Research Papers
“Property Taxes and Elderly Mobility” (Job Market Paper) [Shan-Mobility.pdf]
Abstract: The recent housing market boom in the U.S. has caused sharp increases in residential property taxes. Housing-rich but income-poor elderly homeowners often complain about rising tax burdens, and anecdotal evidence suggests that some move to reduce their tax burden. There has been little systematic analysis, however, of the link between property tax levels and the mobility rate of elderly homeowners. This paper investigates this link using household-level panel data from the Health and Retirement Study (HRS) and a newly-collected dataset on state-provided property tax relief programs. These relief programs generate variation in effective property tax burdens that is not due solely to arguably endogenous local community choices about taxes and expenditure programs. The findings provide robust evidence that higher property taxes raise mobility among elderly homeowners. The point estimates from instrumental variable estimation using relief programs to generate instruments suggest that a $100 increase in annual property taxes is associated with a 0.76 percentage point increase in the two-year mobility rate for homeowners over the age of 50. This is an eight percent increase from the baseline two-year mobility rate of nine percent. These results, as well as reduced form analysis of mobility rates and property tax relief programs, suggest that eligibility for relief programs lowers mobility rates. The impact of relief programs appears to vary with program types, program generosity, and implementation strategy.
“Effect of Capital Gains Taxation on Home Sales: Evidence from the Taxpayer Relief Act of 1997” [Shan-TRA97.pdf]
Abstract: The Taxpayer Relief Act of 1997 (TRA97) significantly changed the tax treatment of housing capital gains in the United States. Before 1997, homeowners were subject to capital gains taxation when they sold their houses unless they purchased replacement homes of equal or greater value. Since 1997, homeowners can exclude $500,000 of capital gains when they sell their houses. Such drastic changes provide a good opportunity to study the lock-in effect of capital gains taxation on home sales. Using zip-code level housing price indices and sales on single-family houses data from 1982 to 2006 in 16 affluent towns within the Boston metropolitan area, this paper finds that TRA97 reversed the lock-in effect of capital gains taxes on houses with low and moderate capital gains. Specifically, the semiannual home sale rate of houses with capital gains between $0 and $500,000 increased by 0.33-0.54 percentage points after TRA97, representing a 13-22 percent increase from the pre-TRA97 average sale rate. In contrast, the semiannual home sale rate of houses with capital gains above $500,000 decreased by 0.79 percentage points after TRA97, representing a 24 percent decline from the pre-TRA97 average sale rate. This finding suggests that TRA97 may have generated an unintended lock-in effect on houses with capital gains over the maximum exclusion amount. In addition, this paper exploits legislative changes in capital gains tax rate to estimate the tax elasticity of home sales during the post-TRA97 period. The estimation results suggest that a $10,000 increase in capital gains taxes reduces the semiannual home sale rate by 0.16-0.25 percentage points, or 7-13 percent from the post-TRA97 average sale rate.
“Property Tax and Elderly Labor Supply” [Shan-LS.pdf]
Abstract: The recent housing market boom in the U.S. has caused sharp increases in residential property taxes. Anecdotal evidence suggests that rising property taxes have induced elderly homeowners to increase their labor supply. This paper uses 1992-2004 panel data from the Health and Retirement Study (HRS) as well as a newly-collected dataset on state-provided property tax relief programs to investigate the effect of property taxes on the labor supply of elderly homeowners. It is the first rigorous study on the link between property taxes and elderly labor supply. I examine both the extensive margin - whether elderly homeowners delay retirement or reenter the labor market in the face of rising property taxes, and the intensive margin - whether elderly homeowners work longer hours when property taxes increase. A simulated IV approach is used to address the potential endogeneity problem associated with property taxes. I find little evidence that property taxes have a significant impact on elderly homeowners' decisions to retire, to re-enter the labor force, or to increase working hours.