This paper jointly archetypes a landowner's decision to disentangle a parcel and the option to enlist that parcel in a generally received use assessment program.

This paper jointly archetypes a landowner's decision to disentangle a parcel and the option to enlist that parcel in a generally received use assessment program. The analytical accrues highlight different factors that influence the effectiveness of a rife use program in delaying growth The results also underscore the difficulty a local regulation might have in influencing the behavior of the landowner. excluding for altering eligibility rules, a local regulation employing current use assessment has yet two policy tools: a penalty for evolution and the property tax rate.

Key Words: existing use assessment, development penalties, land-use change, pecuniary and non-pecuniary benefits, attribute taxation, use value

During the 20th centenary state and municipal governments in the United States witnessed an ongoing conversion of agricultural land and other forms of expand space to metropolitan uses. As Morris (1998) has noted, "Since 1957 each state has responded to increase pressures by allowing or requiring preferential goods tax treatment of farmland, and in a certain number of states other open space land.... [T]he greatest in quantity common policy assesses the land at its value in its now passing agricultural or open space use" (p 144)

Such policies are known as present use (or use-value) assessment. With the single exception of Michigan, every state engages some form of a generally received use assessment program. Because they are in such a manner wide-spread, we believe current use programs must be acknowledged in developing a theory that relates goods taxation to land use patterns.

This application of mind focuses on the tax treatment of properties that are first recorded in and then later with-drawn from generally received use assessment. In 15 states, the landowner have fruition ofs a lower property tax bill while the parcel is enlisted and suffers no penalty when the goods is withdrawn. In seven states, however, the proprietor has to pay a land-use change tax if a parcel is withdrawn from circulating use classification. This tax is typically equal to a percentage of the property's market value at the time of withdrawal. In another 27 states, the proprietor pays a recapture penalty equal to the wealth tax savings (plus interest charges) during the years immediately prior to withdrawal from the program.1 These variations in tax treatment remind of the need to consider to what extent the structure of current use programs might affect the timing of development

We use an intertemporal design to analyze a landowner's decision to expand a parcel of land listed in a current use assessment program. Our protoplast highlights different factors that might affect the step to which such a program guards undeveloped land. The results also underscore the difficulty faced according to a local government in influencing the behavior of the landowner. reject for altering eligibility rules, a local conduct employing current use assessment has nevertheless two policy tools: a penalty for unravelling and the property tax rate.

The mode of building of our model closely come nexts Anderson (1993), who also patterns a landowner's choice of exhibition time (D).2 We extend his work by way of adding several important features. First, we add specific functional forms to the trajectory of flaws for developed and undeveloped land. While this feature makes our example more restrictive, it offers further insight into the comparative statics, which have unambiguous signs.

In addition, our archetype explicitly allows for the possibility that landowners value the nonpecuniary benefits of their land. This feature is central to the policy discussion in succession current use assessment and should be included in the protoplast Lawmakers justify tax benefits for agriculture and land preservation in spells of preserving family farms, the rural landscape, and areas of historic value; however, these benefits may not be museed in market prices. To the size such nonpecuniary values accrue to individual landowners, we wish to investigate the stage to which they affect a rife use program.3

Most importantly, our standard extends Anderson's analysis by explicitly accounting for the penalty a landowner might face for removing a parcel from a now passing use assessment program. This inclusion gives additional policy relevance to the pattern as the penalty is the single in kind policy variable a state guidance could most easily change. We add extent to this policy discussion at explicitly considering a landowner's option to chronicle in a current use program, and we consider the optimal construction of penalties in subordination to such a scenario.

An Intertemporal type of Development

In order to protoplast the impact of current use assessment forward local land use patterns, we pattern the behavior of a representative landowner who allows a single parcel of undevelop land forward a metropolitan fringe. A landowner must decide at what point in time, D to unfold While undeveloped, the parcel generates a stream of pecuniary benefits, c(t) and a stream of nonpecuniary benefits n(t)

We initially assume the parcel is enlisted in a current use program, likewise that the landowner must pay a penalty, P(D) at the time of unfolding Once land is developed, it generates single pecuniary benefits, u(t). Both before and after disentanglement the landowner must pay a goods tax, at a constant rate, [tau], upon the assessed value of land, A(f). Thus, the proprietor chooses the time of unravelling D, to maximize the current value of a stream of payments described by: (1)