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Taxation of Housing: Killing Several Birds with One Stone
Author(s) -
Bø Erlend Eide
Publication year - 2020
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12423
Subject(s) - economics , revenue , microsimulation , welfare , tax revenue , tax reform , labour economics , ad valorem tax , value added tax , population , capital (architecture) , tax deferral , debt , monetary economics , public economics , state income tax , macroeconomics , market economy , finance , gross income , demography , sociology , transport engineering , engineering , archaeology , history
High and sustained housing‐price growth has been observed in many countries over recent decades. In Norway, real housing prices increased by 200 percent between 1990 and 2015, and many households have high debts. In addition, maintaining the welfare state as the population ages likely involves higher taxes in the coming years. Norway taxes housing leniently. Increased taxation of housing is a way of killing several birds with one stone: generating tax revenue, moderating housing prices, and increasing efficiency. In this paper, I use a microsimulation model to determine the effects on revenue and distribution of a hypothetical tax change where housing is taxed as other capital assets. I take into account the effect of taxation on housing demand, using a simple user‐cost model. This housing tax would increase personal tax revenue by 11 percent and make the tax system more progressive. Housing prices would fall by 20 percent.