A Simple General Test for Tax Bias

by Mason Gaffney

Scholarly article, 2006

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Citation:
Gaffney, Mason. “A Simple General Test for Tax Bias.” The American Journal of Economics and Sociology, vol. 65, no. 3, 2006, pp. 733–49, https://doi.org/10.1111/j.1536-7150.2006.00471.x.

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Abstract supplied by Wiley Publishing: The paper infers the biasing effects of taxes from their differential effects on the present values of rival uses for given tracts of land. After-tax wage rates, interest rates, and commodity prices are exogenous, hence not affected by taxes, which are

therefore all shifted to land rents and values. The effects are differential among rival uses, hence change their ranking in the eyes of the landowner-manager. Most taxes downgrade the highest use into a lower use, inducing quantum leaps away from higher and better uses into lower and worse uses. The paper uses forestry as an allegory for all land uses. It compares yield taxes, property taxes, income taxes, and site value taxes. It finds that a change from the first three to the site value tax would induce quantum leaps from lower to higher uses of land.

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