Taxpayer Cost Research Articles

The costs of delivering environmental outcomes with land sharing and land sparing

Abstract The biodiversity and climate crises demand ambitious policies lowering the environmental impacts of farming. Most current interventions incentivise so‐called land‐sharing approaches to address the widespread trade‐off between farm yields and on‐farm environmental outcomes by compensating farmers who adopt yield‐reducing interventions that encourage wildlife or reduce net emissions within farmed land. Here, we present the first quantification of the likely costs to taxpayers of land sharing compared with land sparing, in which large areas are removed from production altogether because of high‐yielding practices elsewhere in the landscape. Focusing on arable production in the United Kingdom, we used a choice experiment to explore farmer preferences and estimated the overall costs of contrasting agri‐environment schemes that delivered increased populations of three well‐studied farmland birds and reduced net carbon emissions in England. We included capital, administration and monitoring costs, and lost food production. Sparing delivered our target biodiversity and carbon emission outcomes at 79% of the food production cost and 48% of the taxpayer cost of sharing. The difference in subsidy payments required by farmers roughly tracked lost food production but other costs favoured sparing even more strongly. The cost‐related merits of sparing would probably increase further in studies incorporating (1) the many species and ecosystem services not deliverable on farmland, (2) the costs of food imports to compensate domestic lost production and (3) countries without as long and extensive a history of agriculture as the United Kingdom. Our results suggest that, for at least some conservation outcomes, continuing a land‐sharing approach in countries such as the United Kingdom is not only an inefficient use of government funds but also undermines conservation and food security in food‐exporting countries which bear the burden of compensating domestic production forgone in the name of conservation. Read the free Plain Language Summary for this article on the Journal blog.

Should Contact Recreation Water Quality Standards be Consistent across Hydrological Extremes?

AbstractWater quality standards are developed to protect and define when waterbodies support their designated uses including public water supply, recreational use, aquatic life use, and others. Recreational use categories include various activities that typically do not occur under similar hydrologic conditions making protection of all uses challenging. This paper presents a case study where Escherichia coli concentrations were grouped by flow rate to demonstrate potential effects of developing use‐specific water quality standards for contact recreation. Adopting this approach requires a shift from current water quality policy which applies to all hydrologic conditions; however, it also requires additional data collection on actual usage types and occurrence before it can be implemented. This paper demonstrates that implementing an alternative water quality standards approach can still reasonably protect human health while minimizing taxpayer cost to restore impaired waterbodies.

Impact of Concessionary Bus Travel on the Well-Being of Older and Disabled People

This study examined the impact of the concessionary bus pass scheme for older and disabled people in Great Britain. The scheme offers people age 61 years and older and those with disabilities free off-peak local bus travel across the country. The plan evolved from half-price local travel and free local travel through ad hoc local schemes. The taxpayer cost is more than £1 billion ($1.6 billion; £1 = $1.60 in 2013) a year. There have been calls for the scheme to be abolished or reduced in scope to save public expenditure. However, the scheme is very popular with those who hold concessionary travel passes and is popular generally. This paper describes the scheme and then considers the take-up rate, along with how it has increased over time. Effects on the travel behavior of older and disabled people in changes in trip patterns, trip purposes, and modal usage are then discussed. The study examined the evidence on the benefits that concessionary travel passes offer their holders; these benefits included quality of life, health, social inclusion, the process of ceasing to drive, and access to local services, all of which affect well-being. The wider benefits to society of concessionary travel passes and the value placed on them were considered. Although placing a monetary value on all the benefits is not possible, the benefits are large and must be considered in any discussion about abolishing or amending the scheme.

Increasing the Value of MTO Research for Housing Policy Development

The Moving to Opportunity for Fair Housing Demonstration Program (MTO) has estimated the effects of two concrete reforms of low-income housing policy on one important group affected by them. Reforms of this type have received, and will continue to receive, serious consideration in housing policy debates. At this stage, it is not feasible to estimate the effects of the MTO reforms on all of the people significantly affected by them. However, it is feasible and desirable to estimate the effects of two similar reforms that would have almost the same effect on the families studied in MTO. These reforms would have no effect on the number of families that receive housing assistance. Instead, they would affect the nature of the housing assistance offered and the taxpayer cost of providing it. One alternative would almost surely have generated cost savings and additional revenue exceeding the cost of the vouchers, thereby providing greater benefits than the current system at a lower taxpayer cost. The MTO results supplemented with estimates of their taxpayer cost would provide a reasonably comprehensive analysis of their effects. This commentary suggests how the taxpayer costs of the alternative reforms might be estimated. Doing it would significantly increase the value of MTO research for housing policy development.

