Cambridge-INET Institute · 2017-07-24 · Cambridge-INET Working Paper Series No: 2016/12...
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Cambridge-INET Working Paper Series No: 2016/12 Cambridge Working Paper Economics: 1648 CONSUMER SPENDING AND FISCAL CONSOLIDATION: EVIDENCE FROM A HOUSING TAX EXPERIMENT Paolo Surico Riccardo Trezzi (London Business School) (University of Cambridge) A major change of the property tax system in 2011 generated significant variation in the amount of housing taxes paid by Italian households. Using new questions added to the Survey on Household Income and Wealth (SHIW), we exploit this variation to provide an unprecedented analysis of the effects of property taxes on consumer spending. A tax on the main dwelling leads to large expenditure cuts among households with mortgage debt and low liquid wealth but generates only small revenues for the government. In contrast, higher tax rates on other residential properties reduce private savings and yield large tax revenues. Cambridge-INET Institute Faculty of Economics
Transcript of Cambridge-INET Institute · 2017-07-24 · Cambridge-INET Working Paper Series No: 2016/12...
Cambridge-INET Working Paper Series No: 2016/12
Cambridge Working Paper Economics: 1648
CONSUMER SPENDING AND FISCAL CONSOLIDATION:
EVIDENCE FROM A HOUSING TAX EXPERIMENT
Paolo Surico Riccardo Trezzi (London Business School) (University of Cambridge)
A major change of the property tax system in 2011 generated significant variation in the amount of housing taxes paid by Italian households. Using new questions added to the Survey on Household Income and Wealth (SHIW), we exploit this variation to provide an unprecedented analysis of the effects of property taxes on consumer spending. A tax on the main dwelling leads to large expenditure cuts among households with mortgage debt and low liquid wealth but generates only small revenues for the government. In contrast, higher tax rates on other residential properties reduce private savings and yield large tax revenues.
Cambridge-INET Institute
Faculty of Economics
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Multiple of monthly income used as grouping cutoff
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