High property tax on the other hand, is helpful in two ways:
1. It directly tax the rich who hold more property.
2. It keeps housing prices lower.
Property tax is a wealth tax for one (very significant) kind of wealth.
This feels like if you're a normal person who happens to own a painting that becomes super desirable and worth millions. If you sell it then tax away, but otherwise it's literally just the same painting you've always had.
(And when you die, the capital gains base resets, which is the real travesty -- the heirs pay the loan with some of the capital at zero capital gains tax cost, and start borrowing again with the same strategy whenever they need to.)
How so though? If you're not selling or collateralizing something, you're not gaining any money from possessing it (unless you're counting the spreadsheet number going up as gains by itself).
> And when you die, the capital gains base resets
Yeah, this seems pretty ludicrous. I can understand why inheritance wouldn't cause a taxable event (e.g. you inherit the painting), but it seems pretty wild to allow that while also resetting the basis.
I could be missing something, but I don't know of a super reasonable defense for this part (other than potentially disincentivizing inter-generational hoarding of assets? Honestly not sure)
You aren’t gaining money, but you’re gaining wealth. And the compounding effects are exaggerated if you don’t pay tax until you sell.
For certain asset classes, especially liquid assets like shares/stocks this is dead simple. The value is easily and accurately determinable. If you don’t have the money to pay the tax, you sell assets to make the money. Property, especially residential, is basically on the same level. Ah, but what if investors don’t have the cash and are forced to sell their properties? God forbid these leeches stop treating housing as speculative assets and sell their portfolios onto owner-occupiers.
For other assets, yeah, I don’t know. But I don’t have a single iota of sympathy for millionaires/billionaires who may struggle to pay tax because their wealth isn’t generated via personal income.
True, but only in a philosophical sense. It's an issue of pricing, and pricing securities assets to original purchase value is a falsehood.
People are very happy when their stock price increases dramatically, or their home value increases; they don't say 'well, those aren't my assets; all I have is the $100 price I bought it at X years ago.' People are happy when it's securities for which they only have future options to buy.
States without income tax are nearly always states with more regressive tax structures as a whole[0]. States with income tax are typically less regressive. Property tax can target wealth, yes; but states without income tax nearly always rely on sales and excise taxes to bridge the gap, not on property taxes.
0. https://itep.org/whopays/#:~:text=Washington%20State%20is%20....
But who taxes unrealized capital gains?
i used to knee jerk think that raising property taxes to the market rate was a great equalizer. in california that bill got killed, but actually i'm more informed now and i don't think it's that easy.
rich people find a way, always.
It wasn’t that way when mortgages were 2-4% —- getting a mortgage is harder and requires a large down payment. It’s more of a commitment. Rent will always be more.
>So people can't be buying for the purpose of making money off renting it out, or for the purpose of saving money by not paying rent.
They can and they did.
> People must be buying for the purpose of making money from the price going up in the future.
It does that too, and for many boomers who bought in the 60s-80s, it went up about 10x for them.
> Property tax prevents it from going up in the future too much, thus it will prevent prices from getting so high.
Look up “California Prop 13”. People who buy basically get a freeze on tax rates at the price they paid for the house. If you bought in 1978, you’d pay the property tax based on the 1975 assessed value, and it can only go up 2% per year up to 1% of that assessed value MAX. That means if you bought a house back then for $100k, the max tax is $1k. Now your neighbor moved out and cashes in on their lottery ticket-like winnings, selling their home right next door for the $2m properties on that street are now worth. Guess how much the new owner pays in taxes? $20k. Even though the house paying $1k could sell tomorrow for the same $2m, they paid a ridiculously low property tax for decades, and the new owners of the exact same property will pay $20k each time property tax season rolls along. This garbage law is a big part of why owning in the Bay Area is so hard for folks trying to get their first home. Meanwhile, tons of owners rent their paid-off cheap tax home for ridiculous market rates. $5-7k/mo for a clapped out 60s POS is very typical. The folks who really played their cards right and have multiple properties for which there paying 1/10th or so of what their property tax SHOULD be then renting those all out while they live like kings are the real winners in this scenario, as are all the businesses that enjoy the same anti-competitive benefits. Ever wonder how all those crappy taquerias in San Jose stay open after all these decades while newer much better restaurants struggle and go under in a year? It’s this. Ever wonder how much tax Disney pays on all their property? It’s criminally low. Yet this issue is such a political third rail because all the boomer voters love love love their sweet sweet 90%+ tax discount, they’ll do anything to keep it. Another fun fact is this benefit can be passed down within the family, and with some clever lawyers, be passed between companies as well (IIRC the trick is to sell a property in 3 parts so no part exceeds 50% of tbe whole). Yay, loopholes. This is also a big part of why we have some schools that are surrounded by $2m+ houses and yet the school is way under-funded: those old neighborhoods don’t pay jack for property tax.
It's not now.
>Look up “California Prop 13”
Yeah, I know about it. I'm not arguing in favor of it.
>all the boomer voters love love love their sweet sweet 90%+ tax discount
Wouldn't it still be possible to remove prop 13 for corporations?
Quantity supplied is not fixed in even the short term, landlords choose whether to let vacant units or remove them from the market, e.g., for upgrades that might improve their relative position in the market when re-let but prevent letting them immediately, based on market conditions including adequacy of price.
There's a limit to how high quantity supplied can be in the short term, but underneath that cap it has the usual slope direction of a supply curve.