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Housing and Tax Policy
Author(s) -
ALPANDA SAMI,
ZUBAIRY SARAH
Publication year - 2016
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12307
Subject(s) - depreciation (economics) , economics , collateral , renting , allowance (engineering) , tax credit , monetary economics , tax reform , tax policy , revenue , ad valorem tax , tax reform act , tax revenue , state income tax , microeconomics , macroeconomics , public economics , gross income , finance , profit (economics) , operations management , financial capital , political science , law , capital formation
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.