Question
Suppose a central city L has 5,000 households (homeowners), each with an average taxable property of $100,000. The average annual cost for the city to
Suppose a central city L has 5,000 households (homeowners), each with an average taxable property of $100,000. The average annual cost for the city to provide local service (i.e., water, sewer, roads, garbage collection) is $2,000 per household. We assume a straight-line taxing system for simplicity and the municipality does not have any other sources of revenues except for collecting property tax
Because of white flight, 1,000 better-off families seceded from this central city and established their own taxing district in the suburban area - town W. The average taxable property value is $200,000 in town W and the same level of local service ($2,000 per household per year). How much will the tax rate to be in town W?
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