Property tax capitalization in a model with tax-deferred assets, standard deductions, and the taxation of nominal interest

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TR Number
Date
1999-02
Journal Title
Journal ISSN
Volume Title
Publisher
MIT Press
Abstract

Previous property tax capitalization studies assume that families itemize, that they save in taxable assets, and that real interest income is taxed. However, many families do not itemize, many families invest in tax-deferred assets, and nominal interest income is taxed. As a consequence, prior studies likely misspecify the property tax capitalization equation for roughly ninety percent of their samples. Taking federal tax provisions into account increases the precision of our estimated capitalization rate. In addition, our results suggest that biases in prior studies likely contribute to the variety of capitalization estimates in the literature.

Description
Keywords
home mortgage debt, borrowing constraints
Citation
de Bartolome, CAM; Rosenthal, SS. "Property tax capitalization in a model with tax-deferred assets, standard deductions, and the taxation of nominal interest," Review of Economics and Statistics 1999, Vol. 81 No. 1, 85-95 doi: 10.1162/003465399767923845