The distribution of the benefits of tax arbitrage in the housing market

Article Abstract:

The distribution of tax arbitrage gains in the housing market depends on the demand and supply forces. Arbitrage opportunites exist because of marginal tax and rental and owner-occupied housing tax differentials. Homeowners' interest payments and property taxes are deductible and their imputed rentals are non-taxable, while landlords' rental housing depreciation schedules also result in tax gains. Analysis shows that in the market for rental housing, the top tax rate will determine the rental equilibrium rate, with all landlords coming from the top tax bracket. This implies that top marginal tax rate increases result in greater tax gains for landlords and thus, lower rents. Alternatively, the property tax rate is directly related to rental costs. These results were obtained from a hedonic pricing model using data about single-family detached houses across US states.

Research, Taxation, Housing, Rental housing, Tax incidence, Real property Taxation

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Pigou, Tiebout, property taxation, and the underprovision of local public goods

Article Abstract:

Public service levels are reduced by the employment of distorting taxes, according to Pigou's proposition, and this is studied through the use of two models, one in which local public services go to the residential public, and one in which all such services go to business. It is demonstrated that when all local public services are provided to the residential public finite alterations in lump sum taxation leads to decreased levels of public services. Within limits, similar results were obtained when the model portrayed local public services as provided only to businesses.

Public goods, Municipal services

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Labor mobility and the incidence of the residential property tax: a comment

Article Abstract:

Research conducted by Jan K. Brueckner on the effects of property tax within the general equilibrium model, where labor is mobile, should be modified to account for the impact of government spending. Such a modification compensates for some of the adverse effects of property tax increases, especially for labor, and may result in a net increase in residents' utilities. The modified model considers migration of labor, housing demand, and property tax changes as variables within a framework that presupposes a balanced budget for the community.

Criticism and interpretation, Labor mobility, Brueckner, Jan K.

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