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Tax Incentives and the Price of Conservation

Dominic Parker and Walter Thurman

Journal of the Association of Environmental and Resource Economists, 2018, vol. 5, issue 2, 331 - 369

Abstract: We study the role of tax incentives in promoting a fast-growing and novel type of conservation: voluntary, permanent restrictions on private land use through conservation easements. In the United States, easements represent the largest charitable gift on a per-donation basis, but skeptics wonder if their tax preference merely subsidizes wealthy landowners rather than inducing conservation. We incorporate federal and state income tax codes into a calculator to quantify the after-tax donation price and demonstrate its sensitivity to landowner income and state and federal policies. Using a 1987–2012 panel, we measure the response of state-level easements to the price. Our large elasticity estimates, spanning −2.4 to −6.1, indicate that tax incentives induce conservation and do not merely subsidize it. We find no evidence that generous tax benefits have caused less strategic patterns of land conservation.

Date: 2018
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Handle: RePEc:ucp:jaerec:doi:10.1086/695615