Suppose that all types of property are assessed equally in a given state with taxable value equal to market value. Now suppose that a change is made to assess industrial property at 0 percent of market value, so effectively, no property tax is levied on industrial properties in the state.

(a) If the other types of property are commercial and residential, analyze the expected effect of this change on the amount, prices, and rate of return of industrial and other property in the state. Does it make any difference whether this tax change attracts any new investment from outside the state?

(b) How would the analysis and results be different if the state reduced industrial property taxes but required that total property tax revenue remain the same?