BUDGETARY AND EFFICIENCY EFFECTS OF HOUSING TAXATION IN THE UNITED-STATES

In the context of a dynamic general equilibrium model of the U.S. econ omy this paper analyzes the budgetary and efficiency effects of elimin ating both the deductibility of housing mortgage interest payments fro m the personal income tax base and the tax exemption of imputed housin g rents for owner-occupants. Simulation results suggest that both poli cies would boost tax revenues. They would, however, have a small contr actionary effect on GDP. Moreover, when tax revenue effects are neutra lized, both policies would marginally improve long-term allocation eff iciency. Rigidities in the accumulation of housing assets would, howev er, lead to short term efficiency losses. (C) 1996 Academic Press, Inc .