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Reducing The Tax Wedge On Labour Income By Reforming Housing Taxation: Can This Reform Achieve A Political Majority?

Author

Listed:
  • Simone Pellegrino
  • Gilberto Turati

    (Department of Economics and Public Finance "G. Prato" School of Economics, University of Turin
    Department of Economics and Public Finance "G. Prato" School of Economics, University of Turin)

Abstract

In this paper we study whether an IRPEF reform aimed at reducing the tax burden on labour income - via the enlargement of the tax base due to the inclusion of imputed rent for owner-occupied dwellings - can achieve a political majority. We use a micro-simulation model designed precisely to examine housing taxation in Italy, and compare the tax burden before and after the reform under three alternative scenarios, all designed in order to keep current revenues at a constant level. Our main result is that, in terms of all three scenarios, the share of the winners is consistent - between 46 and 48 percent - while the share of the losers is around one third of all taxpayers. The percentage of winners is further increased when considering households instead of individual taxpayers, at about 50 percent; however, the share of losers is also substantial - in this case about 40 percent. Overall, then, a political majority supporting the change is presumably obtainable. Finally, it can be seen that reducing the tax wedge on labour income while contemporaneously taxing more housing, would generate a redistribution towards younger generations.

Suggested Citation

  • Simone Pellegrino & Gilberto Turati, 2011. "Reducing The Tax Wedge On Labour Income By Reforming Housing Taxation: Can This Reform Achieve A Political Majority?," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 70(1), pages 123-154, January.
  • Handle: RePEc:gde:journl:gde_v70_n1_p123-154
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    Cited by:

    1. 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).

    More about this item

    Keywords

    Personal Income Tax; Labour Income Taxation; Housing Taxation; Imputed Rent; Microsimulation Model;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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