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.
Modelling fuel-switching between natural gas and fuel oil in US manufacturing☆
Abstract This paper presents a model of short-run substitution between natural gas and fuel oil in US manufacturing. The model provides insight into how elasticity estimates depend upon the level of aggregation, even for two fuels that are close substitutes at the micro level. The model is estimated using US regional data for the period 1974–1981. The results suggest that there are significant regional differences in the premium users are willing to pay for gas. The model provides a framework for analysing future data on gas and oil consumption and technological capabilities in US manufacturing.
Tax Neutrality and the Social Discount Rate: A Suggested Framework
There is probably no specific problem in tax analysis which has generated as much study and discussion among economists as the question of how to formulate "neutral" tax incentives for investment. Yet no consensus has been reached concerning the proper approach to take when adjusting taxes. Comparing the two fundamental notions of neutrality found in the literature, referred to here as "present value" rules and "internal rate of return" rules, we argue that there is both a single appropriate neutrality criterion (the latter) and a framework which can be used to evaluate the performance of a tax system with respect to this criterion.