The effectiveness of other taxes aside, the argument that billionaires will leave if taxed at a higher rate isn't compelling.
Billionaires are not struggling to meet their expenses. If you raise their taxes, they aren't suddenly unable to afford things. They don't need to change their behavior just to get by. A carbon tax forces average people to drive less, but doesn't affect billionaires at all.
Billionaires live where they want to because they can afford to. They're not going to let themselves be chased from jurisdiction to jurisdiction because of numbers that have zero impact on their daily lives. That's what happens to poor people. If California raises taxes on Billionaires, very few will actually leave. They're where they want to be and they can afford to stay there. What's the point of having a really big number in your bank account if you have to move to the middle of nowhere in Alabama to keep it that high?
Land, as apposed to the property on it, is raw nature. If we view raw nature as a common inheritance of mankind, then paying a tax on land is how the exclusionary use of it, balances with the common interest in it.
Economist Henry George in the 1800's, pointed out that taxing land, but not the property on it, incentivizes efficient use of land, because holding land for its passive (parasitic) return even when underused, becomes unprofitable when the land is taxed in proportion to the value it can enable.
And in turn, only taxing land, not property, incentivizes increased development, as higher property investment amortizes land tax against higher returns.
So many things align for higher growth in ways that more evenly benefit everyone. But our relationship with land is over-complicated, and that is both the reason for change, but the reason change is so hard.
Small attempts have failed, but then, for the rich who can hold land and reap growth in value that outpaces the taxes they pay on it, that remains another tilted economic success.
> The land value tax can’t be dodged by leaving nor can it be passed on to renters.
In what sense can't it be passed to renters? Esp if all landlords in the market were faced with a new land tax that they had not previously planned for, why would it not be passed on?
Rent is a function of supply and demand, not a landlord's costs, otherwise we would expect changes in e.g. mortgage interest costs to be passed on to, but in practice we don't see this effect. We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
> otherwise we would expect changes in e.g. mortgage interest costs to be passed on
These aren't a universal cost. When rates change, some landlords' costs go up. But some don't. That lets the latter set the marginal price.
If everyone's costs go up the same amount, it's collusion without communication. In an inelastic market like San Francisco's, you'd expect prices to rise.
Rents are already as high as renters can bear. If a tax is introduced, you'd expect landlord competition to drive down the landlord margins, not increase rents.
That cost will, of course, be passed on to renters unless the rental prices cannot be raised at all.
If they can't be raised, and the costs end up being ruinous to the landlords, they will find other solutions like mass arson. That isn't hyperbole; this was a serious problem in the 1970s:
https://en.wikipedia.org/wiki/1970s_South_Bronx_building_fir...
That was obviously not acceptable... but it was predictable.
All legal proposals should be viewed like a chess move. Presume others will respond, and make sure you're ok with that response.
It is quite disingenuous to attribute the South Bronx fires as a result of landlords unable to raise rental prices. I mean that is technically true, but your comment makes it sound like it was a result of a particular legal proposal. It was not. It was a period of urban decay in NYC and many cities in the United States. It was the continuation of white flight into suburbs that started in earlier decades. It was a large demographic change with complex causes.
This is the problem with governments who think they can synthesize value. They think all businesses can too.
If these communists succeed, they will use the very fact that a landlord cannot synthesize money to prove the landlord passed the cost to the tenant and seize the land.
LVT is incoherent, it pretty much only benefits people who are cash rich and land poor. Which is why it gets so much oxygen from tech elites with lots of cash and an inability to buy a house somewhere like mill valley, or wherever.
Essentially taken to the logical conclusion, there will be people competing for more cash to pay their increasing taxes on the same land, it doesn't fundamentally solve the problem. It's such a joke.
"utilized better" in that context just means that the owner of the land can support the taxes on it, it doesn't mean suddenly we are going to put skyscrapers in el cerrito.
