IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v25y1997i1p5-24.html
   My bibliography  Save this article

The Design of a Tax Rule for Owner-Occuped Housing Under a Personal Consumption Tax

Author

Listed:
  • Laurence S. Seidman

    (University of Delaware)

  • Kenneth A. Lewis

    (University of Delaware)

Abstract

Analysts agree that designing a satisfactory tax rule for owner-occupied housingposes a senous challenge for the personal (cash flow) consumption tax that recently has been introduced in Congress by several senators. We compare tax rules for owner-occupied housing by performing numerical simulations for a person who begins as a renter, then becomes an owner-occupier, and ends as a renter. We show that the most commonly offered tax rule—prepayment with mortgage spreading— yields a time path for taxes over the person's life that is not fully satisfactory. We then show that this time path can be improved if the tax rule is modified so that prepayment with mortgage spreading is coupled with downpayment spreading, tax deferral, and capital gain or loss inclusion. Interestingly, a mortgage interest deduction, together with taxation of the nominal capital gain at sale, may represent an imperfect implementation of tax deferral.

Suggested Citation

  • Laurence S. Seidman & Kenneth A. Lewis, 1997. "The Design of a Tax Rule for Owner-Occuped Housing Under a Personal Consumption Tax," Public Finance Review, , vol. 25(1), pages 5-24, January.
    • Handle: RePEc:sae:pubfin:v:25:y:1997:i:1:p:5-24
    DOI: 10.1177/109114219702500101
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/109114219702500101
    Download Restriction: no
    File URL: https://libkey.io/10.1177/109114219702500101?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Lord, William, 1989. "The transition from payroll to consumption receipts with endogenous human capital," Journal of Public Economics, Elsevier, vol. 38(1), pages 53-73, February.
    2. Goulder, Lawrence H., 1989. "Tax policy, housing prices, and housing investment," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 281-304, May.
    3. Skinner, Jonathan, 1989. "Housing wealth and aggregate saving," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 305-324, May.
    4. James M. Poterba, 1984. "Tax Subsidies to Owner-Occupied Housing: An Asset-Market Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 729-752.
    5. Engelhardt Gary V., 1994. "House Prices and the Decision to Save for Down Payments," Journal of Urban Economics, Elsevier, vol. 36(2), pages 209-237, September.
    6. Joel Slemrod, 1982. "Down-Payment Constraints: Tax Policy Effects in a Growing Economy With Rental and Owner-Occupied Housing," Public Finance Review, , vol. 10(2), pages 193-217, April.
    7. Sarkar, Shounak & Zodrow, George R., 1993. "Transitional Issues in Moving to a Direct Consumption Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 46(3), pages 359-376, September.
    8. Laurence S. Seidman, 1980. "The Personal Consumption Tax and Social Welfare," Challenge, Taylor & Francis Journals, vol. 23(4), pages 10-16, September.
    9. Sarkar, Shounak & Zodrow, George R., 1993. "Transitional Issues in Moving to a Direct Consumption Tax," National Tax Journal, National Tax Association, vol. 46(3), pages 359-76, September.
    10. James Alm & James R. Follain Jr., 1982. "Alternative Mortgage Instruments: Their Effects On Consumer Housing Choices in an Inflationary Environment," Public Finance Review, , vol. 10(2), pages 134-157, April.
    11. Lawrence H. Goulder, 1989. "Tax Policy, Housing Prices, and Housing Investment," NBER Working Papers 2814, National Bureau of Economic Research, Inc.
    12. Lewis, Kenneth A & Seidman, Laurence S, 1991. "The Quantitative Consequences of Raising the U.S. Saving Rate," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 471-479, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kenneth A. Lewis & Laurence S. Seidman, 2000. "Transitional Protection During Conversion to a Personal Consumption Tax," Public Finance Review, , vol. 28(2), pages 99-119, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kenneth A. Lewis & Laurence S. Seidman, 2000. "Transitional Protection During Conversion to a Personal Consumption Tax," Public Finance Review, , vol. 28(2), pages 99-119, March.
    2. Skinner, Jonathan, 1996. "The dynamic efficiency cost of not taxing housing," Journal of Public Economics, Elsevier, vol. 59(3), pages 397-417, March.
    3. Keuschnigg, Christian & Nielsen, Soren Bo, 1996. "Housing markets and vacant land," Journal of Economic Dynamics and Control, Elsevier, vol. 20(9-10), pages 1731-1762.
    4. Anderson, John E. & Roy, Atrayee Ghosh, 2001. "Eliminating Housing Tax Preferences: A Distributional Analysis," Journal of Housing Economics, Elsevier, vol. 10(1), pages 41-58, March.
    5. Andrea J. Heuson & Gary Painter, 2011. "The Impact of the Taxpayer Relief Act of 1997 on Housing Turnover in the U.S. Single Family Residential Market," Working Paper 8509, USC Lusk Center for Real Estate.
    6. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.
    7. Skinner, Jonathan, 1989. "Housing wealth and aggregate saving," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 305-324, May.
    8. Okumura, Tsunao, 1997. "Housing Investment and Residential Land Supply in Japan: An Asset Market Approach," Journal of the Japanese and International Economies, Elsevier, vol. 11(1), pages 27-54, March.
    9. Ross Guest & Robyn Swift, 2010. "Population Ageing and House Prices in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 240-253, September.
    10. Charles E. McLure Jr. & George R. Zodrow, 2019. "A Hybrid Consumption-Based Direct Tax Proposed for Bolivia," World Scientific Book Chapters, in: George R Zodrow (ed.), TAXATION IN THEORY AND PRACTICE Selected Essays of George R. Zodrow, chapter 6, pages 169-193, World Scientific Publishing Co. Pte. Ltd..
    11. Zhicheng Zhou & Prapatchon Jariyapan, 2013. "The impact of macroeconomic policies to real estate market in People's Republic of China," The Empirical Econometrics and Quantitative Economics Letters, Faculty of Economics, Chiang Mai University, vol. 2(3), pages 75-92, September.
    12. Josep Maria Raya Vilchez & Aleksander Kucel, 2023. "How fiscal policy affects housing market dynamics: Evidence from Spain," Bulletin of Economic Research, Wiley Blackwell, vol. 75(2), pages 323-347, April.
    13. Basant Kapur, 2006. "Financial liberalization and short-run housing price dynamics," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(3), pages 649-675, November.
    14. Todd Sinai & Nicholas S. Souleles, 2005. "Owner-Occupied Housing as a Hedge Against Rent Risk," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 763-789.
    15. Frame, David, 2013. "Saving and consumption in cities," Journal of Urban Economics, Elsevier, vol. 73(1), pages 111-124.
    16. Khorunzhina, Natalia, 2021. "Intratemporal nonseparability between housing and nondurable consumption: Evidence from reinvestment in housing stock," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 658-670.
    17. Robin Boadway & David Wildasin, 1994. "Taxation and savings: a survey," Fiscal Studies, Institute for Fiscal Studies, vol. 15(3), pages 19-63, August.
    18. Goulder, Lawrence H. & Thalmann, Philippe, 1993. "Approaches to efficient capital taxation : Leveling the playing field vs. living by the golden rule," Journal of Public Economics, Elsevier, vol. 50(2), pages 169-196, February.
    19. Piazzesi, M. & Schneider, M., 2016. "Housing and Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1547-1640, Elsevier.
    20. Patric H. Hendershott & James D. Shilling, 1982. "Capital Allocation and the Economic Recovery Tax Act of 1981," Public Finance Review, , vol. 10(2), pages 242-273, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:25:y:1997:i:1:p:5-24. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.