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Regional Ownership Cost and Marginal Effective Tax Burdens for Rural Capital: Case Study of the Farm Sector

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  • Canning, Patrick
  • Rhoades, Douglas

Abstract

This report presents estimates of the effective tax burden placed on the lifetime income stream from a marginal addition to regional farm sector capital portfolios, and the ownership costs of these capital additions. Estimates are based on a framework that uses Jorgenson's method of measuring the cost of capital, and data requirements are largely met using official U.S. Government statistics and State and Federal statutory tax rules. Results vary widely across farm production regions due to Federal and State income and wealth tax systems. This disparity systematically changes with alternative assumptions regarding inflationary expectations and the rate of return from employing capital in production. The tax system, inflationary expectations, and the expected rate of return to capital-all of which are influenced by fiscal and monetary policies- affect the relative tax burden and expected lifetime net income from new investments in productive capital across farm production regions.

Suggested Citation

  • Canning, Patrick & Rhoades, Douglas, 1997. "Regional Ownership Cost and Marginal Effective Tax Burdens for Rural Capital: Case Study of the Farm Sector," Staff Reports 278819, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerssr:278819
    DOI: 10.22004/ag.econ.278819
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    1. Mervyn A. King & Don Fullerton, 1984. "The United Kingdom," NBER Chapters, in: The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany, pages 31-86, National Bureau of Economic Research, Inc.
    2. Lind, Robert C., 1990. "Reassessing the government's discount rate policy in light of new theory and data in a world economy with a high degree of capital mobility," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 8-28, March.
    3. Mervyn A. King & Don Fullerton, 1984. "The United States," NBER Chapters, in: The Taxation of Income from Capital: A Comparative Study of the United States, the United Kingdom, Sweden, and Germany, pages 193-267, National Bureau of Economic Research, Inc.
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