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The welfare effects of housing taxation in a distorted economy: A general equilibrium analysis

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  • Brita Bye
  • Turid Åvitsland

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    (Statistics Norway)

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    Abstract

    Efficient capital taxation has been one of the most important objectives for large tax reforms implemented in several countries during the last decades. The Norwegian Tax reform of 1992 took a large step towards tax neutrality between the different capital types and uses. However, housing capital is still an exception. The marginal effective tax rate on housing is substantially lower than the marginal effective tax rates on other capital types and uses. In this paper the welfare effects of imposing a neutral system of housing taxation are analyzed by using an intertemporal disaggregated numerical model for the Norwegian economy. The tax reform implies a substantial increase in the tax revenue from housing taxation, and the welfare effects of different rebating alternatives for the additional tax revenue as lump sum rebating or reductions in other distortionary taxes, are considered.

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    Bibliographic Info

    Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 306.

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    Date of creation: Aug 2001
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    Handle: RePEc:ssb:dispap:306

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    Keywords: Capital taxation; Housing tax reform; Dynamic equilibrium analysis;

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    1. A. Lans Bovenberg & Lawrence H. Goulder, 1989. "Promoting Investment under International Capital Mobility: An Intertemporal General Equilibrium Analysis," NBER Working Papers 3139, National Bureau of Economic Research, Inc.
    2. Parry, Ian W. H. & Williams, Roberton III & Goulder, Lawrence H., 1999. "When Can Carbon Abatement Policies Increase Welfare? The Fundamental Role of Distorted Factor Markets," Journal of Environmental Economics and Management, Elsevier, vol. 37(1), pages 52-84, January.
    3. Auerbach, Alan J., 1989. "The deadweight loss from `non-neutral' capital income taxation," Journal of Public Economics, Elsevier, vol. 40(1), pages 1-36, October.
    4. Steigum, E.Jr., 1992. "Accounting for Long-Run Effects of Fiscal Policy by Means of Computable Overlapping Generations Models," Papers 05-92, Norwegian School of Economics and Business Administration-.
    5. Holmoy, Erling & Vennemo, Haakon, 1995. "A general equilibrium assessment of a suggested reform in capital income taxation," Journal of Policy Modeling, Elsevier, vol. 17(6), pages 531-556, December.
    6. Atkinson, A B & Sandmo, A, 1980. "Welfare Implications of the Taxation of Savings," Economic Journal, Royal Economic Society, vol. 90(359), pages 529-49, September.
    7. Krugman, Paul, 2008. "Increasing returns," Nobel Prize in Economics documents 2008-3, Nobel Prize Committee.
    8. Tor Jakob Klette, 1994. "Estimating Price- Cost Margins and Scale Economies from a Panel of Microdata," Discussion Papers 130, Research Department of Statistics Norway.
    9. Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-59, December.
    10. Bye, Brita, 2000. "Environmental Tax Reform and Producer Foresight: An Intertemporal Computable General Equilibrium Analysis," Journal of Policy Modeling, Elsevier, vol. 22(6), pages 719-752, November.
    11. Goulder, Lawrence H. & Thalmann, Philippe, 1993. "Approaches to efficient capital taxation : Leveling the playing field vs. living by the golden rule," Journal of Public Economics, Elsevier, vol. 50(2), pages 169-196, February.
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