TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

A Member of the Law Professor Blogs Network

Saturday, July 2, 2011

The Costs and Benefits of Housing Tax Subsidies

Cover Page The Pew Charitable Trusts have released The Costs and Benefits of Housing Tax Subsidies (Executive Summary here):

Investment in owner-occupied housing faces an effective marginal tax rate of just 3.5%. In contrast, investment in the business sector faces an effective tax rate of 25.5%. This leads to a tax-induced bias for capital to flow into housing-related uses rather than other types of projects. As a result, businesses are less likely to purchase new equipment and less likely to incorporate new technologies than otherwise might be the case. Less business investment results in lower worker productivity and ultimately lower real wages and living standards. While the housing sector provides employment and has other positive effects on the overall economy and on society, the resources employed in the housing sector displace investment that would otherwise occur in the business sector were it not for the favored tax treatment of housing. The resulting distortion in the allocation of capital likely lowers overall output, because resources are allocated based on tax considerations rather than economic merit. In effect, the United States has chosen as a society to live in larger, debt-financed homes while accepting a lower standard of living in other regards.

Page 6 

http://taxprof.typepad.com/taxprof_blog/2011/07/-the-costs-and-.html

Scholarship, Tax | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341c4eab53ef01543366f354970c

Listed below are links to weblogs that reference The Costs and Benefits of Housing Tax Subsidies:

Comments