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Stamping out stamp duty: Property or consumption taxes?

Author

Listed:
  • Yunho Cho
  • Shuyun May Li
  • Lawrence Uren

Abstract

Property transaction taxes - also known as stamp duty - are widely viewed as an inefficient form of taxation. In this paper, we examine the welfare implications of removing stamp duty in a general equilibrium overlapping generation model with heterogeneous agents. Our model features an idiosyncratic shock to housing preferences which may create mismatch or induce household to move. When examining steady states we find that newborn households prefer entering an economy with a recurring property tax rather than one with stamp duty. In contrast, when examining transition dynamics we find that existing households prefer replacing stamp duty with a consumption tax.

Suggested Citation

  • Yunho Cho & Shuyun May Li & Lawrence Uren, 2021. "Stamping out stamp duty: Property or consumption taxes?," CAMA Working Papers 2021-01, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2021-01
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-01/1_2021_cho_li_uren.pdf
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    Citations

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    Cited by:

    1. Yunho Cho & Shuyun May Li & Lawrence Uren, 2021. "Understanding Housing Affordability in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(3), pages 375-386, September.
    2. Daniel Jonas Schmidt, "undated". "Property transfer taxes, residential mobility, and welfare," Tinbergen Institute Discussion Papers 22-042/VI, Tinbergen Institute.
    3. Manning Clifford & John Freebairn, 2021. "Stamp duty and equity in Australia," Melbourne Institute Working Paper Series wp2021n08, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    4. Ong, Rachel & Graham, James & Cigdem, Melek & Phelps, Christopher & Whelan, Stephen, 2023. "Financing first home ownership: modelling policy impacts at market and individual levels," SocArXiv p59te, Center for Open Science.

    More about this item

    Keywords

    Property transaction taxes; OLG model; Heterogeneous agents; Welfare;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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