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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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    3. 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.
    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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