Differential attribute tax policy for farmland is frequently set under conditions of uncertainty and limited information regarding landowners' objective functions.

Differential attribute tax policy for farmland is frequently set under conditions of uncertainty and limited information regarding landowners' objective functions. This cogitation examines optimal differential tax policy for a parcel of agricultural land facing uncertain progressive growth identifying instances in which usual farmland taxation policies may be non-optimal. Optimal tax rates are characterized given three possible causes of uncertain development: exogenous proffers from developers, tax-related reductions in landowner wealth, and a combination of these factors. design results indicate that underlying causes of uncertain disclosure are critical when seeking to assess the optimality of differential taxation policies, and the use of a single, time-invariant differential tax raise is rarely optimal given uncertain development

Key Words: differential taxation, farmland preservation, land conversion, optimal manage optimal policy, property tax, uncertainty

Differential taxation is a used by all tool employed to prevent conversion of farmland to higher-density residential or commercial uses. greatest in quantity theoretical analyses of differential taxation and land conversion are based forward models of land development and timing. These approaches prototype development from the perspective of the landowner; decisions regarding potential enrollment of land in differential tax programs and conversions from agricultural to nonagricultural use are based in succession a comparison of the discounted value of land in various uses (Anderson, 1986 1993; Bentick, 1979 1997; Bentick and Pogue 1988; England and Mohr 2003; Capozza and Helsley, 1989; Hennessy, 1999; Rose 1973; Shoup 1970; Skouras, 1978)

Where uncertainty or limited information is addressed by means of existing work, it is typically introduced in denominations of landowner uncertainty regarding income, land fissures and other factors (e.g., Parks and Quimio, 1996; Andersen, 1993) In contrast, local and state officials frequently choose tax policies without detailed knowledge of landowner objective functions, and subject to conditions of considerable uncertainty associated with the timing and ultimate causes of farmland conversion. Findings of the empirical literature do not allay this uncertainty. For example, while many empirical studies demonstrate little or no impact of differential taxation programs (Ferguson, 1988; Parks and Quimio, 1996; Wunderlich, 1997) others put in mind of differential taxation may indeed influence the size and rate of development (Lopez Shah, and Altobello, 1994)

Optimal farmland tax policy beneath conditions of uncertainty will not in general coincide with analogous policy in a deterministic words immediately preceding [i]or[/i] following Moreover, the potential causes of uncertain disentanglement may influence optimal policy. This meditation models optimal tax policy in subordination to three scenarios, each characterizing a different cause of uncertain development

The first scenario assumes growth is triggered solely by an exogenous (i.e., not tax related) event-in this case, an show from developers that occurs at an uncertain coming events date. The second scenario assumes exhibition is triggered solely by taxation which shortens the wealth of the landowner to more [i]or[/i] less uncertain threshold. Under the third scenario, it is assumed that progressive growth is triggered by a combination of these uncertain factors. All patterns address optimal tax policy from the limited information perspective of community policy makers, in which detailed knowledge of landowner objective functions is unavailable.

To determine optimal tax policy, an optimal superintend model is developed for a parcel of agricultural land subdue to uncertain and irreversible disentanglement As noted above, development may be triggered by way of an exogenous offer from developer at an uncertain futurity date, by excessive taxation that contracts the wealth of the landowner to a certain number of uncertain threshold, or by a combination of these factors. Optimal policy is compared for each case and contrasted with the case in which the risk of unfolding is not present.

The primary view of this presentation is to proffer new insights into how communities may improve tax policies given that progression in a continuously ascending gradation is uncertain. Although the pattern is purposefully stylized and abstracts from many issues addressed elsewhere in the literature, it exhibits a perspective largely absent from existing work. In particular, the prototype demonstrates that the cause of uncertain evolution has significant implications for optimal farmland taxation, and that use of a single, time-invariant tax raise is rarely optimal given uncertain development

General Theoretical Framework

The literature provides numerous examples addressing resource allocation under uncertainty. These include, among others, archetypes of nonrenewable resource depletion given uncertain technological change (Dasgupta and Heal, 1974; and Dasgupta and Stiglitz, 1981) an examination of optimal forest rotation given uncertain risk of forest fire (Re 1984) analyses of consumption given the risk of pollution-induced catastrophe (Cropper 1976; and Clarke and Re 1994) an analysis of fishery harvest policy given uncertain stock collapse (Re 1988) and a gauge of fishery harvest policy given uncertain biomass shift (Johnston and Sutinen, 1996) Although these examples focus on consumption and resource depletion choices, similar perspectives may be used to address the choice of tax policy given uncertain land conversion.