Wealth taxes are a symptom of a broken tax system. If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
> If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system
This is to once again mistake net worth for money. Net worth is not real. It is not a good measure of the money someone may be able to realise. They do not have hundreds of billions. There is nothing to tax until they sell some shares.
The actual mistake is pretending like they can't leverage those shares to access fiat, for example securities-backed loans. The proceeds aren't taxable income, the bank gets its interest, and the latter is typically substantially cheaper than realizing the shares and paying capital gains tax. Meanwhile, they keep the assets, which on average continue appreciating.
It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes. If "net worth is not real" neither is equity in real estate.
> It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes.
I don't like property taxes either, and at minimum would rather they were called something else, and preferably replaced with per-service charges where possible.
But either way they exist to pay for things, and not to just degrade the value of your property simply because you worked to own it.
The only reason it works with real estate is because they can put a lien on the house and block the sale of it. They don't have any useful mechanism to stop the sale of a share of stock, but since the government is involved in the transfer (due to the registering of the new house deed) of a house, they can stop that one.
> They don't have any useful mechanism to stop the sale of a share of stock
The SEC exists. As do many other mechanisms by which the government regulates direct and brokered securities trades and sales. You can make the case that some of those controls are poorly/ineffectively implemented, but you can’t claim that it’s not something the government routinely regulates, intervenes in, and sometimes prohibits outright.
Why can't govt block the sale of stocks? It's not like you would be selling non digitalized assets, govts often freeze and reverse stock sales/trades when they find it to be illegal already.
It's harder for private companies sure, but who will stand in the way of govts if they said we will sanction your if you buy X or Y company?
The main reason real estate taxes work so well is that tax evasion is very difficult.
Because the building is standing right where it is, in the open, lit by the sun every day. If you don't pay your tax, the government can just take it.
This compensates for the several philosophical and moral problems with it, and I've seen several economists declare it the best form of taxation there is.
People absolutely make that argument about property taxes. That's where deferrals or abatements for e.g. elderly or low-income homeowners, or caps on property tax increases come from. Someone may own a home that property taxes price them out of, forcing them to leave their community because they can't actually conjure money from a higher priced home.
I think a lot of tax authorities also don't reassess that regularly without a sale, so it also kind of ends up baked in that if you didn't pay that much for the property, it's only theoretically worth that much.
If I sell my house, there's a reasonable expected range of money I can expect for it.
If a majority stock holder in a company sells all of their stock, the price first the first share sold is likely going to be completely different (and substantially less!) than the last share sold.
That’s just a decision we made about what is taxable.
Purely an accounting artifact. We can pass a wealth tax tomorrow and it’ll suddenly be taxable.
Net worth is real money, and is usually a very accurate measure of what people can realize. There are a few outliers who own so much that they’d move the market if they sold it all. Selling 2% to cover taxes? Not going to move the market very much.
There is no way to take anything like that. Net worth is quite similar with me saying you are worth 1 billion dollars, but you have zero money in the bank. What do you take, super-rich billionaire person?
Why not? Net worth is the estimated sell value of a list of assets. It is entirely possible to take those assets. Why would it even be a little difficult, let alone impossible?
And certainly ceejayoz was being a bit glib by suggesting we take all of it, but it would not be remotely insurmountable to tax billionaire wealth.
The net worth is simply the sum of assets minus the sum of liabilities. Take away the assets and you take away the net worth. I can't think of an asset category that you can't transfer if you are willing to sacrifice its value (which presumably doesn't matter, because it's not real anyways)
In the rare cases where contract law makes the transfer impossible legally the government could trivially step in to make it possible
Because that would involve seizing assets? The parent meant it's not "real" in the simple-minded sense that people think it is: the average person imagines Elon Musk and other billionaires have a checking account that keeps increasing by tens of thousands of dollars per second because that's the only frame of reference they have. The reality is the wealth is mostly tied up in assets that ain't exactly liquid. Yes yes, they apparently have access to this supposed infinite money glitch where banks will endlessly loan them money without requiring interest payments (which would require liquidating assets for payment and therefore triggering a taxable event, the very thing people think never happens for billionaires). But the fact of the matter is the wealth isn't money in a bank, and therefore not "real" in the sense the parent was referring to. But it is at the same time something they would miss if it was just "taken away", much the same way you'd miss the numbers in your 401k if voters decided you had a few too many millions saved up for retirement.
