"The Implications of Housing for the Design of Wealth Taxes", International Economic Review, 2022, 61, 125-159
Watch this short video of me explaining the paper
How does housing - an important asset for many households - affect the design of optimal wealth taxes? I analyze the macroeconomic and distributional consequences of wealth taxation using a model with two forms of wealth: capital used by entrepreneurs to produce goods, and housing that provides shelter services. Without housing, taxing wealth instead of capital income would improve the capital allocation and raise welfare. With housing, taxing capital and housing equally would worsen the capital allocation and lower welfare. Instead, wealth should be taxed progressively, exempting most housing, resulting in a worse capital allocation but high welfare gains.
Work in Progress
Wealth inequality has elicited calls for higher taxes on capital income and wealth, but also concerns that rich households would respond by concealing their assets offshore. We use a general equilibrium model to study how taxing capital more heavily would affect offshore tax evasion and how this would affect the broader economy. Without evasion, tax revenue could be increased dramatically, inequality could be reduced, and widespread welfare gains could be achieved. After accounting for evasion, however, tax revenue would rise marginally or even fall, inequality would increase, and widespread welfare losses would result.
What would be the consequences of removing the $500,000 exemption given in the U.S. to capital gains homeowners earn upon selling their principal residence? To overcome computational limitations hindering studying this question with real house price growth, I employ the fact that inflation has represented a substantial portion of house price appreciation, and extend a general equilibrium model with constant real house prices to trace the real inflationary gains’ value homeowners make upon selling their home. Abolishing the exemption in the calibrated model to finance lump sum transfers would raise welfare and homeownership, and benefit most households.
"Estate Taxation, Capital Income Taxation, Efficiency, and Wealth Inequality", 2019 (email for a copy)
"More is Less: Misallocating Residential Land", 2018 (dissertation chapter)
This paper studies misallocation of residential land and its implications for income taxation and welfare. I develop a methodology to calibrate a housing model to a transition path of over 50 years of Israeli data on land sales and show that Israel’s government substantially oversold land and could have reduced its income tax rate by 1.8 percentage points.
"Wage Income Expectations and Housing Price Bubbles", 2018 (second year paper)
With a housing model calibrated to U.S. data, I show that expectations about income can explain 20% of the 2008 boom-bust in housing prices. This result is an outcome of households’ perception that their expected life-time income is going up during a sequence of good income shocks, which leads to a rapid increase in housing demand and thus housing prices.