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The behavioral response to housing transfer taxes: Evidence from a notched change in D.C. policy

Joel Slemrod (), Caroline Weber and Hui Shan

Journal of Urban Economics, 2017, vol. 100, issue C, 137-153

Abstract: This paper estimates the behavioral response to residential real estate transfer taxes by studying notched tax rate changes in Washington D.C., exploiting both a price and time notch as identifying variation. We provide evidence that there is manipulation of the sales price to the lower-tax-rate region around the price notch, and use this manipulation to show that there was significant awareness of the tax changes and the incentives they created. We then construct difference-in-difference estimates to examine whether there is a lock-in effect in the volume of house sales away from the price and time notches; we find no evidence of a lock-in effect in this setting. Taken together, our results suggest that the welfare costs of a state introducing or eliminating a housing transaction tax are small.

Keywords: Housing transfer taxes; Lock-in; Tax notches (search for similar items in EconPapers)
Date: 2017
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