Housing property tax, economic growth, and intergenerational welfare: The case of China

Abstract

In an endogenous growth model of overlapping generations, this paper shows that an introduction of a housing property tax in China increases physical and human capital accumulation and growth rate of output in the long run no matter the revenue from housing property tax is used for reducing government debt, personal income tax, or capital income tax, or for increasing government education expenditure. The tax reform has a strong inter-generations redistribution effect, i.e., it increases the welfare of future generations but reduces the welfare of current generations.