WIC and the Price of Infant Formula

This article presents an economic model of a national infant formula market that quantifies the effects of sole‐source contracts on infant formula prices, on producer earnings, and on the taxpayer cost of providing infant formula to participants of the Special Supplemental Nutrition Program for Women, Infants, and Children. It shows that the behavior of paying customers, manufacturers, and retail stores determines the value of local sole‐source contracts to manufacturers and that this value motivates manufacturers to acquire sole‐source contracts and make rebate payments that contain the taxpayer cost of providing infant formula to program participants.

Unintended Pregnancy and Taxpayer Spending

Nearly half of all pregnancies in the United States are unintended. These pregnancies likely represent a substantial cost to taxpayers, but national-level estimates of these public costs have been lacking. Taxpayer spending on unintended pregnancy is measured by multiplying estimates of the 2001 incidence of publicly financed unintended pregnancy outcomes (abortions, fetal losses, births and need for infant medical care) by average per-incident costs. Public savings that would result from preventing unintended pregnancies are estimated by assuming that the prevention of an unwanted pregnancy would save the full cost of financing the pregnancy, while the prevention of a mistimed pregnancy would save the cost of financing the pregnancy today minus the present value of the cost of financing the pregnancy when it eventually occurs. Lower-bound, mean and upper-bound estimates of the annual cost of unintended pregnancy are, respectively, $9.6 billion, $11.3 billion and $12.6 billion. Corresponding estimates of the savings that would accrue to taxpayers by preventing unintended pregnancies are $4.7 billion, $5.6 billion and $6.2 billion. The mean estimate of the taxpayer cost per publicly subsidized unintended pregnancy is $9,000; the prevention of such a pregnancy would save taxpayers about half that amount. The prevention of unintended pregnancy represents an important opportunity for the public to reap substantial savings, especially given the current fiscal climate. The enactment or expansion of cost-effective policies to prevent unintended pregnancies is therefore a timely and sensible strategy.

The Effect on Program Participation of Replacing Current Low-Income Housing Programs with an Entitlement Housing Voucher Program

This paper estimates the effect on participation rates of families of various types of replacing HUD’s largest low-income housing programs with alternative tenure-neutral entitlement housing voucher programs that differ in their taxpayer cost and the relative generosity of the subsidy to households of different types. The estimates of participation in the entitlement programs are based primarily on the five-percent household sample from the 2000 Decennial Census and participation experience in the only entitlement housing assistance programs that have been operated in the United States. HUD’s administrative records provide data on current recipients of low-income housing assistance. The paper explores the sensitivity of the results to the equations used to predict participation. The results indicate that even the entitlement housing voucher program that costs 10 percent less than the current system would serve 50 percent more households in total and many more of each type – white, black, and Hispanic; elderly and nonelderly; families living in metropolitan and nonmetropolitan areas; small, medium, and large families; and households in the first two real income deciles.

