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WASMER Etienne (Sciences-Po)”Land taxation, bequests and capital accumulation Tax the Chatelains! “

October 16 @ 12:15 pm - 1:30 pm

Macro seminar
Time : 12h15 – 13h30
Date : 16 Octobre 2023

Salle 3001

WASMER Etienne (Sciences-Po)”Land taxation, bequests and capital accumulation Tax the Chatelains!”

Abstract: We build a dynamic model to study the optimal level of land taxes and compare them with alternatives. Starting from a Ramsey-Cass-Judd (1985) setup, we add population growth, perpetual youth and flows of new born agents, a dynastic representative agents, a class of rentiers detaining undeveloped land. Capitalists need to purchase land and develop it. A first best modified golden rule is contrasted with the decentralized modified golden rule and shows the under-accumulation of capital under various types of taxes. The first best principle is to set taxes at a level that entirely compensates for the initial allocation of property rights: transfers compensate for total rents paid by poorer agents to richer agents, net of the wage they receive from them, and the net national income is split between classes of agents with shares depending on the elasticity of intertemporal substitution and social planner’s objective. We generalize the optimal land tax principles in the presence of taxes on rents and imputed rents. We show the equivalence of donation taxes, accidental bequests taxes and taxes on assets. We introduce a distinction between raw land and constructible land in limited supply. Steady- state and dynamic simulations show the superiority of land taxes in a variety of contexts. Right after the implementation of a positive and uniform land tax, developed land declines and undeveloped land rise, its price falls leading rentiers to reduce their consumption; welfare increases permanently after a few periods.

Joint work : Jiacheng Li, Alain Trannoy