The Behavioral Response to Housing Transfer Taxes: Evidence from a Notched Change in D.C. Policy
نویسندگان
چکیده
This paper estimates the behavioral response to residential real estate transfer taxes by studying notched tax rate changes in Washington D.C., exploiting both a price and time notch as identifying variation. We provide evidence that there is manipulation of the sales price to the lower-tax-rate region around the price notch, and use this manipulation to show that there was significant awareness of the tax changes and the incentives they created. We find some less compelling evidence of a change in the timing of house sales to beat the tax increase. Finally, we construct difference-in-difference estimates to examine whether there is a lock-in effect in the volume of house sales away from the price and time notches; we find no evidence of a lock-in effect in this setting. We thank Naomi Feldman, Tami Gurley-Calvez, Henrik Kleven, Stuart Rosenthal, Steven Sheffrin, anonymous referees, and participants at the Lincoln Institute Urban Economics and Public Finance Conference, National Tax Association annual meeting, 2016 Workshop on Public, Urban, and Regional Economics, Michigan Tax Research Invitational, and University of Michigan public finance seminar participants for helpful comments and are grateful to the Lincoln Institute for providing funding to purchase data from CoreLogic. We thank Will Boning for exemplary research assistance. We also thank individuals from the D.C. Office of Tax and Revenue for compiling house characteristics data. All errors are our own.
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