WILLINGNESS TO PAY FOR SURPLUS SUGAR IN THE UNITED STATES

I. INTRODUCTION The U.S. sugar program guarantees sugar producers a minimum price for their sugar through a combination of import quotas and restrictions on domestic marketing. The minimum price is called the loan rate because sugar producers can use sugar as collateral for a loan from the Commodity Credit Corporation, a federal corporation in the U.S. Department of Agriculture (USDA). The amount of the loan equals the loan rate multiplied by the quantity of sugar put up as collateral. The loan is a non-recourse loan because the USDA has no recourse to collect payment other than to take ownership of the collateral sugar, which is either refined or raw sugar. If domestic production plus imports exceed domestic consumption at the loan rate, then surplus sugar may be absorbed by the USDA through purchasing at the open market. Otherwise, the sugar price will fall below the loan rate and sugar will flow to the USDA through forfeiture of collateral sugar. Whichever way the USDA accumulates surplus sugar, it will incur program costs to acquire and store surplus sugar. In recent history, the USDA had to acquire and then subsequently dispose of surplus sugar on several occasions. Specifically, in 2000, it entered the sugar market for the first time since 1986 to purchase sugar in an attempt to maintain sugar prices. It also accumulated sugar through loan forfeitures. However, the USDA managed to clear its sugar inventories the following years and succeeded in operating the sugar program at no net cost to taxpayers for the period covered by the last farm bill (2002-2007). Most of the sugar in the USDA inventory was either released through the payment-in-kind (PIK) program or sold to storing warehouse operators. Under the PIK program, sugar producers could reduce their sugar production in return for payment, which was in the form of sugar in government inventory. Because the USDA is required to operate the sugar program at no taxpayer cost, it tries to avoid acquiring sugar. Cuts in future marketing allotments or import quotas have been used to manage domestic sugar supply to support prices at the loan rates. But the ability to restrict imports is becoming more difficult due to trade liberalization agreements that came into effect recently or will become effective in the near future. Notably, beginning in January 2008, Mexico is allowed to export sugar to the United States without restriction. Mexico has the potential to produce exportable sugar, so many feel that the ability to support U.S. sugar prices above world price levels is in jeopardy. (1) In response to these fears Congress created the Feedstock Flexibility Program in the Food, Conservation, and Energy Act (the 2008 farm bill). This program, more commonly known as the sugar-to-ethanol program, is designed to divert surplus sugar from food markets into fuel markets by having the USDA sell its sugar to ethanol producers through competitive procedures. In addition to this program, the farm bill authorizes the USDA to sell surplus sugar to sugar producers who agree to reduce their production by the amount of sale. (2) However, the law does not require the USDA to exercise this authority. The extent to which the domestic sugar industry can be protected from increased import competition depends on the price that the USDA will receive for its surplus sugar and the target of a sugar program operating at no net cost to taxpayers. If the willingness to pay (WTP) for sugar is significantly less than the loan rate, then either taxpayers will have to cover the difference or the U.S. sugar program will have to be modified. The lawmakers who championed the sugar-to-ethanol program insisted that it would reduce the nation's dependence on foreign oil and help protect against imported sugar. The skeptics, including the previous Bush administration, claimed that only at a huge loss could the surplus sugar be sold to ethanol facilities. The objective of this paper is to provide insight into the WTP for surplus sugar by sugar and ethanol producers, that is, the maximum price that these producers are willing to bid for surplus sugar. …

On Requirements for the Tax Authorities to Adjust a Taxpayer's Cost Incurred in connection with a Cost Contribution Arrangement

On Requirements for the Tax Authorities to Adjust a Taxpayer's Cost Incurred in connection with a Cost Contribution Arrangement

Unemployment Insurance Savings Accounts

We examine a system of Unemployment Insurance Saving Accounts (UISAs) as an alternative to the traditional unemployment insurance system. Individuals are required to save up to 4 percent of wages in special accounts and to draw unemployment compensation from these accounts instead of taking state unemployment insurance benefits. If the accounts are exhausted, the government lends money to the account. Positive accounts earn the return on commercial paper and negative accounts are charged that rate. Positive UISA balances are converted into retirement income or bequeathed if the individual dies before retirement age. Negative account balances are forgiven at retirement age. Money taken by an unemployed individual from a UISA with a positive balance reduces the individual's personal wealth by an equal amount. In this case, individuals fully internalize the cost of unemployment compensation. UISAs provide the same protection to the unemployed as the current UI system but with less of the adverse incentives. The key empirical question is whether accounts based on a moderate saving rate can finance a significant share of unemployment payments or whether the concentration of unemployment among a relatively small number of individuals implies that the UISA balances would typically be negative, forcing individuals to rely on government benefits with the same adverse effects that characterize the current UI system. To resolve this issue we use the Panel Study on Income Dynamics to simulate the UISA system over a 25 year historic period. Our analysis indicates that almost all individuals have positive UISA balances and therefore remain sensitive to the cost of unemployment compensation. Even among individuals who experience unemployment, most have positive account balances at the end of their unemployment spell. Although about half of the benefit dollars would go to individuals whose accounts are negative at the end of their working life, less than one third of the benefits go to individuals who also have negative account balances when unemployed. These facts suggest a substantial potential improvement in the incentives of the unemployed. The cost to taxpayers of forgiving the negative balances is substantially less than half of the taxpayer cost of the current UI system. Our analysis of the distribution of lifetime UISA payments and taxes of household heads shows the top quintile gaining a small cumulative amount while those in the bottom quintile lose a very small cumulative amount. Other quintiles are small net gainers.

