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Land is back, it should be taxed, it can be taxed

Etienne Wasmer, Odran Bonnet, Guillaume Chapelle and Alain Trannoy

No 15845, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Land is back. The increase in wealth in the second half of 20th century arose from housing and land. It should be taxed. We introduce land and housing structures in Judd’s standard setup: first best optimal taxation is achieved with a property tax on land and requires no tax on capital. With positive taxes on housing rents, a first best is still possible but with subsidies to rental housing investments, and either with differential land tax rates or with a tax on imputed rents. It can be taxed. Even absent land taxes, one can tax it indirectly and reach a Ramsey-second best still with no tax on capital and positive housing rent taxes in the steady-state. This result extends to the dynamics under restrictions on parameters.

Keywords: Capital; Wealth; Housing; Land; Optimal tax; First best; Second best (search for similar items in EconPapers)
JEL-codes: D63 R14 (search for similar items in EconPapers)
Date: 2021-02
New Economics Papers: this item is included in nep-acc, nep-dge, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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