ECONOMIC ASPECTS OF THE TAXATION OF DECONTROLLED NATURAL GAS
Bills to decontrol completely natural gas prices have been introduced. As a corollary, a "windfall profits tax" on the rise in price for those categories of gas not at market levels has been proposed. This paper uses a simulation of the natural gas market to estimate the effects of two types of natural gas windfall profits taxes under alternative assumptions concerning supply elasticities and the course of future prices. We estimate the induced changes in production, the division of incremental revenues and the welfare cost. We conclude that the defects of such taxes are likely to outweigh any advantages.
The Irreversible Output Effects of Severance Taxes on Oil
This article explains why the output effect of a severance tax on oil is not generally reversed when the tax is removed. It is shown that this severance-tax-induced irreversibility in supply has important implications for both the interpretation and estimation of the supply of oil. Specifically, severance taxes cause a path dependence in supply that makes the concept of a supply curve for oil ambiguous. The authors provide estimates for the case of Kansas that indicate that the magnitude of the irreversible effects of severance taxes is large.
Tax Neutrality and the Investment Tax Credit
This paper concerns the question of how the rules for calculating the investment tax credit and the associated rules for calculating depreciation allowances for tax purposes should be structured to assure the "appropriate" relationship between the subsidy granted to long-lived assets and that to short-lived assets. The increasing rate of tax subsidy under the investment credit favors long-lived assets by comparison with a flat-rate credit, while the neglect of the credit in calculating depreciation allowances favors short-lived assets (for which the depreciation allowance is a more important element in the cash flow). In reviewing the literature on this issue, Emil Sunley focused on the question of whether the investment credit should vary with the durability of the asset purchased. He concluded that neutrality requires a subsidy rate increasing with the useful life of the asset in a way qualitatively similar to that prescribed in present U.S. law. This paper develops Sunley's discussion through the use of simple formal models of the yield from investment.