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Author Nakajima, Makoto
Source CiteSeerX
Content type Text
File Format PDF
Subject Domain (in DDC) Computer science, information & general works ♦ Data processing & computer science
Abstract I quantitatively study the optimal capital income taxation in the general equilibrium overlapping generations model with uninsurable idiosyncratic income shocks and with housing and financial assets. Following key characteristics of housing are explicitly modeled: (i) housing is held for the dual purpose of consumption and savings, (ii) housing can be either owned or rented, (iii) if owned, housing can be used as a collateral for mortgage loans, and (iv) there is a preferential tax treatment for owner-occupied housing through tax-exemption of imputed rents and mortgage interest payment deduction. Using calibrated models, I investigate whether and how the optimal capital income tax rate differs between the model with both housing and financial assets and the standard model without housing. I find that the optimal capital income tax changes significantly depending on the housing tax policy. This is mainly because capital income tax affects both portfolio choice between housing and financial assets, and tenure decision. In particular, I find that, when preferential tax treatment for owner-occupied housing like the current U.S. economy is maintained, there is a large welfare gain by lowering the capital income tax rate and thus narrowing the tax
Educational Role Student ♦ Teacher
Age Range above 22 year
Educational Use Research
Education Level UG and PG ♦ Career/Technical Study
Publisher Date 2008-01-01