Shifting Taxes from Labour to Property: A Simulation under Labour Market Equilibrium

Flavia Coda Moscarola, Ugo Colombino, Francesco Figari () and Marilena Locatelli

No 8832, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: A tax shifting from labour income to housing taxation is generally advocated on efficiency grounds. However, most of the empirical literature focuses on the distributional implications of property tax reforms without paying much attention to potential consequences on the labour market. The aim of this paper is to fill this gap by investigating the effects of a tax shifting from labour income to property, guaranteeing revenue neutrality, and to assess the consequences of labour market equilibrium, both on occupation rates and income distribution. We propose to consider a hypothetical tax reform in Italy which uses the revenue of the tax on house property (actually implemented in 2012) for increasing tax credits on low incomes and making them refundable. In order to evaluate the reform we have developed a structural model of household labour supply which takes into account the labour market equilibrium conditions. Overall, the simulated policy provides a more effective income support and better incentives to work for low wage households and determines an improvement in inequality indexes.

Keywords: labour supply; tax shifting; personal tax on labour income; property tax; labour market equilibrium; microsimulation (search for similar items in EconPapers)
JEL-codes: C35 C53 D31 H31 J22 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2015-02
New Economics Papers: this item is included in nep-acc, nep-cmp, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published - revised version published as 'Shifting Taxes away from Labour Enhances Equity and Fiscal Efficiency' in: Journal of Policy Modelling, 2020, 42 (2), 367- 384

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Related works:
Working Paper: Shifting Taxes from Labour to Property. A Simulation under Labour Market Equilibrium (2015)
Working Paper: Shifting Taxes from Labour to Property. A Simulation under Labour Market Equilibrium (2015)
Working Paper: Shifting taxes from labour to property. A simulation under labour market equilibrium (2014)
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