Removing Homeownership Bias in Taxation: The Distributional Effects of Including Net Imputed Rent in Taxable Income

The income tax systems of most countries entail a favourable treatment of homeownership, compared to rental‐occupied housing. Such ‘homeownership bias’ and its consequences for a wide range of economic outcomes have long been recognised in the economic literature. Although a removal of the homeownership bias is generally advocated on efficiency grounds, its distributional implications are often neglected, especially in a cross‐country perspective. In this paper, we aim to fill this gap by investigating the first‐order effects, in terms of distribution of income and work incentives, of removing the income tax provisions favouring homeownership. We consider six European countries – Belgium, Germany, Greece, Italy, the Netherlands and the UK – that exhibit important variation in terms of income tax treatment of homeowners. Using the multi‐country tax benefit model EUROMOD, we analyse the distributional consequences of including net imputed rent in the taxable income definition that applies in each country, together with the removal of existing special tax treatments of incomes or expenses related to the main residence; thus, we provide a measure of the homeownership bias. We implement three tax policy scenarios. In the first, imputed rent is included in the taxable income of homeowners, while at the same time existing mortgage interest tax relief schemes and taxation of cadastral incomes are abolished. In the two further revenue‐neutral scenarios, the additional tax revenue raised through the taxation of imputed rent is redistributed to taxpayers, through either a tax rate reduction or a tax exemption increase. The results show how including net imputed rent in the tax base might affect inequality in each of the countries considered. Housing taxation appears to be a promising avenue for raising additional revenues, or lightening taxation of labour, with no inequality‐increasing side effects.     

ABC: The Pathway to Comparison of the Costs of Integrated Care

In recent years, health care demand has become increasingly complicated and care has had to be integrated. The main reasons for this are a rising number of chronically ill patients and ageing of populations. Integrated health care is processual so there are continuous changes in care delivery; it incorporates many co–ordinating and co–operative activities which can produce uncertain outcomes; and activities are directed at delivering tailor–made care so there are no standardized or generalized outcomes. These characteristics mean that it is difficult to determine and compare the costs of different integrated care structures. This article argues that using Activity Based Costing (ABC) and integrated care pathways provides the best information possible for decision–making by health care managers, insurers, care suppliers and governments.     

World Heritage as NIMBY? The Case of the Dutch part of the Wadden Sea

Acquiring the world heritage label, a reward for establishing and preserving an outstanding environment, is often assumed to be an honour for the local population and a useful leverage for the tourist and environmental organisations. However, the case of the Wadden Sea, a trilateral nomination by Denmark, Germany and The Netherlands, makes clear that this is not always true, and public consultation in The Netherlands has revealed that these local stakeholders do not support such a nomination. It seems they epitomise a 'Not in my back yard' (NIMBY) approach to World Heritage listing. This discussion paper examines the factors that complicate the nomination process. Contrary to common expectation, why do critical stakeholders, like the tourism industry, local inhabitants and environmental organisations become opponents? What are the interests at stake that subvert the balance of benefits and costs of the world heritage status to the extent that nomination is suspended? Is this phenomenon an exception, or an indication that obtaining the accolade is increasingly assessed from a rational rather than an emotional viewpoint, and that 30 years after the convention which created it the world heritage stamp has lost its uniqueness?     

Indexing Out of Poverty? Fiscal Drag and Benefit Erosion in Cross-National Perspective

We assess how tax-benefit policy developments in 2001–11 affected the household income distribution in seven EU countries. We use the standard microsimulation-based decomposition method, separating further the effect of structural policy changes and the uprating of monetary parameters, which allows us to measure the extent of fiscal drag and benefit erosion in practice. The results show that despite different fiscal effects, policies overall mostly reduced poverty and inequality and both types of policy developments had sizeable effects on the income distribution. We also find that the uprating of monetary parameters not only had a positive effect on household incomes, meaning fiscal drag and benefit erosion were avoided, but generally also contributed more to poverty and inequality reduction than structural policy reforms.     

Mögliche Entwicklung der Umlage zur Förderung der Stromerzeugung aus erneuerbaren Energien durch das Erneuerbare-Energien-Gesetz bis 2018

As a result of the strong growth of renewable energies in the German electricity sector within the last few years, the allocation of renewable costs to the consumer (RES-E apportionment) has been set to 5.277 ct/kWh for 2013 (ÜNB, Pressemitteilung der Übertragungsnetzbetreiber zur veröffentlichten EEG-Umlage 2013, 2012a). This article presents potential developments in the costs of promoting renewable energy and the RES-E apportionment in Germany using three different scenarios. Each of the scenarios considers different trends with respect to further deployment of renewable energies, wholesale prices and electricity demand. Due to the underlying uncertainties surrounding these major parameters, the scenarios show a wide range for the RES-E apportionment. A reduction of the RES-E apportionment can be reached if we consider an increase in wholesale prices. However, the scenarios indicate a further increase in the RES-E apportionment, where the amount heavily depends on the further deployment of renewable energies and the development of wholesale prices. Despite the reduction of feed-in tariffs, a main contributor to an increase in the RES-E apportionment is still the ongoing deployment of photovoltaics (PV). In order to prevent a further cost increase without inhibiting renewable targets, it may be worth focusing on comparably cheaper technologies in the further deployment of renewable energies.     

The Economies of the Baltic Sea Region: Growth Patterns and Foreign Trade Now and in the Future

The article studies the economic growth patterns of the Baltic Sea Region countries, describes their gross domestic product trends, and predicts the future developments. As foreign trade is one characteristic of interrelationships between the countries, the geographical pattern of foreign trade is analyzed, especially emphasizing the linkages between the countries in the Baltic Sea Region. The article pays attention also to the perspectives in the 2025 time framework and ends with some comments regarding the conditions for future development.     

Europe Through the Crisis: Discretionary Policy Changes and Automatic Stabilizers

Tax-benefit policies affect changes in household incomes through two main channels: discretionary policy changes and automatic stabilizers. We study their role in the EU countries in 2007–14 using an extended decomposition approach. Our results show that the two policy actions often reduced rather than increased inequality of net incomes, and so helped offset the inequality-increasing impact of growing disparities in gross market incomes. While inequality reductions were achieved mainly through benefits using both routes, policy changes to and the automatic stabilization response of taxes and contributions raised inequality in some countries and lowered it in others.