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Homeownership Investment and Tax Neutrality: a Joint Assessment of Income and Property Taxes in Europe
[journal article]
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 f... view more
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 the 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.... view less
Keywords
Europe; apartment ownership; investment; taxation; income tax; distribution impact; simulation
Classification
Public Finance
Methods and Techniques of Data Collection and Data Analysis, Statistical Methods, Computer Methods
Free Keywords
homeownership investment; tax neutrality; property tax; microsimulation; EU-SILC 2010
Document language
English
Publication Year
2022
Page/Pages
p. 62-76
Journal
International Journal of Microsimulation, 15 (2022) 2
DOI
https://doi.org/10.34196/ijm.00263
ISSN
1747-5864
Status
Published Version; peer reviewed