IDEAS home Printed from https://ideas.repec.org/p/ags/aaea84/279013.html
   My bibliography  Save this paper

Tax Policy And Invariant Asset Valuations Under Inflation

Author

Listed:
  • Watts, Myles J.
  • Bravo-Ureta, Boris E.

Abstract

The objective of the paper is to derive a tax policy which yields an imputed value of an investment, in real terms, which is invariant with the rate of inflation. The approach explicitly introduces inflation into Samuelson's "fundamental theorem of tax-rate invariance." The results indicate that only real interest should be taxed and depreciation allowances should be equal to economic depreciation indexed for inflation.

Suggested Citation

  • Watts, Myles J. & Bravo-Ureta, Boris E., 1984. "Tax Policy And Invariant Asset Valuations Under Inflation," 1984 Annual Meeting, August 5-8, Ithaca, New York 279013, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea84:279013
    DOI: 10.22004/ag.econ.279013
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/279013/files/aaea-1984-069.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.279013?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Michael Boehlje & Hoy Carman, 1982. "Tax Policy: Implications for Producers and the Agricultural Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(5), pages 1030-1038.
    2. Aaron, Henry J, 1976. "Inflation and the Income Tax," American Economic Review, American Economic Association, vol. 66(2), pages 193-199, May.
    3. Richardson, James W. & Nixon, Clair J. & Smith, Edward G., 1982. "Economic Impacts Of The 1981 Agricultural Act And The 1981 Tax Act On Texas High Plains Farmers," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 14(2), pages 1-6, December.
    4. Donald W. Reid & Garnett L. Bradford, 1983. "On Optimal Replacement of Farm Tractors," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(2), pages 326-331.
    5. Paul A. Samuelson, 1937. "Some Aspects of the Pure Theory of Capital," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(3), pages 469-496.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Davis, Neal & Hanson, Gregory D. & Kinnucan, Henry, 1986. "Taxation And Agriculture: An Annotated Bibliography Of Selected Journals," Staff Reports 277841, United States Department of Agriculture, Economic Research Service.
    2. Unknown, 1998. "References/Literature Cited," Commodity Costs and Returns Estimation Handbook,, Iowa State University.
    3. Martin Feldstein, 1979. "Adjusting Depreciation in an Inflationary Economy: Indexing versus Acceleration," NBER Working Papers 0395, National Bureau of Economic Research, Inc.
    4. Vincent Carret, 2021. "Rupture and continuity in the original divide between micro-dynamics and macro-dynamics," Working Papers halshs-03242180, HAL.
    5. Nowotny, Ewald, 1980. "Inflation and Taxation: Reviewing the Macroeconomic Issues," Journal of Economic Literature, American Economic Association, vol. 18(3), pages 1025-1049, September.
    6. Herwig Immervoll, 2006. "Fiscal Drag – An Automatic Stabiliser?," Research in Labor Economics, in: Micro-Simulation in Action, pages 141-163, Emerald Group Publishing Limited.
    7. Rossi, Clifford V., 1988. "Estimating The Effects Of Tax Reform On Farm Sole Proprietorships," Staff Reports 278124, United States Department of Agriculture, Economic Research Service.
    8. Sonin, Isaac M. & Whitmeyer, Mark, 2020. "Some nontrivial properties of a formula for compound interest," Finance Research Letters, Elsevier, vol. 33(C).
    9. Lawrence H. Summers, 1981. "Inflation and the Valuation of Corporate Equities," NBER Working Papers 0824, National Bureau of Economic Research, Inc.
    10. Saak, Alexander & Hennessy, David A., 2001. "Well-behaved cash flows," Economics Letters, Elsevier, vol. 73(1), pages 81-88, October.
    11. Bradford, Garnett L. & Miller, Stephen E., 1998. "An Analysis Of Alternative Net Present Value Capital Investment Decision Models," Working Papers 18804, Clemson University, Department of Agricultural and Applied Economics.
    12. Magni, Carlo Alberto, 2016. "Capital depreciation and the underdetermination of rate of return: A unifying perspective," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 54-79.
    13. Lowenberg-DeBoer, James & Boehlje, Michael, 1987. "The Distributional Impact Of 1981 And 1982 Federal Income Tax Legislation: Which Farmers Benefit?," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 16(1), pages 1-10, April.
    14. James M. Rock, 1987. "Book IV: The Inducement to Invest," The American Economist, Sage Publications, vol. 31(1), pages 27-32, March.
    15. Stanley Fischer & Franco Modigliani, 1978. "Towards an understanding of the real effects and costs of inflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(4), pages 810-833, December.
    16. Immervoll, Herwig, 2004. "Falling up the stairs: an exploration of the effects of ‘bracket creep’ on household incomes," EUROMOD Working Papers EM3/04, EUROMOD at the Institute for Social and Economic Research.
    17. Chang Woon Nam & Doina Radulescu & Doina Maria Radulescu, 2004. "Does Debt Maturity Matter for Investment Decisions?," CESifo Working Paper Series 1124, CESifo.
    18. Adnan Abdulaziz Shahir & Francesco Figari, 2021. "The effect of fiscal drag on income distribution and work incentives: A microsimulation analysis on selected African countries," WIDER Working Paper Series wp-2021-167, World Institute for Development Economic Research (UNU-WIDER).
    19. Joao Marques Silva & Jose Azevedo Pereira, 2017. "Over-Valuation: Avoid Double Counting when Retaining Dividends in the FCFE Valuation," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 8(4), pages 107-114, October.
    20. Cairns, Robert D., 2008. "Value and income," Ecological Economics, Elsevier, vol. 66(2-3), pages 417-424, June.

    More about this item

    Keywords

    Agribusiness; Agricultural Finance;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea84:279013. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: http://www.aaea.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.