Housing And Tax Policy

Keywords

Dynamic general equilibrium; Housing; Tax policy

Abstract

This paper investigates the effects of housing-related tax policy measures on macroeconomic aggregates using a dynamic general-equilibrium model featuring borrowing and lending across heterogeneous households, financial frictions in the form of collateral constraints tied to house prices, and a rental housing market alongside owner-occupied housing. We analyze the effects of various tax policies and find that they all lead to significant output losses, with large long-run tax multipliers of around 2. Among them, reducing the mortgage interest deduction is the most effective in raising tax revenue per unit of output lost, whereas reducing the depreciation allowance for rental income is the least effective.

Publication Date

3-1-2016

Publication Title

Journal of Money, Credit and Banking

Volume

48

Issue

2-3

Number of Pages

485-512

Document Type

Article

Personal Identifier

scopus

DOI Link

https://doi.org/10.1111/jmcb.12307

Socpus ID

84962815342 (Scopus)

Source API URL

https://api.elsevier.com/content/abstract/scopus_id/84962815342

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