Hacker News Reader

Comment by crdb | Hacker News Reader

> it is tough to side with capitalism on this subject

Assuming you mean "with the philosophy of free markets and individual rights" by the catch all "capitalism", it's not.

The foreign buyer is benefiting from state-provided services, such as the police providing some degree of safety from robbery and damage, safety from invasion and confiscation by the armed forces, and a sound legal framework and justice system that protects their property right.

Citizen pay for this via income taxes and their employer's corporate tax, as well as value-added taxes on products and services purchased (since there is no modern country that generally allocates a certain type of tax income to a certain type of spending). Non-resident owners do not. They get a free ride.

Thus, the free market, moral, individual rights protecting solution that might be Barry Goldwater approved is to charge the non-resident owners a yearly tax that covers the cost of services provided.

View on HN

> Citizen pay for this via income taxes and their employer's corporate tax

100% correct. The property tax rate in Vancouver is 0.35%, which is a small fraction of what other cities across North America pay, while income taxes are significantly higher on the middle class. NYC suburbs, for example Weschester, charge 1.93% of assessment, and even in California, property tax is 1.25%. Some Texas counties are 2+%.

In the absence of a reasonably high property tax, like in Vancouver, homes become much more like an expensive savings account. This is especially the case as interest rates falling below 0 in much of the Western world (some banks in Switzerland charge you to put your money there). And day-to-day services like police, schools and ambulatory are paid for by locals through income and sales taxes. UCLA professor says CA could get rid of income taxes through a 3% property tax. http://www.latimes.com/opinion/op-ed/la-oe-adv-welch-califor...

My suggestion to reduce property speculation is to reduce income taxes drastically (1/2 to 1/3), raise property taxes to at least 1.5% (5x) and provide basic tax assessment increase controls for owner-occupied dwellings, up to say $1m in value.

> My suggestion to reduce property speculation is to reduce income taxes drastically (1/2 to 1/3), raise property taxes to at least 1.5% (5x) and provide basic tax assessment increase controls for owner-occupied dwellings, up to say $1m in value.

Exactly. Unfortunately, the short term effect in most countries would be a brutal recession, probably some banks going under/being nationalised, a flight of capital out of the country, and so on - enough to dissuade any administration to try.

It does not help that most politicians are from the middle upper class and own large amounts of property. Few will have the courage to devalue their own net worth by double digit percent.

Thus I think it exceedingly unlikely that we will ever see a shift from production taxes and consumption taxes to "dead" asset taxes. In fact, the historical precedent is the other way round.

There are many others, but France's ISF (wealth tax, of 1.5% of the government-assessed asset value per year) is one of the reasons you can buy a large castle there for less than a studio in Sydney.

< It does not help that most politicians are from the middle upper class and own large amounts of property. Few will have the courage to devalue their own net worth by double digit percent. >

This is the real reason. As I've mentioned on other threads, California's main business is and always has been real estate.

I think I've got a clear understanding of capitalism but let me know whether something is missing: https://goo.gl/DEIU6Y

Assuming what you mean by "a yearly tax that covers the cost" , which I have also quoted although it's obvious what was meant by what was said, it's not covering the "true cost to society". I don't have to stretch far to define this cost as there is a limited supply of housing and you know where this leads.

I like your suggestion that we charge investors, at least of the high-net-worth or institutional kind, for participating in housing. However, how we measure that tax needs to include variables other than taxes paid for waste management and law enforcement.

Oh this is good stuff. Thanks for contributing! ;)

Reply on news.ycombinator.com