How Should the Government Address the Concern for Relative Consumption in Housing: Property Tax or Income Tax?

Zhiyong An

Journal of Housing Research, 2016, vol. 25, issue 1, 105-113

Abstract: In this paper, I examine the question of whether the government should adopt a property tax or an income tax to address the concern for relative consumption in housing by building and analyzing a stylized model that might be new to the literature. I conclude that the concern should be addressed with a property tax; the optimal property tax rate is proportional to the degree of the concern; and while the concern leads to higher income guarantees, it does not lead to a higher marginal income tax rate. The findings suggest that the ‘additivity property’ holds for both ‘atmospheric’ and ‘positional’ externalities.

Date: 2016
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DOI: 10.1080/10835547.2016.12092110

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