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Imputed Rental Income, Taxation and Income Distribution in Finland

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  • Tuukka Saarimaa

    (The Government Institute for Economic Research (VATT), Po Box 1279, FI-001 01, Helsinki, Finland)

Abstract

In most Western countries, owner-occupied housing is tax-favoured compared with other investments and housing tenure modes. This paper analyses the effects of imputed rental income and its tax treatment on income distribution in Finland. Using household data from the 2004 Wealth Survey produced by Statistics Finland, it is found that imputed rental income has a major effect on homeowners’ well-being as it constitutes on average almost 10 per cent of homeowner households’ disposable income. Furthermore, including imputed rental income in household disposable income decreased overall inequality measured by the Gini index. The tax subsidy resulting from non-taxation of imputed rental income is skewed towards high-income households. However, the effects of a new tax on imputed rental income on overall inequality would depend vitally on the way the increased government tax revenue is transferred back to the households.

Suggested Citation

  • Tuukka Saarimaa, 2011. "Imputed Rental Income, Taxation and Income Distribution in Finland," Urban Studies, Urban Studies Journal Limited, vol. 48(8), pages 1695-1714, June.
    • Handle: RePEc:sae:urbstu:v:48:y:2011:i:8:p:1695-1714
    DOI: 10.1177/0042098010377474
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    Cited by:

    1. Erlend Eide Bø, 2020. "Taxation of Housing: Killing Several Birds with One Stone," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(3), pages 534-557, September.
    2. Tuukka Saarimaa & Mika Kortelainen, 2012. "Do Homeowners Benefit the Neighborhood? Evidence from Semiparametric Hedonic Regressions," ERSA conference papers ersa12p472, European Regional Science Association.
    3. Fessler, Pirmin & Rehm, Miriam & Tockner, Lukas, 2014. "The impact of housing non-cash income on the unconditional distribution of household income in Austria," Working Paper Series 1718, European Central Bank.
    4. Kortelainen, Mika & Saarimaa, Tuukka, 2012. "Do homeowners benefit urban neighborhoods? evidence from housing prices," LSE Research Online Documents on Economics 57923, London School of Economics and Political Science, LSE Library.
    5. Rik de Boer & Rosamaria Bitetti, 2014. "A Revival of the Private Rental Sector of the Housing Market?: Lessons from Germany, Finland, the Czech Republic and the Netherlands," OECD Economics Department Working Papers 1170, OECD Publishing.
    6. John Gibson & Bonggeun Kim, 2018. "Home Ownership and Political Participation: Longitudinal Evidence Suggests There is No Causal Relationship," Working Papers in Economics 18/02, University of Waikato.

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    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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