Taxes, House Prices and Housing Consumption
95-9, The Charles A. Dice Center for Research in Financial Economics Working Papers Series
Posted: 7 Jul 1998
Date Written: Undated
Abstract
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. We find that marginal income and property tax rates are fully capitalized into house prices and explain a significant proportion of the regional variation in house prices. Applying the results to proposed tax changes, we show that removal of the interest and property tax deduction will reduce the average house price by 14% and could result in house price declines of up to 30% in some locations.
JEL Classification: R31
Suggested Citation: Suggested Citation
Dennis R. Capozza
Ross School of Business, University of Michigan ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
734 995 7271 (Phone)
734 629-0635 (Fax)