Section 103(b) (4) (A) of the internal revenue code: can the tax code provide an efficient and effective low income "housing program"? ; (an economic analysis)

Abstract

Section 103(b)(4)(A) the Internal Revenue Code was examined to determine its e££ectiveness in helping to achieve the goal of the federal government's low income housing policy--"a decent home and a suitable living environment for every American family."

A theoretical analysis of the general excise subsidy model on which this program is based highlighted certain empirical factors on which to focus to determine the potential effectiveness of the program. A theoretical analysis of the particular mechanism used resulted in a measure of effectiveness of providing a subsidy through tax-exempt bond financing.

Empirical analysis basically showed that the mechanism is ineffective. Therefore, recent recommendations to abolish Section 103(b)(4)(A) are sound.