Owner-occupied housing, capital gains, and the Tax Reform Act of 1986

Article Abstract:

The US tax code's rollover provisions create a nonlinear budget constraint for the many previous homeowners who are provided with a way to avoid paying capital gains tax on the sale of their house if the next house that they buy has an equal or higher market value. To better understand the issues of the kinked budget constraint and the capital gains tax rate, a study was conducted that simulated the effects of federal tax policy changes, particularly the introduction of the Tax Reform Act of 1986 (TRA86), on social welfare and housing demand. The study found that the significance of the capital gains kink was increased by the enactment of TRA86. Consequently, cutting the capital gains tax rate would mean lower housing demand because families with the kinked bugdet constraint are likely to purchase lower-priced houses. Other results of the study are discussed.

Taxation, Capital gains tax, Home ownership

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Property taxation, Nash equilibrium, and market power

Article Abstract:

The relationship between changes in tax rates, levels of public service, and the number of jurisdictions in a metropolis was examined. Local tax policy was examined by developing a model in which policies in one jurisdiction led to responses by governments in other jurisdictions. The results indicated that tax rates and welfare increased when competition was reduced by decreasing the number of jurisdictions in a metropolis. The amount of public service was inefficiently low when jurisdictions competed for capital. The inefficiency resulted from wasteful tax competition because reducing competition by decreasing the number of jurisdictions resulted in higher taxes and welfare.

Analysis, Interpretation and construction, Tax law, Tax research, Civil service

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Subsidies as sorting devices

Article Abstract:

A strategy to expand the public sector, which is subsidized by higher-income households, is explained. Subsidizing the luxuries of the rich helps the poor to subsidize their consumption and to reduce the number of poor in the community.

Forecasts, trends, outlooks, Administration of General Economic Programs, Management dynamics, Grants to Business, Management, Economic aspects, Forecasts and trends, Market trend/market analysis, Company business management, Households, Public sector, Subsidies

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