NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How to Protect Future Generations Using Tax Base Restrictions

Antonio Rangel

NBER Working Paper No. 9179
Issued in September 2002
NBER Program(s):   PE

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.

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Document Object Identifier (DOI): 10.3386/w9179

Published: Rangel, Antonio. "How To Protect Future Generations Using Tax-Base Restrictions," American Economic Review, 2005, v95(1,Mar), 314-346.

 
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