Research Report Tax Reform, Transaction Costs, and Metropolitan Housing in the United States
Benjamin H. Harris
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This study analyzes the effect of tax reforms on housing prices in selected cities. Using a model that incorporates transaction costs, the study finds (1) the presidents proposed limit on itemized deductions would have a minimal impact on housing prices; (2) eliminating itemized deductions altogether would cause housing prices to fall markedly; (3) limiting the mortgage interest deduction while providing a flat closing credit can boost housing prices; and (4) the higher 2013 tax rates are unlikely to substantially boost housing prices. Together, these findings suggest that plausible tax reforms will have only a modest impact on housing prices.
Research Areas Taxes and budgets
Tags State and local tax issues Individual taxes Federal budget and economy Campaigns, proposals, and reforms Federal tax issues and reform proposals
Policy Centers Urban-Brookings Tax Policy Center