Real Estate Papers

Document Type

Journal Article

Date of this Version

2012

Publication Source

Journal of Economic Geography

Volume

12

Issue

2

Start Page

327

Last Page

354

DOI

10.1093/jeg/lbr007

Abstract

Taxes levied on the sale or purchase of real estate are pervasive but little studied. By exploiting a natural experiment arising from Toronto's imposition of a Land Transfer Tax (LTT) in early 2008, we estimate the impact of real estate transfer taxes on the market for single family homes. Our data show that Toronto's 1.1% tax caused a 15% decline in the number of sales and a decline in housing prices about equal to the tax. Relative to an equivalent property tax, the associated welfare loss is substantial, about $1 for every $8 in tax revenue. The magnitude of this welfare loss is comparable to those associated with better known interventions in the housing market. Unlike many possible tax reforms, eliminating existing LTTs in favour of revenue equivalent property taxes appears straightforward.

Copyright/Permission Statement

This is a pre-copyedited, author-produced PDF of an article accepted for publication in Journal of Economic Geography following peer review. The version of record is available online at: http://joeg.oxfordjournals.org/content/12/2/327.full#cited-by

Comments

At the time of publication, Gilles Duranton was affiliated with the University of Toronto. Currently, he is a faculty member at the Real Estate Department at the University of Pennsylvania.

Keywords

land transfer tax, property tax, land regulation

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Date Posted: 27 November 2017

This document has been peer reviewed.