Investable Tax Credits: The Case of the Low Income Housing Tax Credit

45 Pages Posted: 24 Jun 2008

See all articles by Mihir A. Desai

Mihir A. Desai

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Dhammika Dharmapala

University of Chicago Law School

Monica Singhal

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Date Written: June 23, 2008

Abstract

The Low Income Housing Tax Credit (LIHTC) represents a novel tax expenditure program that employs "investable" tax credits to spur production of low-income rental housing. While it has grown into the largest source of new affordable housing in the U.S. and its structure is now being replicated in other programs, the LIHTC has also drawn skepticism and calls for its repeal. This paper outlines a conceptual framework for exploring the conditions under which investable tax credits may be the most effective mechanism to deliver a production subsidy and discusses the desirability of employing investable tax credits in other policy domains. Estimates of tax expenditures under this program are provided and efficiency costs, distributional issues, and the likely effects of reforms to tax provisions such as the AMT are considered.

Keywords: housing subsify, tax credit, tax expenditure

JEL Classification: H2, H71, R31

Suggested Citation

Desai, Mihir A. and Dharmapala, Dhammika and Singhal, Monica, Investable Tax Credits: The Case of the Low Income Housing Tax Credit (June 23, 2008). HKS Working Paper No. RWP08-035. Available at SSRN: https://ssrn.com/abstract=1150302 or http://dx.doi.org/10.2139/ssrn.1150302

Mihir A. Desai

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States
617-495-6693 (Phone)
617-496-6592 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dhammika Dharmapala

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

Monica Singhal (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-5062 (Phone)
617-496-6372 (Fax)

HOME PAGE: http://ksgfaculty.harvard.edu/monica_singhal

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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