Tax Policy, Housing Prices, and Housing Investment / Lawrence H. Goulder.

Format:

Book

Author/Creator:

Goulder, Lawrence H.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2814.

NBER working paper series no. w2814

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1989.

Summary:

This paper employs a general equilibrium model to assess the effects of major components of the Tax Reform Act of 1986 on the performance of housing and other industries. The model considers both short-term and long-term effects on housing demands, house values, and investment in housing. Model results indicate that in the short run, the recent cuts incorporate tax rates, elimination of investment tax credits, and scaling back of depreciation deductions together have negative implications for investment in non-residential capital but positive effects on housing investment. This mainly reflects the fact that prior to the '86 tax reforms, investment tax credits and favorable depreciation rules disproportionately benefited non-housing industries; thus their removal especially affects industries other than housing and helps ?crowd in housing investment. Over the long term, however, the tax changes imply lower investment in housing as well as in other types of capital. The reduced housing investment stems from adverse effects of the reforms on aggregate output and real income.

Notes:

Print version record

1989.