Welcome to the Center for Housing and Tax Research
As of August 4, 2020 deaths in America related to the coronavirus (CV) have crossed the 154,000 mark. Most states are under lockdown or partial lockdown. Unemployment in the U.S. has settled near 11 percent and stock markets (although having rebounded somewhat) are still about 5 percent below their 2019 highs. States across America are facing tax revenue shortfalls for FY20, and even more significant tax revenue declines for FY21. Most of the job losses are in low wage sectors. Consequently, more tax revenues are going to have to come from high-income taxpayers. Data on housing makes it clear that despite the nationwide shockwaves generated by the coronavirus pandemic, home prices haven’t been hit to the same degree as other sectors of the economy — at least for now. Individuals want to live in a detached house. Preceeding CV, however, Congress passed the 2017 Tax Cuts and Jobs Act (TCJA) in December, 2017. These two events have drastically changed the incentive to own a detached home especially in states that have high income and/or property taxes.
RECENT ARTICLES, RESEARCH FOR THE U.S. AND INDIVIDUAL STATES
TCJA/CV and Income Tax Revenue:
Income Tax Revenue Collections
TCJA So Far:
The 2017 Tax Cuts and Jobs Act represents an exogenous shock to the U.S. housing market and state tax revenue collections. Evidence so far on home price appreciation and FY18/19 tax revenue collection show a very slow, but rising impact. Historical evidence on similar shocks to housing and tax revenue collections provide mixed evidence as to what will happen next.
The Impact Of A 1% Increase In State Income Tax Rates On Net-outmigration Of High-Income Taxpayers In The Initial Year:
TCJA is a national law which does not change a state’s stated marginal tax rate. The impact, however, is to raise taxpayer’s income tax burdens in high SALT states. This negative financial change could motivate some high-income taxpayers to leave the state. We look at the experience of three states which raised their marginal income tax rate during some point in the years 2012 – 2018 to guage the impact of a 1% tax rate increase on net-outmigration.
Housing Market Risk
Impact Of CV/TCJA On High-Tier HPA:
TCJA reduced the MID deduction. This has reduced the financial value of owning a home. Demand for expensive homes has fallen relative to what would have been had TCJA not become law. Nonetheless, demand for homes has been very strong this spring/summer due to CV. These are two contervailing forces. We find that as of Jun-20, home price for high-tier homes in high SALT states has appreciated faster where taxes are lower.
Impact Of TCJA On Low-Tier Homes:
TCJA reduced the amount of mortgage size that one can deduct on federal taxes to the first $750,000. It, however, also raised the standard deduction thereby reducing the value of the MID on homes with smaller mortgages. It has changed the incentive to own even a small home.