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The Variation of Homeowner Tax Preferences by Income, Age and Leverage

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  • David C. Ling
  • Gary A. McGill

Abstract

It is well known that owner-occupied housing has long received favorable tax treatment in the U.S. federal income tax system relative to a system in which all income, regardless of its source, is subject to taxation. As a result, many economists have argued that the United States overinvests in owner-occupied housing relative to the investment that would result from a neutral income tax system. In addition, the distribution of the subsidy is often viewed as inequitable because high-income households receive the largest subsidy per dollar of housing. This article uses the 2005 American Housing Survey, conducted by the U.S. Department of Commerce, to perform a microlevel analysis of the current magnitude and distribution of homeowner tax preferences. We then assess how the magnitude and distribution of tax preferences would be altered by replacement of the mortgage interest deduction with a 15% credit. Copyright 2007 American Real Estate and Urban Economics Association

Suggested Citation

  • David C. Ling & Gary A. McGill, 2007. "The Variation of Homeowner Tax Preferences by Income, Age and Leverage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 35(4), pages 505-539, December.
  • Handle: RePEc:bla:reesec:v:35:y:2007:i:4:p:505-539
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    References listed on IDEAS

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    1. Joe Peek & James A. Wilcox, 1991. "The Measurement and Determinants of Single-Family House Prices," Real Estate Economics, American Real Estate and Urban Economics Association, pages 353-382.
    2. Ozanne, Larry & Thibodeau, Thomas, 1983. "Explaining metropolitan housing price differences," Journal of Urban Economics, Elsevier, vol. 13(1), pages 51-66, January.
    3. Patric H. Hendershott & Thomas G. Thibodeau, 1990. "The Relationship between Median and Constant Quality House Prices: Implications for Setting FHA Loan Limits," Real Estate Economics, American Real Estate and Urban Economics Association, pages 323-334.
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    5. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, pages 125-137.
    6. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, pages 253-273.
    7. H. Leroy Gill & Donald R. Haurin, 1991. "User Cost and the Demand for Housing Attributes," Real Estate Economics, American Real Estate and Urban Economics Association, pages 383-396.
    8. Gabriel, Stuart A. & Shack-Marquez, Janice & Wascher, William L., 1993. "Does migration arbitrage regional labor market differentials?," Regional Science and Urban Economics, Elsevier, vol. 23(2), pages 211-233, April.
    9. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, pages 125-137.
    10. Winkler, Anne E., 1992. "The impact of housing costs on the living arrangements of single mothers," Journal of Urban Economics, Elsevier, vol. 32(3), pages 388-403, November.
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    Cited by:

    1. Poterba, James M. & Sinai, Todd, 2011. "Revenue Costs and Incentive Effects of the Mortgage Interest Deduction for Owner-Occupied Housing," National Tax Journal, National Tax Association, pages 531-564.

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