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This paper analyzes the connection between the asymmetric tax treatment of homeowners and landlords and the progressivity of income taxation using a quantitative overlapping generations general equilibrium model with housing and rental markets. The authors' model emphasizes the determinants of tenure choice (owning versus renting) and the household decision to supply housing services to the rental market. This formulation breaks the link between the rental price and the equilibrium interest rate. Hence, the aggregate supply of rental property responds differently to the direction of rental price changes, marginal tax rate changes, and maintenance cost changes.
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