Flip or Flop? Tobin Taxes in the Real Estate Market

77 Pages Posted: 25 Jan 2021 Last revised: 21 Oct 2022

See all articles by Chun-Che Chi

Chun-Che Chi

Institute of Economics, Academia Sinica

Cameron LaPoint

Yale School of Management

Ming-Jen Lin

National Taiwan University - Department of Economics

Date Written: December 23, 2020

Abstract

We develop a structural framework featuring heterogeneous investor beliefs and rental rate and pricing risk to study the question of how policymakers should set tax rates to deter speculative housing transactions. We calibrate the model using the universe of personal income tax returns and responses to a sales tax on investment properties in Taiwan. The optimal tax on property flips is 4% — close to the flat transfer tax rates imposed in global real estate markets. The model predicts levying higher sales taxes on second homes increases price levels but entails large welfare gains for renters on the margin of homeownership.

Keywords: Tobin tax, housing affordability, noise trading, holding period returns, macroprudential policy, bunching, optimal taxation, redistribution

JEL Classification: E61, G11, G12, H22, R31, R38

Suggested Citation

Chi, Chun-Che and LaPoint, Cameron and Lin, Ming-Jen, Flip or Flop? Tobin Taxes in the Real Estate Market (December 23, 2020). Available at SSRN: https://ssrn.com/abstract=3761226 or http://dx.doi.org/10.2139/ssrn.3761226

Chun-Che Chi

Institute of Economics, Academia Sinica ( email )

128 Academia Road, Section 2
Nankang
Taipei, 11529
Taiwan

Cameron LaPoint (Contact Author)

Yale School of Management ( email )

165 Whitney Ave
P.O. Box 208200
New Haven, CT 06511
United States

HOME PAGE: http://som.yale.edu/faculty/cameron-lapoint

Ming-Jen Lin

National Taiwan University - Department of Economics ( email )

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

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