Second-home tax and tax avoidance in the housing market

Xiaokuai Shao () and Ming Gao ()
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Xiaokuai Shao: Beijing Foreign Studies University
Ming Gao: Liaoning University

Economic Theory, 2025, vol. 79, issue 2, No 7, 601 pages

Abstract: Abstract In many countries, households must pay additional taxes for their second homes, leading to voluntary marriage distortions for tax avoidance, through divorce or delaying marriage. We develop a novel theoretical framework to show (i) such marriage distortions lead to lower effective taxes, which increase the marginal households’ willingness-to-pay for a second house, and housing suppliers respond by raising price; (ii) higher equilibrium prices reduce aggregate consumer surplus, even though tax-avoiding marriage distortions are voluntary choices of households; (iii) simulations show such tax avoidance tends to reduce (resp. increase) social surplus at relatively low (resp. high) levels of tax.

Keywords: Housing price; Second-home tax; Tax avoidance; Marriage distortion; Multi-purchase (search for similar items in EconPapers)
JEL-codes: D43 H21 H26 J12 L13 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00199-024-01592-7

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