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Distributing Patronage Income Under Differing Tax Rates and Member Risk Preferences

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  • Russell, Levi A.
  • Briggeman, Brian C.

Abstract

This paper examines the effects of income tax rates and member risk preferences on the distribution of patronage income in a local agricultural cooperative. The paper uses a modified mean-variance model to provide some discussion points on how to consider the interaction of tax and member risk preferences on maximizing member benefits. Our results suggest that qualified earnings distributions should be relatively low under current tax policy conditions, and consideration should be given to using non-qualified distributions. Also, optimal patronage income distributions are more affected by significant changes in member risk preferences than significant changes in taxes.

Suggested Citation

  • Russell, Levi A. & Briggeman, Brian C., 2014. "Distributing Patronage Income Under Differing Tax Rates and Member Risk Preferences," Journal of Cooperatives, NCERA-210, vol. 29, pages 1-24.
    • Handle: RePEc:ags:jlcoop:244024
    DOI: 10.22004/ag.econ.244024
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    References listed on IDEAS

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    1. Richard J. Sexton, 1986. "The Formation of Cooperatives: A Game-Theoretic Approach with Implications for Cooperative Finance, Decision Making, and Stability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(2), pages 214-225.
    2. John J. VanSickle & W. Ladd George, 1983. "A Model of Cooperative Finance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(2), pages 273-281.
    3. Wilmer A. Dahl & W. D. Dobson, 1976. "An Analysis of Alternative Financing Strategies and Equity Retirement Plans for Farm Supply Cooperatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 58(2), pages 198-208.
    4. James G. Beierlein & Lee F. Schrader, 1978. "Patron Valuation of a Farmer Cooperative under Alternative Finance Policies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(4), pages 636-641.
    5. Boland, Michael A., 2012. "Cooperative finance and equity management," Conference Summaries 143556, University of Minnesota, The Food Industry Center.
    6. Royer, Jeffrey S. & Shihipar, M.L. Mohamad, 1997. "Individual Patron Preferences, Collective Choice, and Cooperative Equity Revolvement Practices," Journal of Cooperatives, NCERA-210, vol. 12, pages 1-16.
    7. Charles R. Knoeber & David L. Baumer, 1983. "Understanding Retained Patronage Refunds in Agricultural Cooperatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(1), pages 30-37.
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    Cited by:

    1. Briggeman, Brian & Jacobs, Keri & Kenkel, Phil & McKee, Greg, 2016. "Current Trends in Cooperative Finance," ISU General Staff Papers 3560, Iowa State University, Department of Economics.
    2. Kenkel, Phil, 2015. "Profit Distribution Alternatives for Agricultural Cooperatives," Journal of Cooperatives, NCERA-210, vol. 30, pages 1-23.

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