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Land is back, it should be taxed, it can be taxed

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  • Bonnet, Odran
  • Chapelle, Guillaume
  • Trannoy, Alain
  • Wasmer, Etienne

Abstract

Land is back. The increase in wealth in the second half of 20th century arose from housing and land. It should be taxed. We introduce land and housing structures in Judd’s standard setup: first best optimal taxation is achieved with a property tax on land and requires no tax on capital. With positive taxes on housing rents, a first best is still possible but with subsidies to rental housing investments, and either with differential land tax rates or with a tax on imputed rents. It can be taxed. Even absent land taxes, one can tax it indirectly and reach a Ramsey-second best still with no tax on capital and positive housing rent taxes in the steady-state. This result extends to the dynamics under restrictions on parameters.

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  • Bonnet, Odran & Chapelle, Guillaume & Trannoy, Alain & Wasmer, Etienne, 2021. "Land is back, it should be taxed, it can be taxed," European Economic Review, Elsevier, vol. 134(C).
  • Handle: RePEc:eee:eecrev:v:134:y:2021:i:c:s0014292121000490
    DOI: 10.1016/j.euroecorev.2021.103696
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    1. Land is back, it should be taxed, it can be taxed
      by Christian Zimmermann in NEP-DGE blog on 2022-04-07 19:10:20

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    1. Braun, Stefanie & Lee, Gabriel S., 2021. "The prices of residential land in German counties," Regional Science and Urban Economics, Elsevier, vol. 89(C).

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    More about this item

    Keywords

    Capital; Wealth; Housing; Land; Optimal tax; First best; Second best;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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