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Farmland Preservation and Differential Taxation: Evaluating Optimal Policy Under Conditions of Uncertainty

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  • Johnston, Robert J.

Abstract

Differential property tax policy for farmland is often set under conditions of uncertainty and limited information regarding landowners’ objective functions. This study examines optimal differential tax policy for a parcel of agricultural land facing uncertain development, identifying instances in which common farmland taxation policies may be non-optimal. Optimal tax rates are characterized given three possible causes of uncertain development: exogenous offers from developers, tax-related reductions in landowner wealth, and a combination of these factors. Model results indicate that underlying causes of uncertain development are critical when seeking to assess the optimality of differential taxation policies, and the use of a single, time-invariant differential tax levy is rarely optimal given uncertain development.

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  • Johnston, Robert J., 2003. "Farmland Preservation and Differential Taxation: Evaluating Optimal Policy Under Conditions of Uncertainty," Agricultural and Resource Economics Review, Cambridge University Press, vol. 32(2), pages 198-208, October.
    • Handle: RePEc:cup:agrerw:v:32:y:2003:i:02:p:198-208_00
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    1. Rigoberto A. Lopez & Farhed A. Shah & Marilyn A. Altobello, 1994. "Amenity Benefits and the Optimal Allocation of Land," Land Economics, University of Wisconsin Press, vol. 70(1), pages 53-62.
    2. John E. Anderson, 1993. "Use-Value Property Tax Assessment: Effects on Land Development," Land Economics, University of Wisconsin Press, vol. 69(3), pages 263-269.
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    Cited by:

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    2. Jeffrey I. Chapman & Robert J. Johnston & Timothy J. Tyrrell, 2009. "Implications of a Land Value Tax with Error in Assessed Values," Land Economics, University of Wisconsin Press, vol. 85(4), pages 576-586.
    3. Chhetri, Sagar Godar & Li, Yanshu & Hepinstall-Cymerman, Jeffery & Siry, Jacek & Gordon, Jason, 2024. "Factors influencing forestland enrollment in Georgia's preferential property tax programs," Forest Policy and Economics, Elsevier, vol. 160(C).

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