Tax in Kind to Reduce Supply and Increase Income without Government Payments and Marketing Quotas

Abstract

AbstractTheoretically, a tax in kind can be used to reduce supply and increase net farm income. Applied through a share payment to government, private marginal costs are increased and supply is decreased. The government also has a food fund to be used for aid or similar purposes. The mechanism requires neither government payments nor compulsory market quotas to lessen supply. However, compulsory sharing is necessary to prevent “free riders.” Variants of the mechanism would include a gross sales tax collected in conjunction with income taxes. The mechanism provides a policy alternative with interesting potentials in income distribution.