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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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9179.

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Date of creation: Sep 2002
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Publication status: published as Rangel, Antonio. "How To Protect Future Generations Using Tax-Base Restrictions," American Economic Review, 2005, v95(1,Mar), 314-346.
Handle: RePEc:nbr:nberwo:9179
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Find related papers by JEL classification:

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

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  1. Poterba, James M, 1994. "State Responses to Fiscal Crises: The Effects of Budgetary Institutions and Politics," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 799-821, August.
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  7. Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1989. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc.
  8. Skinner, Jonathan, 1991. "Prospects for Agricultural Land Taxation in Developing Countries," World Bank Economic Review, World Bank Group, vol. 5(3), pages 493-511, September.
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Cited by:

  1. Gersbach, Hans, 2009. "Minority voting and public project provision," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 3, pages 1-40.
  2. Parry, Ian W.H., 2006. "Are the Costs of Reducing Greenhouse Gases from Passenger Vehicles Negative?," Discussion Papers dp-06-14-rev, Resources For the Future.
  3. 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.
  4. Marko Köthenbürger & Panu Poutvaara, 2007. "Rent Taxation and its Intertemporal Welfare Effects in a Small Open Economy," CESifo Working Paper Series 2158, CESifo Group Munich.
  5. Marco Bassetto & Thomas Sargent, 2005. "Politics and Efficiency of Separating Capital and Ordinary Government Budgets," NBER Working Papers 11030, National Bureau of Economic Research, Inc.
  6. 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.
  7. Robert P. Inman, 2010. "States in Fiscal Distress," NBER Working Papers 16086, National Bureau of Economic Research, Inc.
  8. Robert P. Inman, 2010. "States in fiscal distress," Regional Economic Development, Federal Reserve Bank of St. Louis, issue Oct, pages 65-80.
  9. 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.
  10. 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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