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An Analysis of the Distributional Impact of Imputed Rent Taxation

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  • Yates, Judith

Abstract

This paper argues that any housing policy which attempts to redistribute expenditure on housing by working within the confines of the public sector must be extremely limited and is unlikely to be effective. It examines both the potential for and distributional implications of providing additional resources for expenditure on housing in Australia by going beyond the existing framework of government expenditure and withdrawing the implicit subsidies which accrue to owner-occupiers through the non-taxation of their imputed income. It is shown that the distributional implications of taxing imputed income from owner-occupied housing depend on the interaction of house value, equity and income over the life-cycle of the owner-occupier and that a failure to take all of these factors into account could result in a policy of imputed income taxation having unintended distributional effects within the owner-occupied sector. However, since the survey data analysed shows that the subsidy to owner-occupiers which resulted from not taxing this income outweighted explicit public authority expenditure on housing at the time of the survey by a margin of more than 500%, it is argued that the revenue gained from the introduction of such a policy would be more than adequate to offset these effects and to ensure that housing resources were redistributed in an equitable manner.

Suggested Citation

  • Yates, Judith, 1981. "An Analysis of the Distributional Impact of Imputed Rent Taxation," Working Papers 54, University of Sydney, School of Economics.
    • Handle: RePEc:syd:wpaper:2123/7498
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    References listed on IDEAS

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    1. D. M. Kiefer, 1978. "The Equity of Alternative Policies for the Australian Homeowner," The Economic Record, The Economic Society of Australia, vol. 54(1), pages 127-139, April.
    2. Litzenberger, Robert H & Sosin, Howard B, 1978. "Taxation and the Incidence of Homeownership across Income Groups," Journal of Finance, American Finance Association, vol. 33(3), pages 947-961, June.
    3. B. F. Reece, 1975. "The Income Tax Incentive to Owner‐occupied Housing in Australia," The Economic Record, The Economic Society of Australia, vol. 51(2), pages 218-231, June.
    4. Reece, B F, 1975. "The Income Tax Incentive to Owner-Occupied Housing in Australia," The Economic Record, The Economic Society of Australia, vol. 51(134), pages 218-231, June.
    5. Kiefer, D M, 1978. "The Equity of Alternative Policies for the Australian Homeowner," The Economic Record, The Economic Society of Australia, vol. 54(145), pages 127-139, April.
    6. Aaron, Henry, 1970. "Income Taxes and Housing," American Economic Review, American Economic Association, vol. 60(5), pages 789-806, December.
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    Cited by:

    1. Michael Barrow & Ray Robinson, 1986. "Housing and Tax Capitalisation," Urban Studies, Urban Studies Journal Limited, vol. 23(1), pages 61-66, February.
    2. Figari, Francesco & Paulus, Alari & Sutherland, Holly & Tsakloglou, Panos & Verbist, Gerlinde & Zantomio, Francesca, 2012. "Taxing Home Ownership: Distributional Effects of Including Net Imputed Rent in Taxable Income," IZA Discussion Papers 6493, Institute of Labor Economics (IZA).
    3. Susan J. Smith, 1990. "Income, Housing Wealth and Gender Inequality," Urban Studies, Urban Studies Journal Limited, vol. 27(1), pages 67-88, February.

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