Tax Deductibility of Commuting Expenses and Residential Land Use with More than One Center

28 Pages Posted: 31 Jul 2003

See all articles by Matthias Wrede

Matthias Wrede

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Institute of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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

Wrede, Matthias, Tax Deductibility of Commuting Expenses and Residential Land Use with More than One Center (June 2003). Available at SSRN: https://ssrn.com/abstract=427620 or http://dx.doi.org/10.2139/ssrn.427620

Matthias Wrede (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg - Institute of Economics ( email )

Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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