Working Paper: NBER ID: w9179
Authors: 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.
Keywords: No keywords provided
JEL Codes: H0; H2; H3; H4; H5; H6; H7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| income tax base (H24) | lower investment in IPGs (G31) |
| land tax base (R51) | higher investment in IPGs (E22) |
| tax base choice (H29) | IPG spillovers capitalized into land values (H82) |
| IPG spillovers capitalized into land values (H82) | political dynamics (D72) |