Tax Incentives and the Price of Conservation

Dominic P. Parker and Walter N. Thurman

No 264977, CEnREP Working Papers from North Carolina State University, Department of Agricultural and Resource Economics

Abstract: The growth of land trusts and the restrictions on land development through conservation easements is one of the most striking trends in charitable giving and American land conservation. We exploit sharp variation over time and across states in tax policy to estimate the extent to which this trend is explained by tax incentives. Relying on detailed information about the federal and state income tax codes between 1987 and 2012, we develop an income tax calculator that quantifies the after-tax price of donating an easement. We use panel data techniques to measure the response of state-level growth in easement acreage to the price of donating. Our analysis reveals large responses of easement holdings to changes in the donation price. Characterized as elasticities, our estimates range from around -3.3 to -5.5: the percentage change in easement holdings resulting from a one percent change in the donation price. These elasticities support previously untested assertions that tax policy is responsible for the rapid expansion of conservation easements, and are larger than estimates of how charitable donations of other types respond to after-tax prices. Although we find that tax policy is effective in encouraging the private provision of open space amenities, it comes with a caveat. We present evidence that donated easements are inferior to purchased lands in ecological quality, according to land trusts’ own definitions of the term.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 77
Date: 2016-11-01
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nccewp:264977

DOI: 10.22004/ag.econ.264977

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