The Behavioral Response to Housing Transfer Taxes: Evidence from a Notched Change in D.C. Policy

Slemrod, Joel; Weber, Caroline; Shan, Hui

doi:10.2139/ssrn.2771229

Cited by 30 publications

(30 citation statements)

References 17 publications

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“…Contemporaneously, three other papers (Slemrod et al, 2012;Best and Kleven, 2013;Besley et al, 2013) look at similar distortions to the distribution of final prices (but not listings) in the United Kingdom and Washington, D.C. These studies focus on the standard extensive margin response (the general effect on sales) to policy changes, rather than incidence, listings and search frictions as we do.…”

Section: Introductionmentioning

confidence: 72%

“…1 Furthermore, the statutory incidence is different for the mansion tax (which is the responsibility of the buyer) than for the New Jersey RTF and New York City RPTT (which are the responsibility of sellers, with the exception of sales of new constructions in NYC). Interestingly, such discontinuities are not uncommon-for example, they are also present in the UK (Besley et al, 2013;Best and Kleven, 2013) and D.C. (Slemrod et al, 2012).…”

Section: Introductionmentioning

confidence: 99%

“…As in the research on responses to income taxation, we are interested in separating real, timing, avoidance, and evasion responses (Slemrod, 1990;Saez et al, 2012). Contrary to that strand of work, our context requires considering both sides of the market.…”

Section: Introductionmentioning

confidence: 99%

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

Kopczuk¹,

Munroe²

2015

American Economic Journal: Economic Policy

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Houses and apartments sold in New York and New Jersey at prices above $1 million are subject to the so-called 1% "mansion tax" imposed on the full value of the transaction. This policy generates a discontinuity (a "notch") in the overall tax liability. We rely on this and other discontinuities to analyze implications of transfer taxes in the real estate market. Using administrative records of property sales, we find robust evidence of substantial bunching and show that the incidence of this tax for transactions local to the discontinuity falls on sellers, may exceed the value of the tax, and is not explained by tax evasion (although supply-side quality adjustments may play a role). Above the notch, the volume of missing transactions exceeds those bunching below the notch. Interpreting our results in the context of an equilibrium bargaining model, we conclude that the market unravels in the neighborhood of the notch: its presence provides strong incentive for buyers and sellers in the proximity of the threshold not to transact. This effect, the identification and recognition of which is novel to this paper, is above and beyond the standard extensive margin response. When present, unraveling affects interpretation and estimation of bunching estimates. Finally, we show that the presence of the tax affects how the market operates away from the threshold-taxation increases price reductions during the search process and in the bargaining stage and weakens the relationship between listing and sale prices. We interpret these results as demonstrating that taxation affects the ultimate allocation in this search market. Short Abstract (100 words)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.

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Section: Introductionmentioning

confidence: 72%

Section: Introductionmentioning

confidence: 99%

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

Kopczuk¹,

Munroe²

2015

American Economic Journal: Economic Policy

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“…Researchers have also investigated notch-related consumer behavior in financial institutions and the housing market. (8,9) The observed excess of tumor measurements at the 2.0-cm and 5.0-cm margins is evidence of similar behavior in HCC tumor size reporting.…”

Section: Discussionmentioning

confidence: 67%

Biases in the reporting of hepatocellular carcinoma tumor sizes on the liver transplant waiting list

et al. 2017

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We investigate the possibility that patients with hepatocellular carcinoma (HCC) listed for liver transplant with tumors just outside Stage T2 size criteria may be inaccurately reported as just meeting the tumor size criteria for transplant. The UNOS/STAR database identified 12,958 patients listed for liver transplants with HCC exception points from 2006–2013, 9,168 of whom were listed with one tumor. A logistic power peak function was fitted to the single-tumor size histogram, with the fitted values representing unbiased expected values. The difference between the observed and expected tumor counts for 2.0cm and 5.0cm was 238 (22%) and 66 (57%), respectively. This suggests that up to 304 (3.0%) patients with tumors outside of transplant criteria had their measurements recorded at the margins of eligibility. A risk-adjusted Poisson model evaluated the ratio of observed to expected (O:E) HCC recurrence by tumor size. There were 435 HCC recurrences among 6,049 transplants. Only 2.0cm tumors had O:E recurrence differing from 1 (ratio 0.73, 95%CI 0.57–0.94), indicating a 27% lower than expected rate of recurrence. Conclusion Higher than expected observed tumor counts at the lower transplant criteria margin were corroborated by lower than expected HCC recurrence, suggesting that tumor sizes at the margins of HCC transplant criteria may be subject to inaccurate reporting.

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“…In addition to the above study on Toronto's LTT, studies using various methods around the world from places as diverse as France (Bérard and Trannoy 2017), Germany (Büttner 2017), New York City (Kopczuk and Munroe 2015), Washington, DC (Slemrod, Weber, and Shan 2017), Australia (Davidoff and Leigh 2013), and the United Kingdom (Besley, Meads, and Surico 2014;Best and Kleven 2017) all show the same result: LTTs substantially reduce the number of housing transactions. The world has also learned about the broader economic costs of these levies.…”

Section: The Economic Cost Of Land Transfer Taxesmentioning

confidence: 90%

A Roadmap to Municipal Reform: Improving Life in Canadian Cities

Dachis¹

2018

SSRN Journal

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Institute's reputation for quality, integrity and nonpartisanship is its chief asset. Its books, Commentaries and E-Briefs undergo a rigorous two-stage review by internal sta , and by outside academics and independent experts. e Institute publishes only studies that meet its standards for analytical soundness, factual accuracy and policy relevance. It subjects its review and publication process to an annual audit by external experts.

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The Behavioral Response to Housing Transfer Taxes: Evidence from a Notched Change in D.C. Policy

Cited by 30 publications

References 17 publications

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

Biases in the reporting of hepatocellular carcinoma tumor sizes on the liver transplant waiting list

A Roadmap to Municipal Reform: Improving Life in Canadian Cities

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