This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Add to Saved Citations Download to citation manager Add to My Marked Citations Citing Articles Citing Articles via Google Scholar Google Scholar Articles by Englund, P. Search for Related Content Social Bookmarking                   What's this?

Taxing Residential Housing Capital

Department of Finance, Stockholm School of Economics and in the Stockholm Institute for Financial Research, Wallingatan 11, SE-111 60, Stockholm, Sweden, peter.englund{at}sifr.org

This paper discusses the main aspects of the taxation of housing drawing on general principles of optimal taxation. It focuses on the role of the property tax in achieving neutrality between rental and owner-occupied housing. Assuming that landlords are taxed according to a neutral profits tax, it follows that the property tax should be based on the rate of interest. The paper discusses how the tax rate could be adjusted to account for the lack of effective taxation of capital gains, the double taxation of dividends and the differences in the cost of labour between rental and owner-occupied housing. In most OECD countries, the combined effect of the different housing taxes amounts to a tax subsidy to owner-occupied housing. It is demonstrated how this subsidy has been reduced in Sweden—as in many other countries—in the past decade as a result of tax reforms and a lower rate of inflation. The subsidy has effects on consumption patterns, saving, capital accumulation, the distribution of welfare across generations and the allocation of risks. The paper provides a brief overview of the literature, trying to quantify some of these effects. Finally, a number of problems are noted in the practical application of a property tax.

CiteULike    Connotea    Del.icio.us    Digg    Reddit    Technorati    What's this?