Abstract
In this paper, I examine the question of whether the government should adopt a property tax or an income tax to address the concern for relative consumption in housing by building and analyzing a stylized model that might be new to the literature. I conclude that the concern should be addressed with a property tax; the optimal property tax rate is proportional to the degree of the concern; and while the concern leads to higher income guarantees, it does not lead to a higher marginal income tax rate. The findings suggest that the ‘additivity property’ holds for both ‘atmospheric’ and ‘positional’ externalities.
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