 5.233 | 1.098 | 3 | 8.3 |
| Confederate state dummy variable | 94 | 0.298 | 0.460 | 0 | 1 |
| Northeast region dummy variable | 94 | 0.191 | 0.396 | 0 | 1 |
| Midwest region dummy variable | 94 | 0.255 | 0.438 | 0 | 1 |
| South region dummy variable | 94 | 0.319 | 0.469 | 0 | 1 |
| West region dummy variable | 94 | 0.234 | 0.426 | 0 | 1 |
| Lawyers per 1,000 population, 2000 & 2006–2010 | 94 | 2.959 | 0.931 | 1.743 | 5.760 |
| Income skewness (median household income divided by average household income), 1999 & 2005 | 94 | 0.765 | 0.026 | 0.702 | 0.820 |
| State-government-owned portion of total state land area (%), 1995 | 94 | 5.311 | 6.309 | 0.180 | 36.710 |
Correlation coefficients.
| Eminent domain condemnations per housing unit | Eminent domain condemnations per capita | Eminent domain power binary variable | |
| State and local own-source general revenue (% of personal income) | 0.0412 | 0.047 | 0.0828 |
| 0.6932 | 0.6527 | 0.4276 | |
| State and local tax revenue (% of personal income) | 0.0626 | 0.0596 | 0.3125* |
| 0.5487 | 0.5681 | 0.0022 | |
| Change in state and local own-source general revenue (% of personal income) | −0.1308 | −0.1463 | 0.053 |
| 0.2088 | 0.1594 | 0.6119 | |
| Change in state and local tax revenue (% of personal Income) | −0.114 | −0.1269 | 0.113 |
| 0.274 | 0.2229 | 0.2783 |
References
Acemoglu, D. and S. Johnson. 2005. “Unbundling Institutions,” 113 Journal of Political Economy 949–995.10.3386/w9934Search in Google Scholar
Acemoglu, D., S. Johnson and J.A. Robinson. 2001. “The Colonial Origins of Comparative Development: An Empirical Investigation,” 91 The American Economic Review 1369–1401.10.3386/w7771Search in Google Scholar
Acemoglu, D., S. Johnson and J.A. Robinson. 2002. “Reversal of Fortunes: Geography and Institutions in the Making of the Modern World Income,” 117 Quarterly Journal of Economics 1231–1294.10.3386/w8460Search in Google Scholar
Allen, C. 2014. “Kelo Revisited: Properties Were Seized and a Neighborhood Razed in the Name of ‘Economic Development’ That Never Came,” 19 The Weekly Standard February 10.Search in Google Scholar
Benson, B.L. ed. 2010. Property Rights: Eminent Domain and Regulatory Takings Re-Examined. Oakland, CA: The Independent Institute.10.1057/9780230107793Search in Google Scholar
Berliner, D. 2003. Public Power, Private Gain. Washington, DC: Institute for Justice.Search in Google Scholar
Berliner, D. 2006. Opening the Floodgates: Eminent Domain Abuse in the Post-Kelo World. Washington, D.C: Institute for Justice.Search in Google Scholar
Besley, T. 1995. “Property Rights and Investment Incentives: Theory and Evidence From Ghana,” 103 The Journal of Political Economy 903–937.10.1086/262008Search in Google Scholar
Boettke, P.J. 1994. “The Political Infrastructure of Economic Development,” 13 Human Systems Management 89–100.10.3233/HSM-1994-13202Search in Google Scholar
Boettke, P.J. and C.J. Coyne. 2003. “Entrepreneurship and Development: Cause or Consequence?” 6 Advances in Austrian Economics 67–88.10.1016/S1529-2134(03)06005-8Search in Google Scholar
Boettke, P.J., C.J. Coyne and P.T. Leeson. 2010. “Land Grab: Takings, the Market Process, and Regime Uncertainty,” in B.L. Benson, ed. Property Rights: Eminent Domain and Regulatory Takings Re-Examined. Oakland, CA: The Independent Institute.10.1057/9780230107793_9Search in Google Scholar
Brennan, G. and J. Buchanan. 1980. The Power to Tax: Analytical Foundations of a Fiscal Constitution. Cambridge: Cambridge University Press.Search in Google Scholar
Carpenter, D.M. and J.K. Ross. 2008. Doomsday? No Way: Economic Trends and Post-Kelo Eminent Domain Reform. Washington, DC: Institute for Justice.Search in Google Scholar
Cohen, C.E. 2006. “Eminent Domain After Kelo v. City of New London: An Argument for Banning Economic Development Takings,” 29 Harvard Journal of Law and Public Policy 491–568.Search in Google Scholar
de Soto, H. 1989. The Other Path. New York: Basic Books.Search in Google Scholar
de Soto, H. 2000. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York: Basic Books.Search in Google Scholar
Epstein, R.A. 1985. Takings: Private Property and the Power of Eminent Domain. Cambridge, MA: Harvard University Press.Search in Google Scholar
Greenhut, S. 2004. Abuse of Power: How the Government Misuses Eminent Domain. Santa Ana, CA: Steven Locks Press.Search in Google Scholar
Hayek, F.A. 1945. “The Use of Knowledge in Society,” 35 American Economic Review 519–530.Search in Google Scholar
Hayek, F.A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press.Search in Google Scholar
Kerekes, C.B. 2011. “Government Takings: Determinants of Eminent Domain,” 13 American Law and Economics Review 201–219.10.1093/aler/ahq023Search in Google Scholar
