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Homeownership Investment and Tax Neutrality. A joint assessment of income and property taxes in Europe

Author

Listed:
  • Francesco Figari

    (Department of Economics, University of Insubria; ISER, University of Essex; CeRP Collegio Carlo Alberto and Dondena Bocconi University)

  • Gerlinde Verbist

    (Centre for Social Policy Herman Deleeck, University of Antwerp)

  • Francesca Zantomio

    (Department of Economics, Ca' Foscari University of Venice)

Abstract

Western countries' income tax system exempts the return from investing in owner-occupied housing. Returns from other investments are instead taxed, thus distorting households' portfolio choices, although it is argued that housing property taxation might act as a counterbalance. Based on data drawn from the Statistics of Income and Living Conditions and the UK Family Resources Survey, and building on tax benefit model EUROMOD, we provide novel evidence on the interplay of income and property taxation in budgetary, efficiency and equity terms in eight European countries. Results reveal that, even accounting for recurrent housing property taxation, a sizeable ‘homeownership bias' i.e. a lighter average and marginal taxation for homeownership investment, is embedded in current tax systems, and displays heterogeneous distributional profiles across different countries. Housing property taxation represents only a partial correction towards neutrality.

Suggested Citation

  • Francesco Figari & Gerlinde Verbist & Francesca Zantomio, 2019. "Homeownership Investment and Tax Neutrality. A joint assessment of income and property taxes in Europe," Working Papers 2019: 27, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2019:27
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    References listed on IDEAS

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    Cited by:

    1. Lenarčič, Črt, 2022. "Drivers of household arrears: an euro area country panel data analysis," MPRA Paper 114558, University Library of Munich, Germany.

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    More about this item

    Keywords

    Homeownership investment; tax neutrality; income tax; property tax; distributional effect; Europe; microsimulation;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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