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The Role of Housing Tax Provisions in the 2008 Financial Crisis

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Author Info

  • Thomas Hemmelgarn

    ()
    (European Commission)

  • Gaetan Nicodeme

    ()
    (European Commission)

  • Ernesto Zangari

    ()
    (Banca d'Italia)

Abstract

The 2008 financial crisis is the worst economic crisis since the Great Depression of 1929. It has been characterised by a housing bubble in a context of rapid credit expansion, high risk-taking and exacerbated financial leverage, ending into deleveraging and credit crunch when the bubble burst. This paper discusses the interactions between housing tax provisions and the financial crisis. In particular, it reviews the existing evidence on the links between capital gains taxation of houses, interest mortgage deductibility and characteristics of the crisis.

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File URL: http://ec.europa.eu/taxation_customs/resources/documents/taxation/gen_info/economic_analysis/tax_papers/taxation_paper_27_en.pdf
File Function: final version, 2011
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Bibliographic Info

Paper provided by Directorate General Taxation and Customs Union, European Commission in its series Taxation Papers with number 27.

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Length: 35 pages
Date of creation: Mar 2011
Date of revision:
Publication status: Published in Julian S. Alworth and Giampaolo Arachi (eds), 2012, Taxation and the Financial Crisis, chapter 3, Oxford University Press.
Handle: RePEc:tax:taxpap:0027

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Web page: http://ec.europa.eu/taxation_customs/index_en.htm
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Related research

Keywords: financial crisis; tax policy; housing; interest deductibility; capital gains;

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References

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  1. James M. Poterba, 1983. "Tax Subsidies to Owner-occupied Housing: An Asset Market Approach," Working papers 339, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Edward L. Glaeser & Jesse M. Shapiro, 2003. "The Benefits of the Home Mortgage Interest Deduction," NBER Chapters, in: Tax Policy and the Economy, Volume 17, pages 37-82 National Bureau of Economic Research, Inc.
  3. Robert J. Shiller & Karl E. Case, 1988. "The Behavior of Home Buyers in Boom and Post-Boom Markets," Cowles Foundation Discussion Papers 890, Cowles Foundation for Research in Economics, Yale University.
  4. Paul van den Noord & Chistopher Heady, 2001. "Surveillance of Tax Policies: A Synthesis of Findings in Economic Surveys," OECD Economics Department Working Papers 303, OECD Publishing.
  5. Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 67-92, Fall.
  6. Serge Wibaut, 2008. "Quelles leçons tirer de la crise financière ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 64, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  7. Poterba, James M, 1992. "Taxation and Housing: Old Questions, New Answers," American Economic Review, American Economic Association, vol. 82(2), pages 237-42, May.
  8. Yuliya Demyanyk & Otto Van Hemert, 2009. "Understanding the subprime mortgage crisis," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
  9. Paul van den Noord, 2005. "Tax Incentives and House Price Volatility in the Euro Area: Theory and Evidence," Economie Internationale, CEPII research center, issue 101, pages 29-45.
  10. Shakil Quayes, 2010. "The impact of capital gains tax exemption on housing sales," Applied Economics Letters, Taylor & Francis Journals, vol. 17(3), pages 213-216.
  11. Edward L. Glaeser & Jessse M. Shapiro, 2002. "The Benefits of the Home Mortgage Interest Deduction," Harvard Institute of Economic Research Working Papers 1979, Harvard - Institute of Economic Research.
  12. Paul Louis Ceriel Hilbers & Angana Banerji & Haiyan Shi & Alexander W. Hoffmaister, 2008. "House Price Developments in Europe," IMF Working Papers 08/211, International Monetary Fund.
  13. Topel, Robert H & Rosen, Sherwin, 1988. "Housing Investment in the United States," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 718-40, August.
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Citations

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Cited by:
  1. European Commission, 2011. "Tax Reforms in EU Member States 2011: tax policy challenges for economic growth and fiscal sustainability," Taxation Papers 28, Directorate General Taxation and Customs Union, European Commission.
  2. European Commission, 2012. "Tax reforms in EU Member States - Tax policy challenges for economic growth and fiscal sustainability – 2012 Report," Taxation Papers 34, Directorate General Taxation and Customs Union, European Commission.
  3. Evridiki Tsounta, 2011. "Home Sweet Home," IMF Working Papers 11/191, International Monetary Fund.

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