Taxes and House Prices
The Charles A. Dice Center Working Paper Series 97-16
Posted: 23 Dec 1997
Date Written: December 1997
This research assesses the impact of income and property taxes on house prices using a decadal panel data set for 63 metropolitan areas from 1970 to 1990. Our evidence is consistent with full capitalization of marginal income tax rates into house prices. Full capitalization suggests that income tax changes have limited effects on the allocation of real capital among structure types, implying that past changes in the tax advantages have had little impact on home ownership and housing investment, in contrast to the conclusions of much of the existing literature. When we apply the results to some proposed tax changes, we compute substantial house price declines and wide geographic variation.
JEL Classification: H22, R38
Suggested Citation: Suggested Citation