The Impact of the Taxpayer Relief Act of 1997 on Housing Turnover in the U.S. Single‐Family Residential Market

Abstract

The Taxpayer Relief Act of 1997 (TRA97) replaced a one‐time, post‐age‐55 capital gain exclusion with a larger gain exclusion amount that could be protected every two years without requiring that the taxpayer trades up in housing. This action had the potential to impact housing transactions for every existing homeowner, regardless of age, as well as future purchasers of housing. We analyze household‐level data to determine if the repeated ability to exclude periodic recognized capital gains on housing from taxation shortened housing tenure significantly after TRA97 became effective. We next consider whether the decline was heterogeneous across age groups, across trading up and trading down and across geography. Given that the impact of TRA97 appears at first glance to be most profound for taxpayers close to 55 years of age, a somewhat surprising result of our research is that significant decreases in tenure are pervasive, appearing in all age ranges and in samples of homeowners who trade up and who trade down. Finally, we provide additional evidence at the aggregate level that TRA97 led to measurable changes in the price elasticity of housing turnover in the four geographic regions defined by the U.S. Census Bureau (Northeast, Midwest, South and West) and in states that are home to large metropolitan housing markets.

The Decision to Move House and Aggregate Housing-Market Dynamics

“…Comparative statics of moving and transaction thresholds ξ ↑ or r ↓ v ↑Shan (2011) andHeuson and Painter (2014) present evidence showing that this policy change led to an increase in mobility and transactions.…”

The Impact of the Amendment of Taiwan’s Certified Public Accountant Act in 2007 on Large Accounting Firms

“…Many studies have been mainly conducted to analyze the industry data and government data. (These include studies of the Tax Reform Act [11][12][13][14], the Economic Recovery Tax Act [29][30][31], IFRS16 [15][16][17], the Securities Act [18], the America Invents Act [32,33], the American Recovery and Reinvestment Act [34,35], the American Jobs Creation Act [36,37], the Sherman Act [38], the Taxpayer Relief Act [39][40][41], the Glass-Steagall Act [42], the Gramm-Leach-Bliley Act [43], and the Omnibus Trade and Competitiveness Act [44].) The focus of these studies is on the significant impact of the promulgation or amendment of laws on society or related industries.…”