The taxation of the owner-occupied house – the “principal dwelling”– was a recurrent central issue in the political and economic debate in Italy especially in the last 15 years. It may be useful, therefore, to address this issue, by both examining the theoretical aspects and reviewing the Italian legislation since the general tax reform of the seventies – whose starting point for direct taxation was the year 1974 – with respect to the two tax bases that can be used in the taxation of owner-occupied dwellings, namely the imputed income and the asset value. This paper first analyzes the tax treatment of principal dwellings in Italy on both equity and efficiency grounds over the past forty years and compares it with the solutions adopted in other countries; second an empirical assessment of the evolution of the total tax burden on owner-occupied houses in Italy is proposed.

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