Department of Economics, University of Shiraz, Shiraz, Iran.
The aim of this study is to investigate the optimal tax rate in the housing market. Further, an optimum portfolio of investment in housing and business sector is determined in steady state and Ramsey equilibrium. In addition, optimal tax rate and optimal effective housing capital tax rate, business capital and labor income in steady state are calculated. Results indicate when housing capital return increases, goods production and capital in productive sectors decreases, thus housing capital must be taxed. Based on the results, the optimal tax rate of housing capital would be equal to 4.12 % and the optimal effective tax rate of housing capital is equal to 1.8 %. Moreover, in this case, the optimal tax rate of business capital and labor income reduce to 10.6 %.