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The optimal tax treatment of housing capital in the neoclassical growth model

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  • Eerola , Essi

    ()
    (RUESG, University of Helsinki)

  • Määttänen , Niku

    ()
    (The Research Institute of the Finnish Economy and CEBR)

Abstract

In a dynamic setting, housing is both an asset and a consumption good. But should it be taxed like other forms of consumption or like other forms of saving? We consider the optimal taxation of the imputed rent from owner housing within a version of the neoclassical growth model. We find that the optimal tax rate on the imputed rent is quite sensitive to the constraints imposed on the other available tax rates. In general, it is not optimal to tax the imputed rent at the same rate as the business capital income.

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Bibliographic Info

Paper provided by Bank of Finland in its series Research Discussion Papers with number 10/2005.

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Length: 34 pages
Date of creation: 11 Jul 2005
Date of revision:
Handle: RePEc:hhs:bofrdp:2005_010

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Keywords: housing; capital taxation; optimal taxation;

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  16. Patric H. Hendershott & Michael White, 2000. "Taxing and Subsidizing Housing Investment: The Rise and Fall of Housing's Favored Status," NBER Working Papers 7928, National Bureau of Economic Research, Inc.
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  18. Andrew Atkeson & V.V. Chari & Patrick J. Kehoe, 1999. "Taxing capital income: a bad idea," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sum, pages 3-17.
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Citations

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Cited by:
  1. Hamza Polattimur, 2013. "Housing, Collateral Constraints, and Fiscal Policy," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 2(2), pages 53-82, May.
  2. Makoto Nakajima, 2010. "Optimal capital income taxation with housing," Working Papers 10-11, Federal Reserve Bank of Philadelphia.
  3. Holger Strulik & Timo Trimborn, 2014. "Natural disasters and macroeconomic performance: The role of residential investment," Center for European, Governance and Economic Development Research Discussion Papers 194, University of Goettingen, Department of Economics.
  4. Ossi Korkeamäki, 2011. "The Finnish payroll tax cut experiment revisited," Working Papers 22, Government Institute for Economic Research Finland (VATT).

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