Kerekes, C.B. and C.R. Williamson. 2008. “Unveiling De Soto’s Mystery: Property Rights, Capital Formation, and Development,” 4 Journal of Institutional Economics 299–325.10.1017/S1744137408001100Search in Google Scholar
Knack, S. and P. Keefer. 1995. “Institutions and Economic Performance: Cross Country Tests Using Alternative Institutional Measures,” 7 Economics and Politics 207–228.10.1111/j.1468-0343.1995.tb00111.xSearch in Google Scholar
Landau, D. 2003. “A Simple Theory of Economic Growth,” 52 Economic Development and Cultural Change 217–325.10.1086/380823Search in Google Scholar
Lanza, S.P., T.J. Miceli, C.F. Sirmans and M. Diop. 2013. “The Use of Eminent Domain for Economic Development in the Era of Kelo,” 27 Economic Development Quarterly 352–362.10.1177/0891242413493661Search in Google Scholar
Leblang, D.A. 1996. “Property Rights, Democracy and Economic Growth,” 49 Political Research Quarterly 5–26.10.1177/106591299604900102Search in Google Scholar
Lopez, E.J., C.B. Kerekes and G.D. Johnson. 2007. “Make Property Rights Stronger: Limit Eminent Domain,” in R.S. Sobel, ed. Unleashing Capitalism: Why Prosperity Stops at the West Virginia State Line and How to Fix It. Morgantown, WV: The Public Policy Foundation of West Virginia.Search in Google Scholar
Lopez, E.J., R. Todd Jewel and N.D. Campbell. 2009. “Pass a Law, Any Law, Fast! State Legislative Responses to the Kelo Backlash,” 5 Review of Law and Economics 101–135.10.2202/1555-5879.1268Search in Google Scholar
Lopez, E.J. and S.M. Totah. 2007. “Kelo and Its Discontents: The Best (or Worst) Thing to Happen to Property Rights?” 11 The Independent Review 681–712.10.2139/ssrn.1620707Search in Google Scholar
Mauro, P. 1995. “Corruption and Growth,” 110 The Quarterly Journal of Economics 681–712.10.2307/2946696Search in Google Scholar
McGeehan, P. 2009. “Pfizer to Leave City That Won Land-Use Case,” The New York Times November 13, A1.Search in Google Scholar
Ranis, P. 2007. “Eminent Domain: Unused Tool for American Labor?” 10 Working USA: The Journal of Labor and Society 193–208.10.1111/j.1743-4580.2007.00151.xSearch in Google Scholar
Sandefur, T. 2006a. “The Backlash so Far: Will Americans Get Meaningful Eminent Domain Reform?” 3 Michigan State Law Review 709–777.Search in Google Scholar
Sandefur, T. 2006b. “Playing the Takings Game: How Government Regulates Away Property Rights,” Goldwater Institute Policy Report 210.Search in Google Scholar
Somin, I. 2007. “Is Post-Kelo Eminent Domain Reform Bad for the Poor?” 101 Northwestern University Law Review 1931–1943.Search in Google Scholar
Somin, I. 2009. “The Limits of Backlash: Assessing the Political Response to Kelo,” 93 Minnesota Law Review 2100–2178.10.1057/9780230107793_7Search in Google Scholar
Stansel, D. 2006. “Interjurisdictional Competition and Local Government Spending in U.S. Metropolitan Areas,” 34 Public Finance Review 173–194.10.1177/1091142105283576Search in Google Scholar
Turnbull, G.K. and R.F. Salvino. 2009. “Do Broader Eminent Domain Powers Increase Government Size?” 5 Review of Law and Economics 785–806.10.2202/1555-5879.1395Search in Google Scholar
Turnbull, G.K., R.F. Salvino and M.T. Tasto. 2013. “Does the Power to Use Eminent Domain for Economic Development Actually Enhance Private Sector Employment?” in R.F. Salvino, M.T. Tasto, and G.M. Randolph, eds. Entrepreneurial Action, Public Policy, and Economic Outcomes. Northampton, MA: Edward Elgar Publishing Limited.10.4337/9781781005798Search in Google Scholar
von Mises, L. 1935. “Economic Calculation in the Socialist Commonwealth,” in F.A. Hayek, ed. Collectivist Economic Planning. London: George Routledge & Sons. Originally published as “Die Wirtschaftsrechnung im sozialistischen Gemeinwesen” in the Archiv für Sozialwissenschaften, vol. 47, 1920.Search in Google Scholar
©2016 by De Gruyter
Articles in the same Issue
- Frontmatter
- Litigation with a Variable Cost of Trial
- Ex ante versus Ex post Governance: A Behavioral Perspective
- Risk Aversion, the Hand Rule, and Comparison between Strict Liability and the Negligence Rule
- Takings and Tax Revenue: Fiscal Impacts of Eminent Domain
- When Should Governments Reveal Criminal Histories?
- Ideology and Strategy among Politicians: The Case of Judicial Independence
- Tax Return as a Political Statement
- What Makes Law to Change Behavior? An Experimental Study
Articles in the same Issue
- Frontmatter
- Litigation with a Variable Cost of Trial
- Ex ante versus Ex post Governance: A Behavioral Perspective
- Risk Aversion, the Hand Rule, and Comparison between Strict Liability and the Negligence Rule
- Takings and Tax Revenue: Fiscal Impacts of Eminent Domain
- When Should Governments Reveal Criminal Histories?
- Ideology and Strategy among Politicians: The Case of Judicial Independence
- Tax Return as a Political Statement
- What Makes Law to Change Behavior? An Experimental Study
