How to Protect Future Generations Using Tax Base Restrictions

32 Pages Posted: 17 Sep 2002

See all articles by Antonio Rangel

Antonio Rangel

California Institute of Technology

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Date Written: August 2002

Abstract

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.

Keywords: Intergenerational, Future generations, Intergenerational public goods, debt, expropriation, political economy, tax incidence, land taxes, political economy, constitution, constitutional design, budget institutions, capital accounting

JEL Classification: H0, H2, H3, H4, H5, H6, H7

Suggested Citation

Rangel, Antonio, How to Protect Future Generations Using Tax Base Restrictions (August 2002). Available at SSRN: https://ssrn.com/abstract=324965 or http://dx.doi.org/10.2139/ssrn.324965

Antonio Rangel (Contact Author)

California Institute of Technology ( email )

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