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Property Tax Shocks and Macroeconomics

François Geerolf () and Thomas Grjebine

Working Papers from CEPII research center

Abstract: We study the macroeconomic effects of aggregate tax changes using more than 100 property tax changes in advanced economies identified through the narrative record, and a structural VAR approach. Both methodologies lead to very similar estimates of tax multipliers that are higher than 2. The motivation behind using property taxes is threefold. First, property taxes are in theory the least distortive of all taxes, which allows to interpret our tax multipliers in terms of disposable income effects, and not in terms of supply or incentive effects. Second, the base for property taxes is not contemporaneously affected by GDP, unlike other major tax revenues, which considerably eases inference both in the narrative and in the structural VAR approaches. Third, the effects of property tax changes inform more broadly on the consequences of policies shifting the user cost of owner-occupied housing (including monetary policy). It casts a new light on a growing literature investigating the links between housing and macroeconomics: our results suggest that house prices have a much more muted impact on macroeconomic aggregates than was previously believed.

Keywords: Multipliers; Consumption; User cost of housing (search for similar items in EconPapers)
JEL-codes: E32 E62 H20 N12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-ure
Date: 2018-03
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