Income taxes and price variability in storable commodity markets

Progressive income taxes lead to distortions in economic decisions made acr oss tax years. This is particularly important when income is volatile,as in the case of agriculture. Progressive taxes, therefore, can fundamentally c hange economic behavior over time. This study explores how progressive inco me taxes influence storage decisions and the markets for storable commoditi es. Under a progressive tax system, commodity storage tends to be lower in the aggregate and, as a consequence, price volatility increases. These dist ortions could be eliminated by introducing a hat-rate tax or by changing th e tax reporting system for farmers.