Document Type

Article

Language

eng

Format of Original

34 p.

Publication Date

2014

Publisher

University of Chicago Press

Source Publication

Tax Policy and the Economy

Source ISSN

0892-8649

Original Item ID

doi: 10.1086/675588

Abstract

Tax benefits to owner-occupied housing provide incentives to consume housing, offsetting weaker disincentives of the property tax. These benefits also help counter the penalty federal taxes impose on households who work in productive high-wage areas, but reinforce incentives to consume local amenities. We simulate the effects of these benefits in a parameterized model, and determine the consequences of various tax reforms. Reductions in housing tax benefits generally increase efficiency in consumption, but reduce efficiency in location decisions, unless they are accompanied by tax rate reductions. The most efficient policy would eliminate most tax benefits to housing and index taxes to local wage levels.

Comments

Published version. Tax Policy and the Economy, Vol. 28, No. 1 (2014): 63-96. DOI. © University of Chicago Press 2014. Used with permission.

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