Equity and Neutrality in Housing Taxation
FAME Research Paper No. 147
24 Pages Posted: 8 Aug 2005 Last revised: 28 May 2015
Date Written: June 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 simulates tax changes designed to restore 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. And it shows the key role played by the differential in producing housing services under owner-occupation and renting.
Keywords: Housing taxation, tenure choice, tax equity, tax neutrality
JEL Classification: R21, R31, H21
Suggested Citation: Suggested Citation