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Mansion Tax: The Effect of Transfer Taxes on the Residential Real Estate Market

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  • Wojciech Kopczuk
  • David Munroe

Abstract

Using discontinuities in housing transaction taxes in New York and New Jersey we find robust price bunching. Incidence for transactions local to the notch falls on sellers, with no evidence of evasion. The volume of missing transactions above the notch exceeds those bunching (beyond the usual extensive-margin response), indicating incentives for buyers and sellers not to transact (market unravels). The possibility of unraveling affects interpretation and estimation of bunching. Away from the threshold, we find increased discounts and weaker relationship between listing and sale prices. Equilibrium bargaining framework highlights that taxation affects the ultimate allocation in this search market. (JEL H71, R21, R31)

Suggested Citation

  • Wojciech Kopczuk & David Munroe, 2015. "Mansion Tax: The Effect of Transfer Taxes on the Residential Real Estate Market," American Economic Journal: Economic Policy, American Economic Association, vol. 7(2), pages 214-257, May.
  • Handle: RePEc:aea:aejpol:v:7:y:2015:i:2:p:214-57
    Note: DOI: 10.1257/pol.20130361
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    References listed on IDEAS

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    1. Marion, Justin & Muehlegger, Erich, 2011. "Fuel tax incidence and supply conditions," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1202-1212, October.
    2. B. Douglas Bernheim & Jonathan Meer, 2013. "Do Real Estate Brokers Add Value When Listing Services Are Unbundled?," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1166-1182, April.
    3. Emmanuel Saez & Joel Slemrod & Seth H. Giertz, 2012. "The Elasticity of Taxable Income with Respect to Marginal Tax Rates: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 50(1), pages 3-50, March.
    4. Panle Jia & Parag A. Pathak, 2010. "The Impact of Commissions on Home Sales in Greater Boston," American Economic Review, American Economic Association, vol. 100(2), pages 475-479, May.
    5. Emmanuel Saez & Manos Matsaganis & Panos Tsakloglou, 2012. "Earnings Determination and Taxes: Evidence From a Cohort-Based Payroll Tax Reform in Greece," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 493-533.
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    7. Jesse Rothstein, 2010. "Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence," American Economic Journal: Economic Policy, American Economic Association, vol. 2(1), pages 177-208, February.
    8. Persson, Petra, 2015. "Social insurance and the marriage market," Working Paper Series 2015:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    9. Paul E. Carrillo, 2012. "An Empirical Stationary Equilibrium Search Model Of The Housing Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 203-234, February.
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    More about this item

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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