Tenure Neutral and Equitable Housing Taxation
22 Pages Posted: 3 Jul 2011
Date Written: July 1, 2005
Equity and neutrality are distinct concepts in housing taxation and weak and strong tenure neutrality should be distinguished. When a tax system is tested for those criteria, the taxes paid by landlords must be included, as they affect the rents renters pay. This paper defines appropriate tests, applies them to a stylised tax system and proposes tax changes designed to restore tenure equity and/or neutrality. It shows how the homeowner’s implicit income should be computed for taxes to be fundamentally tenure-neutral or equitable or both. It also shows the key role played by the cost differential in producing housing services under owner-occupation and renting.
Keywords: housing taxation, tenure choice, home ownership, owner-occupied housing, tax neutrality
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