Differential land rent and agricultural taxation

Abstract

The paper addresses the influence of various types of taxes on changes in differential (Ricardian) land rent, and the economic performance of agricultural producers. Labour and capital taxes lead to higher prices for agricultural products, causing a decrease in consumer demand and lower income for agricultural producers (mostly utilizing marginal land). A polynomial single-product model has been used to demonstrate that reducing the tax burden on agricultural producers - specifically taxes on labour and capital - will result in increases in differential land rents on the average and relatively better plots, and/or the emergence of the rent on the marginal land. Thus, substituting labour and capital taxes for land/property taxes reduces the overall tax burden of agricultural producers on marginal lands.