Revisiting the Effects of Housing Transfer Taxes

Housing transfer taxes are fiscally important in many countries despite evidence of substantial welfare costs. We argue that the welfare costs are larger than previously thought because previous studies ignore spillovers between treatment and control groups. We analyze the effect of transfer taxes on household mobility using a quasi-experiment arising from a tax reform. To account for spillovers between treatment and control groups, we use a housing market model calibrated to match the mobility rates in our micro data and our quasi-experimental mobility effect estimate. Ignoring the spillovers leads to a 20% underestimation of the negative mobility effect.