Income Taxes and Price Variability in Storable Commodity Markets

Kevin McNew and Bruce Gardner

No 285725, 1981-1999 Conference Archive from NCR-134/ NCCC-134 Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: Progressive income taxes lead to distortions in economic decisions made across tax years. This is particularly important when income can be quite volatile, as in the case of agriculture. Progressive taxes, therefore, can fundamentally change economic behavior over time. This study explores how progressive income taxes influence storage decisions and the markets for storable commodities. Under a progressive tax system, commodity storage tends to be lower in the aggregate, and, as a consequence, price volatility increases. These distortions could be eliminated by introducing a flat-rate tax or by changing the tax reporting system for farmers.

Keywords: Marketing (search for similar items in EconPapers)
Date: 1998-04
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Journal Article: Income Taxes and Price Variability in Storable Commodity Markets (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nc8191:285725

DOI: 10.22004/ag.econ.285725

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