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  3. American Economic Journal: Economic Policy
  4. May 2015
  5. Mansion Tax: The Effect of Transfer Taxes on the Residential Real Estate Market

Mansion Tax: The Effect of Transfer Taxes on the Residential Real Estate Market

  • Wojciech Kopczuk
  • David Munroe
American Economic Journal: Economic Policy
vol. 7, no. 2, May 2015
(pp. 214-57)
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Abstract

Using discontinuities in housing transaction taxes in New York and New Jersey we find robust price bunching. Incidence for transactions local to the notch falls on sellers, with no evidence of evasion. The volume of missing transactions above the notch exceeds those bunching (beyond the usual extensive-margin response), indicating incentives for buyers and sellers not to transact (market unravels). The possibility of unraveling affects interpretation and estimation of bunching. Away from the threshold, we find increased discounts and weaker relationship between listing and sale prices. Equilibrium bargaining framework highlights that taxation affects the ultimate allocation in this search market. (JEL H71, R21, R31)

Citation

Kopczuk, Wojciech, and David Munroe. 2015. "Mansion Tax: The Effect of Transfer Taxes on the Residential Real Estate Market." American Economic Journal: Economic Policy, 7 (2): 214-57. DOI: 10.1257/pol.20130361

Additional Materials

JEL Classification

  • H71 State and Local Taxation, Subsidies, and Revenue
  • R21 Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
  • R31 Housing Supply and Markets
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