Date of this Version
Journal of Economic Geography
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.
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
land transfer tax, property tax, land regulation
Dachis, B., Duranton, G., & Turner, M. A. (2012). The Effects of Land Transfer Taxes on Real Estate Markets: Evidence From a Natural Experiment in Toronto. Journal of Economic Geography, 12 (2), 327-354. http://dx.doi.org/10.1093/jeg/lbr007
Date Posted: 27 November 2017
This document has been peer reviewed.