Shifting taxes from labour to property. A simulation under labour market equilibrium

Publication type:

EUROMOD Working Paper Series

Series Number:

EM20/14

Authors

Flavia Coda Moscarola, Ugo Colombino, Francesco Figari and Marilena Locatelli

Publication date

23 Dec 2014

Abstract

A tax shifting from labour income to housing taxation is generally advocated on efficiency grounds. However, most of the empirical literature focuses on the distributional implications of property tax reforms without paying much attention to potential consequences on the labour market. The aim of this paper is to fill this gap by investigating the effects of a tax shifting from labour income to property, guaranteeing revenue neutrality, and to assess the consequences of labour market equilibrium, both on occupation rates and income distribution. We propose to consider a hypothetical tax reform in Italy which uses the revenue of the tax on house property (actually implemented in 2012) for increasing tax credits on low incomes and making them refundable. In order to evaluate the reform we have developed a structural model of household labour supply which takes into account the labour market equilibrium conditions. Overall, the simulated policy provides a more effective income support and better inc

Subjects

Welfare Benefits, Microsimulation and Taxation

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