TAXATION OF ECONOMIC RENTS

Gregor Schwerhoff, Ottmar Edenhofer, Marc Fleurbaey

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

Economic rents have long been identified as an efficient tax base. In addition, the recent literature documents that rent income is highly concentrated and that rents are quickly increasing. Rent taxation thus seems attractive for reasons of both efficiency and equity. Nevertheless, rent taxation remains a marginal topic in research and policy making. In a systematic review of the neoclassical literature on different rent types, we find that some types of rents reflect inefficiencies and should thus be minimized, while others reward investments and should be supported in line with social welfare. What remains for taxation are land rents, one of the few true scarcity rents. Land rents have significant potential to improve the efficiency of the tax system. We then begin to develop a comprehensive theory of land rent taxation by identifying relevant efficiency and equity effects. The interaction of many of these effects remains unexplored, which might explain policymakers' hesitation in using land taxes to date.

Original languageEnglish (US)
Pages (from-to)398-423
Number of pages26
JournalJournal of Economic Surveys
Volume34
Issue number2
DOIs
StatePublished - Apr 1 2020

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • D31
  • D33
  • Distribution
  • H21
  • H24
  • Land rents
  • Optimal taxation
  • Rent taxation

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