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The Effect of Consumption Based Taxes on Agriculture in the United States

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  • Marcu, Mihaela
  • Moss, Charles B.

Abstract

Recently several proposals have arisen to replace the current income tax system in the United States with a consumption based or Fair Tax. This study investigates the effect of such a consumption based tax on agricultural investment decisions using stochastic optimal control to model the investment decision at the farm level. The results indicate that a consumption tax rate of 25.9 percent would be equivalent to the income tax rate paid by very large producers in the United States.

Suggested Citation

  • Marcu, Mihaela & Moss, Charles B., 2005. "The Effect of Consumption Based Taxes on Agriculture in the United States," 2005 Annual meeting, July 24-27, Providence, RI 19217, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19217
    DOI: 10.22004/ag.econ.19217
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    References listed on IDEAS

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    1. Allen M. Featherstone & Charles B. Moss & Timothy G. Baker & Paul V. Preckel, 1988. "The Theoretical Effects of Farm Policies on Optimal Leverage and the Probability of Equity Losses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(3), pages 572-579.
    2. Robert A. Collins, 1985. "Expected Utility, Debt-Equity Structure, and Risk Balancing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 67(3), pages 627-629.
    3. Merton, Robert C, 1969. "Lifetime Portfolio Selection under Uncertainty: The Continuous-Time Case," The Review of Economics and Statistics, MIT Press, vol. 51(3), pages 247-257, August.
    4. Hoppe, Robert A. & Perry, Janet E. & Banker, David E., 2000. "ERS Farm Typology for a Diverse Agricultural Sector," Agricultural Information Bulletins 33657, United States Department of Agriculture, Economic Research Service.
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