Tax Deductibility of Commuting Expenses and Residential Land Use with More than One Center
28 Pages Posted: 31 Jul 2003
Date Written: June 2003
Abstract
This paper analyzes the treatment of commuting expenses by the income tax code from a normative and a positive point of view within a continuous space framework with endogenous residence choices and perfect labor mobility. As commuting expenses should never be deductible from the income tax base in a first-best world, deductibility might well be the outcome of a second-best-optimum-tax approach provided that not all factors of production were mobile. Non-deductibility might be justified by a lack of instruments to internalize environmental and congestion externalities or by perfect mobility of all production factors. However, the existence of deductions in many countries can be easily explained within a public choice framework by redistribution from non-commuters to commuters.
Keywords: Income Tax, Relief, Residential Land Use, Labor Mobility, Commuting Expenses, Optimum Taxation
JEL Classification: H21, J61, R13
Suggested Citation: Suggested Citation
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