On the political economy of housing's tax status

Arbeitspapier

We analyze housing taxation from a political economy perspective. Our aim is to understand why the US tax system favors owner housing with respect to business capital despite the efficiency losses involved. The starting point of our analysis is the observation that housing wealth is much more evenly distributed than total wealth. We build a simple dynamic general equilibrium model where households vote over the effective capital income tax rates for housing and business capital under a government budget constraint. We calibrate the model so that it roughly matches the joint distribution of total wealth and housing wealth among US households. The median voter turns out to be a household with a large share of his wealth in the form of housing. The key trade-off he faces is that a low tax rate on housing 1) shifts the tax burden to wealthier households but 2) leads to a high tax rate on business capital and hence low wages and high interest rates. In our calibrated model economy, the first effect dominates, and the equilibrium tax rate on housing is much lower than the tax rate on business capital.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ETLA Discussion Papers ; No. 905

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Fiscal Policy ; Fiscal Policies and Behavior of Economic Agents: Household ; Capitalist Systems: Political Economy
• Thema: Housing taxation ; capital taxation ; political economy ; Grundsteuer ; Kapitalertragsteuer ; Wirtschaftswissenschaft ; Theorie ; USA

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Eerola, Essi ; Määttänen, Niku
• Ereignis: Veröffentlichung
• (wer): The Research Institute of the Finnish Economy (ETLA)
• (wo): Helsinki
• (wann): 2004

Weitere Informationen

• Handle: http://hdl.handle.net/10419/63895
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