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How to Protect Future Generations Using Tax Base Restrictions

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  • Antonio Rangel

Abstract

This paper studies constitutional restrictions on the tax base that protect future generations from expropriation and improve the optimality of investment in Intergenerational Public Goods (IPGs). The choice of the tax base matters because it affects how intergenerational (IG) spillovers are capitalized into assets that are owned by current generations, and thus the IG politics. We show that with an income tax base, present generations expropriate future generations and produce inefficiently low levels of IPGs. By contrast, with a land tax base, IG expropriation using debt is impossible, the level of investment in IPGs is higher and, for some types of IPGs, Pareto optimal.

Suggested Citation

  • Antonio Rangel, 2002. "How to Protect Future Generations Using Tax Base Restrictions," NBER Working Papers 9179, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9179
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    Cited by:

    1. Robert P. Inman, 2010. "States in Fiscal Distress," NBER Working Papers 16086, National Bureau of Economic Research, Inc.
    2. Hilber, Christian A.L., 2010. "New housing supply and the dilution of social capital," Journal of Urban Economics, Elsevier, vol. 67(3), pages 419-437, May.
    3. Marco Bassetto, 2009. "The Research Agenda: Marco Bassetto on the Quantitative Evaluation of Fiscal Policy Rules," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 10(2), April.
    4. Marco Bassetto, 2006. "Politics and Efficiency of Separating Capital and Ordinary Government Budgets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1167-1210.
    5. Robert P. Inman, 2010. "States in fiscal distress," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Oct, pages 65-80.
    6. Marko Koethenbuerger & Panu Poutvaara, 2009. "Rent taxation and its intertemporal welfare effects in a small open economy," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(5), pages 697-709, October.
    7. Parry, Ian W.H., 2007. "Are the costs of reducing greenhouse gases from passenger vehicles negative?," Journal of Urban Economics, Elsevier, vol. 62(2), pages 273-293, September.
    8. Gersbach, Hans, 2009. "Minority voting and public project provision," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-40.
    9. Dao, Nguyen Thang & Edenhofer, Ottmar, 2018. "Feldstein meets George: Land rent taxation and socially optimal allocation in economies with environmental externality," Resource and Energy Economics, Elsevier, vol. 53(C), pages 20-41.
    10. Springer, Job D. & Lusby, Aaron K. & Leatherman, John C. & Featherstone, Allen M., 2007. "Property Tax Lids and the Effect on Kansas," 2007 Annual Meeting, February 4-7, 2007, Mobile, Alabama 34887, Southern Agricultural Economics Association.
    11. Gersbach, Hans & Kleinschmidt, Tobias, 2009. "Power to youth: Designing democracy for long-term well-being," Mathematical Social Sciences, Elsevier, vol. 58(2), pages 158-172, September.

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    JEL classification:

    • H0 - Public Economics - - General
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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