Shifting Taxes from Labour to Property: A Simulation Under Labour Market Equilibrium

30 Pages Posted: 14 Feb 2015

See all articles by Flavia Coda Moscarola

Flavia Coda Moscarola

Center for Research on Pensions and Welfare Policies (CeRP)

Ugo Colombino

University of Turin - Department of Economics

Francesco Figari

ISER - University of Essex

Marilena Locatelli

University of Turin - Department of Economics

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 incentives to work for low wage households and determines an improvement in inequality indexes.

Keywords: labour supply, tax shifting, personal tax on labour income, property tax, labour market equilibrium, microsimulation

JEL Classification: C35, C53, D31, J22, H31

Suggested Citation

Coda Moscarola, Flavia and Colombino, Ugo and Figari, Francesco and Locatelli, Marilena, Shifting Taxes from Labour to Property: A Simulation Under Labour Market Equilibrium. IZA Discussion Paper No. 8832, Available at SSRN: https://ssrn.com/abstract=2564965

Flavia Coda Moscarola (Contact Author)

Center for Research on Pensions and Welfare Policies (CeRP) ( email )

Via Real Collegio, 30
Moncalieri, Turin
Italy
+34.011.64 (Phone)
+34.6403680 (Fax)

Ugo Colombino

University of Turin - Department of Economics ( email )

Via Po, 53
Torino, 10124
Italy

Francesco Figari

ISER - University of Essex ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Marilena Locatelli

University of Turin - Department of Economics ( email )

Lungo Dora Siena, 100A
Torino, 10156
Italy
+39 011 6703894 (Phone)
+39 011 6703895 (Fax)

HOME PAGE: http://www.de.unito.it/web/member/locatelli/personal-inf.htm

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