Welcome to the Center for Housing and Tax Research

As of September 8, 2020 deaths in America related to the coronavirus (CV) have crossed the 190,000 mark. Most states are under lockdown or partial lockdown. In a split by income class, unemployment in the U.S. has settled near 10 percent while stock markets have begun to exeed 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. Despite help from the CARES Act, and possible help from the HEROS Act, more tax revenues are going to have to come from high-income taxpayers. Tangentally, 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, combined with low mortgage rates, have drastically increase the incentive to own a mid-priced detached home especially in states that have high income and/or property taxes. 

Income Tax Revenue Collections

Can States Close Funding Gaps By Raising Income Tax Rates?

During the Great Recession, counts of high-income taxpayers dropped by 14%. Even if counts of high-income taxpayers in 2020 dropped by a smaller amount because FY20 contained only four months of coronavirus returns and recent stock market gains have ameliorated income loses for FY21, it is not unreasonable to assume tax revenue declines of similar magnitude for those years. We anticipate a combined two year decline in state PIT revenues from all taxpayers of about $95 billion (a 23% decline). This is more than ½ of the money provided by the CARES act. Do states have any ability to raise additional tax revenues from their citizens?

Read More

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.

Read More

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.

Read More

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.

Read More

Contact Us