Housing Taxation and Economic Growth: Analysis of a Balanced-Growth Model with Residential Capital
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Philip Vinson
Abstract
Using a neoclassical model with endogenous growth, this study examines the effects of increasing housing taxation and eliminating the mortgage interest tax deduction on economic growth and household welfare in the United States. The optimal tax policy reduces taxation of income in favor of increased taxation of housing and consumption. This policy increases the growth rate by 0.49 percentage points. In addition, simply shifting the tax burden by reducing the tax rates on productive forms of capital toward housing can increase the growth rate up to 0.18 percentage points. This study also find that eliminating the income tax deduction on mortgage interest and lowering income taxes would increase growth by about 0.016 percentage points. Each of these proposed policies improves household welfare.
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Articles in the same Issue
- Frontmatter
- Advances
- A New General Equilibrium Welfare Measure, with Application to Labor Income Taxes
- Labor Share Dynamics and Factor Complementarity
- Effect of Monetary Policy on Government Spending Multiplier
- News-Driven Housing Booms: Spain Versus Germany
- Sovereign Debt Crisis, Fiscal Consolidation, and Active Central Bankers in a Monetary Union
- Housing Taxation and Economic Growth: Analysis of a Balanced-Growth Model with Residential Capital
- Intergenerational Linkages, Uncertain Lifetime and Educational and Health Expenditures
- Contributions
- Tolerance of Informality and Occupational Choices in a Large Informal Sector Economy
- Uncertainty Shocks, Innovation, and Productivity
- Asymmetric Effects of Private Debt on Income Growth
- Interpreting Structural Shocks and Assessing Their Historical Importance
- Charge-offs, Defaults and the Financial Accelerator
- Filtering Persistent and Asymmetric Cycles
- Population Aging and Convergence of Household Credit
- Robustly Optimal Monetary Policy in a Behavioral Environment
- Forward Guidance Effectiveness in a New Keynesian Model with Housing Frictions
- The Welfare Effects of Social Insurance Reform in the Presence of Intergenerational Transfers
Articles in the same Issue
- Frontmatter
- Advances
- A New General Equilibrium Welfare Measure, with Application to Labor Income Taxes
- Labor Share Dynamics and Factor Complementarity
- Effect of Monetary Policy on Government Spending Multiplier
- News-Driven Housing Booms: Spain Versus Germany
- Sovereign Debt Crisis, Fiscal Consolidation, and Active Central Bankers in a Monetary Union
- Housing Taxation and Economic Growth: Analysis of a Balanced-Growth Model with Residential Capital
- Intergenerational Linkages, Uncertain Lifetime and Educational and Health Expenditures
- Contributions
- Tolerance of Informality and Occupational Choices in a Large Informal Sector Economy
- Uncertainty Shocks, Innovation, and Productivity
- Asymmetric Effects of Private Debt on Income Growth
- Interpreting Structural Shocks and Assessing Their Historical Importance
- Charge-offs, Defaults and the Financial Accelerator
- Filtering Persistent and Asymmetric Cycles
- Population Aging and Convergence of Household Credit
- Robustly Optimal Monetary Policy in a Behavioral Environment
- Forward Guidance Effectiveness in a New Keynesian Model with Housing Frictions
- The Welfare Effects of Social Insurance Reform in the Presence of Intergenerational Transfers
