Owner Occupied Housing Taxation: A Vertical Equity Evaluation of the UK and US Tax Systems.

Abstract

Tax favouritism of homeowner occupiers continues to be discussed by academics and policymakers given its significant personal and fiscal importance. This research area has become even more topical in the last few years given the recent financial crisis. The multi-layered, comparative micro-simulation technique employed within this study provides a solid platform from which to appraise existing tax systems and proposals for future policy with regard to owner-occupied housing taxation. This paper presents the findings of evaluations on the vertical equity of specific US and UK tax policies affecting homeowner occupiers, as well as the impact on the overall tax systems. The evaluations include comparisons with investors in alternative capital assets within the two respective countries. Vertical equity is quantified using a combination of structural and distributional measurement techniques.