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The Implications Of Housing For The Design Of Wealth Taxes

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  • Shahar Rotberg

Abstract

How does housing—an important asset for many households—affect the design of optimal wealth taxes? I analyze the macroeconomic and distributional consequences of wealth taxation using a model with two forms of wealth: capital used by entrepreneurs to produce goods, and housing that provides shelter services. Without housing, taxing wealth instead of capital income would improve the capital allocation and raise welfare. With housing, taxing capital and housing equally would worsen the capital allocation and lower welfare. Instead, wealth should be taxed progressively, exempting most housing, resulting in a worse capital allocation but high welfare gains.

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  • Shahar Rotberg, 2022. "The Implications Of Housing For The Design Of Wealth Taxes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(1), pages 125-159, February.
    • Handle: RePEc:wly:iecrev:v:63:y:2022:i:1:p:125-159
    DOI: 10.1111/iere.12532
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