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Non-Taxation of imputed rent: A gift to Scrooge ? Evidence from France

Author

Listed:
  • Montserrat Botey
  • Guillaume Chapelle

    (Université de Cergy-Pontoise, THEMA)

Abstract

The dramatic rise in wealth inequalities has generated debates on the oppor- tunity to tax wealth (Piketty, 2014; Garbinti et al., 2017). Increasing housing prices are, to a great extent, driving these widening wealth disparities. This paper examines the potential redistributive impact of taxing imputed rents, which usually are exempt from income taxation. We estimate tax savings and their distribution between households in France by using a fiscal simulator that Landais et al. (2011) developed. We find that while net imputed rents represent 7% of national net income, their nontaxation amounts to hidden fiscal spending (i.e., tax expenditures) totaling up to 11 billion euros annually. This indicates that nontaxation is the largest public spending directed at homeowners, bene- fiting mostly the oldest and wealthiest households. Replacing the property tax with imputed rent taxation could favor the youngest and poorest households, who went through a steady decline in their homeownership rates over the past few decades.

Suggested Citation

  • Montserrat Botey & Guillaume Chapelle, 2023. "Non-Taxation of imputed rent: A gift to Scrooge ? Evidence from France," THEMA Working Papers 2023-21, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    • Handle: RePEc:ema:worpap:2023-21
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    More about this item

    Keywords

    Housing; Wealth; Imputed Rents; Taxation ; Inequalities;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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