The Interrelationship between Estimated Tax Payments and Taxpayer Compliance

This paper examines taxpayers' compliance behavior and the tax agency's audit decision in a broader, more realistic, setting. Whereas prior research has taken the taxpayer's prepayment position as exogenous, this study extends the literature by incorporating the estimated tax payment decision into a tax compliance game. A two-period game-theoretic model is used to examine the effect that the estimated tax payment rules have on taxpayers' incentives to evade and on the tax agency's audit strategy. Our primary results are as follows. First, in equilibrium taxpayers' estimated tax payment decision will depend upon the uncertainty about their true tax liability, and the cost from overpayment (the taxpayer's cost of capital) or underpayment (penalty interest) of installments of estimated tax. Second, under reasonable assumptions, high-type taxpayers who make higher installments of estimated tax are less likely to lie about their level of income than those who make lower installments—that is, taxpayers who pay low are more likely to evade. Third, the tax agency audits taxpayers who have made low reports and low estimated tax payments with a higher probability than those who have made high estimated tax payments. The gain to the tax agency from auditing taxpayers who make lower payments and evade arises not only from the penalties charged for evasion, but also from the interest charged on deficient installments of estimated tax.

Improving the Cost Efficiency of Supported Employment Programs

This article reviews the monetary benefits and costs that taxpayers incur as a result of funding supported employment programs. Each cost accounting variable involved in formulating cost efficiency from the taxpayer's perspective is discussed. Methods for increasing taxpayer cost efficiency are then suggested.

The organisation and outcomes of supported employment in Britain

The study involved a questionnaire survey of all Supported Employment Agencies in Great Britain. The Agencies who responded (numbering 101 or 48%) supported in jobs, 90.3% those supported worked for under 16 hours per week and 30% small amount up to limits allowing them to retain their welfare benefit income. Of supported workers, 78% employment. Job Coach support was found to fall over time to a mean of one hour per week by the eighth month of work while mean hours worked remained stable in the first year at around 16 hours per week. A cost : benefit analysis showed workers gained {\pounds}2.47 for every {\pounds}1 they lost in taking up employment, and taxpayers received 43p back in savings for each {\pounds}1 invested. Taxpayer cost : benefit improved over time, recouping 54p for every

The Political Economy of U.S. Agricultural Policy: Discussion

Why is agriculture regulated in the way that it is, and what sustains that regulation? Gardner and Paarlberg respond by reviewing frameworks for explaining political choice in agriculture. These frameworks are simplifications, so there are limits on what can be explained. Either real life offers apparent contradictions to the models or some parameters cannot be well quantified. For example, Paarlberg uses the Anderson and Hayami thesis to explain much about protection in U.S. agriculture but concludes that the existence of acreage reduction programs (ARPs) is not adequately explained. Gardner follows the maximization of a political preference function (PPF) whose arguments are the gains of interest groups. The weights on the gains of each group are viewed as not well explained by researchers. Most of this work is considered ad hoc and does not explain causality. At the outset of a discussion of political choice modeling, it seems reasonable to ask, Who Cares? An obvious response is that if you advocate policy, you care because such information may help further your cause. If you are not an advocate but an economic analyst interested in the effects of policy instruments, then the political decision process might seem to be largely irrelevant and any interest purely academic. There are, however, some reasons for caring. Such knowledge may aid problem definition for policy analysis by (a) eliminating infeasible policy options, (b) establishing different evaluation criteria, and (c) helping the researcher know whether an economically strange policy choice resulted from political weights or economic misinformation. A recent example is ethanol. Political support now seems to be growing despite numerous pessimistic analyses by economists. Is this testimony to the lobbying effectiveness of ethanol interests, or have the economic analyses omitted some impacts? Both papers present the ultimate political decision as a function of interest groups and their gains. What strikes me is the difficulty in observing a political decision, identifying the gainer, and consequently ascribing a high PPF weight to that interest group. Sometimes this is done pretty casually in economics, usually by dividing the world into consumer surplus, producer surplus, and taxpayer cost. Then, by revealed preference, it is argued that the political weights on producer surplus and taxpayer cost exceed that on consumer surplus. Some economists see a more complex picture. Rausser and Foster recently examined the framework that distinguishes between policies that transfer economic surplus (PESTS) and those that increase economic surplus (PERTS). The theory demonstrates that the effects of these policies are interdependent and therefore the policy choices may also be interdependent. To understand policy choices, you may need to look at a package of policies and the net gain accruing to the various groups. Advocacy stands out as a difference between the papers. Paarlberg uses his paper to focus on acreage reduction programs, which are characterized as uniquely American and apparently irrational. Gardner, in offering a clear survey of political choice research results and where they fit in the PPF optimization model, does not zero in on the choice of a current policy instrument. In fact, he steers clear of advocacy in his section, Positive and Normative. Gardner sees beneficial and