Why Not Tax It? The Effects of Property Taxes on House Price and Homeownership
Abstract
Working paper
Owner-occupied housing units are exempt from property taxes in many countries. How does the owner-occupied exemption affect house prices, home ownership, and welfare? If owner-occupied housing is taxed, should the tax be progressive? To answer these questions, I develop a life-cycle model of homeownership with heterogeneous agents. I calibrate the model to the Italian housing market, where owner-occupied houses are exempt from property taxes, and taxes are based on cadastral values that understate the value of more expensive properties. This discrepancy creates a regressive system, despite a proportional statutory tax rate. The results show that removing only the owner-occupied exemption increases property tax revenues as a percentage of GDP by over 0.8 percentage points but reduces the homeownership rate by 2.6 percentage points. However, complementing this policy with the adjustment of the cadastral values, i.e., switching from a regressive to a proportional property tax based on market values, counteracts the decline in homeownership and generates the same level of property tax revenue. Additionally, the reform improves the welfare of new generations across steady states. However, the average welfare of households alive at the time of the reform decreases, with young households being better off, while older households are losing out. This highlights the political tension surrounding these reforms.
Opioids and Post-COVID Labor Force Participation
w/
Jeremy Greenwood ,
Nezih Guner, and
Karen A. Kopecky
Abstract
Working paper
At the onset of the COVID-19 pandemic, the labor force participation of the working-age US population dropped by about three percentage points. The recovery was slow, and three years after the start of the pandemic, the labor force participation was still below its pre-pandemic level. The pace of recovery of the labor supply varied widely across US states. To understand this variation, the role of the opioid crisis, which was unfolding in the US before the COVID-19 pandemic, is studied. Labor supply recovery in the aftermath of COVID-19 was slower in states with greater pre-COVID exposure to the opioid crisis, measured by pre-COVID age-adjusted opioid overdose death rates. An event-study analysis shows that a one-standard-deviation increase in pre-COVID age-adjusted death rate is associated with a one percentage point drop in labor force participation after COVID-19. The effect of prior opioid exposure had a more significant impact on individuals without a college degree. The slow recovery in states with more opioid exposure was characterized by an increase in individuals who are not in the labor force due to disability.
