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Income Taxes and Price Variability in Storable Commodity Markets

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  • McNew, Kevin
  • Gardner, Bruce

Abstract

Progressive income taxes lead to distortions in economic decisions made across tax years. This is particularly important when income can be quite volatile, as in the case of agriculture. Progressive taxes, therefore, can fundamentally change economic behavior over time. This study explores how progressive income taxes influence storage decisions and the markets for storable commodities. Under a progressive tax system, commodity storage tends to be lower in the aggregate, and, as a consequence, price volatility increases. These distortions could be eliminated by introducing a flat-rate tax or by changing the tax reporting system for farmers.

Suggested Citation

  • McNew, Kevin & Gardner, Bruce, 1998. "Income Taxes and Price Variability in Storable Commodity Markets," 1981-1999 Conference Archive 285725, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    • Handle: RePEc:ags:nc8191:285725
    DOI: 10.22004/ag.econ.285725
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    2. Tomek, William G. & Peterson, Hikaru Hanawa, 2000. "Risk Management In Agricultural Markets: A Survey," 2000 Producer Marketing and Risk Management Conference, January 13-14, Orlando, FL 19580, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. McPhail, Lihong Lu & Babcock, Bruce A., 2008. "Ethanol, Mandates, and Drought: Insights from a Stochastic Equilibrium Model of the U.S. Corn Market," Hebrew University of Jerusalem Archive 6305, Hebrew University of Jerusalem.
    4. McNew, Kevin & Smith, Vincent H., 2003. "Segregation of Grain Markets: Consequences for Price Behavior," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(01), pages 1-19, April.
    5. Janzen, Joseph P., 2024. "Realized Farm-Level Returns to Post-Harvest Grain Storage and Marketing," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2024, January.
    6. Mallory, Mindy L. & Irwin, Scott H., 2010. "The Forward Contract’s Income Shifting Option and Implications on the Forward Basis," 2010 Conference, April 19-20, 2010, St. Louis, Missouri 285314, NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    7. Mattke, Alicia & Hansen, Kristiana & Peck, Dannele & Vivek, Sharma & Miller, Scott & Bastian, Christopher, 2024. "Potential Benefits of Water-Use Efficiency Technologies in Southeastern Wyoming," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2024, January.
    8. Lihong Lu McPhail & Bruce A. Babcock, 2008. "Short-Run Price and Welfare Impacts of Federal Ethanol Policies," Center for Agricultural and Rural Development (CARD) Publications 08-wp468, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    9. Joseph P. Janzen & Nicholas D. Paulson & Juo‐Han Tsay, 2024. "Commodity storage and the cost of capital: Evidence from Illinois grain farms," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(2), pages 526-546, March.
    10. Mallory, Mindy L. & Zhao, Wenjiao & Irwin, Scott H., 2012. "Farmer’s Income Shifting Option in Post-harvest Forward Contracting," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124692, Agricultural and Applied Economics Association.

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