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The effects of land transfer taxes on real estate markets: evidence from a natural experiment in Toronto

Dachis, B. and Duranton, Gilles and Turner, Matthew A. (2012) The effects of land transfer taxes on real estate markets: evidence from a natural experiment in Toronto. Journal of Economic Geography, 12 (2). pp. 327-354. ISSN 1468-2702

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Identification Number: 10.1093/jeg/lbr007

Abstract

Taxes levied on the sale or purchase of real estate are pervasive but little studied. By exploiting a natural experiment arising from Toronto's imposition of a Land Transfer Tax (LTT) in early 2008, we estimate the impact of real estate transfer taxes on the market for single family homes. Our data show that Toronto's 1.1% tax caused a 15% decline in the number of sales and a decline in housing prices about equal to the tax. Relative to an equivalent property tax, the associated welfare loss is substantial, about $1 for every $8 in tax revenue. The magnitude of this welfare loss is comparable to those associated with better known interventions in the housing market. Unlike many possible tax reforms, eliminating existing LTTs in favour of revenue equivalent property taxes appears straightforward

Item Type: Article
Official URL: http://joeg.oxfordjournals.org/
Additional Information: © 2012 The Authors
Subjects: H Social Sciences > HA Statistics
H Social Sciences > HD Industries. Land use. Labor > HD100 Land Use
H Social Sciences > HJ Public Finance
Sets: Departments > Geography and Environment
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 15 Mar 2012 09:16
Last Modified: 15 Mar 2012 09:16
URI: http://eprints.lse.ac.uk/id/eprint/42508

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