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The long-term effects of capital gains taxes in New Zealand

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  • Andrew Coleman

Abstract

This paper develops a model of the housing market to examine the long-term consequences of different types of capital gains taxes. The model, which uses an overlapping generations framework to model the housing demands of agents who differ by age, income, and wealth, incorporates rental and owner-occupancy options, credit constraints, detailed tax regulations, and a construction sector. It suggests capital gains taxes will raise rents, increase homeownership rates, promote smaller houses, and increase the net foreign asset position. The welfare implications are less clear, particularly for young low income households that will face higher rents.

Suggested Citation

  • Andrew Coleman, 2010. "The long-term effects of capital gains taxes in New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 44(2), pages 159-177.
    • Handle: RePEc:taf:nzecpp:v:44:y:2010:i:2:p:159-177
    DOI: 10.1080/00779954.2010.492575
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    References listed on IDEAS

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    1. Martin S. Feldstein, 1999. "Capital Income Taxes and the Benefit of Price Stability," NBER Chapters, in: The Costs and Benefits of Price Stability, pages 9-46, National Bureau of Economic Research, Inc.
    2. Andrew Coleman, 2007. "Credit constraints and housing markets in New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2007/11, Reserve Bank of New Zealand.
    3. Martin S. Feldstein, 1997. "The Costs and Benefits of Going from Low Inflation to Price Stability," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 123-166, National Bureau of Economic Research, Inc.
    4. Andrew Coleman, 2009. "The long term effects of capital gains taxes in New Zealand," Working Papers 09_13, Motu Economic and Public Policy Research.
    5. Andrew Coleman & Grant M. Scobie, 2009. "A Simple Model of Housing Rental and Ownership with Policy Simulations," Treasury Working Paper Series 09/05, New Zealand Treasury.
    6. Andrew Coleman, 2008. "Tax, Credit Constraints, and the Big Costs of Small Inflation," Working Papers 08_14, Motu Economic and Public Policy Research.
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