You are ignoring the most common approach, borrow against the asset. In that case the sufficient assets turn into essentially unlimited untaxed cashflow. Especially with how the market has been lately, the gains erase any burden of the loan. Sounds like a broken tax system to me.
That may be a perfectly viable solution. Seems like an easier path to me, at least. But the point is that these assets are a lot more fungible than you imply.
> It is not a good measure of the money someone may be able to realise.
And as such, when you get into the higher ranges, net worth is quite a good indicator.
Try this - go to a bank and say “I’d like to borrow money using my 401k/Roth IRA as collateral. If I fall behind in payments you can liquidate the entire thing, including penalties, and make yourself whole.”
You’d think they’d jump over each other to lend money against such a stable, secure asset right?
Except they’ll say “sorry, this isn’t allowed. IRS treats borrowing against an untaxed retirement account as an early withdrawal, even if the asset itself stays untouched.”
Turns out the government fully understands the concepts of stocks, gains, unrealized net worth and more, and has laws on the books to make sure you are being taxed appropriately for them.
Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth. Because it’s “paper money”. It doesn’t exist. There’s nothing to tax. Just cannot be done, or it’ll bend the laws of spacetime.
Your 401k/Roth IRA (subtracting early withdrawal penalty) literally do count when considering qualifying income for a conventional mortgage. This is not a taxable event. It's just standard procedure for loans.
Incredibly terrible example because you are allowed to borrow money against a 401k, up to $50000 with no penalties as long as you pay yourself back at whatever schedule you have determined for yourself
Another thing with taxing unrealized gains is that no one in the government is willing to return any money if the unrealized losses happened. Somehow it's all hunky-dory when someone loses 1M in stock value, but as soon as someone's stock went up 1M they all want to tax it right away.
I dont know why it's so complicated to just say "Money is Money when it's Liquid, tax it then". Any loans on wealth should be taxed..nationwide.
But even in California's case this doesn't feel like anything anybody would object to. Given how much California Billionaires liquidate using loans on their wealth, I bet, they could do a middle class tax cut too to offset it a little bit too.
I am little baffled as to why the politicos haven't latched on to this whole-heartedly. You can still proudly say you're taxing Billionaire wealth. Because you are! Just more sensibly.
Well one thing is, they'd sell shares to pay the taxes. Then dilute their own ownership of the thing (Tesla, Amazon) and it would serve as another form of wealth distribution.
Absolutely ridiculous statement, it's not an accurate measure but it's definitely a good measure of money.
If you have 100B to your name even if it's post IPO stock in a possibly ponzi company that's your current wealth and you can easily convert a staggering portion of it into material realized wealth depending on several factors.
If I use cash to buy 1B dollars in Microsoft shares today, am I not worth a Billion dollars...?
The value may not be exactly convertible agreed so let's just force everyone to book all gains every year, and force sell a net percent of your share.
Not 100B$ of share, but 2% of 100 Million units of stock that you own. Why does this not work?
If I take 2% of your shares why can't it work the same way? I can then pick and sell it over the next year or two however I see fit, in case of govt they can slowly sell back this share to not affect the prices too much.
I am baffled by the fact that we have a tractible quantity and people call it hard to use to measure money.
Paintings, Jewels, etc. are what's truly the hard part of the wealth equation not the stocks, which is over 99% of what a wealthy billionaire owns.
I am not even considering pro or against taxes on billions people make but it's ridiculous to say stocks aren't money? Then what is money really... Currency is also traded, it's value can also go up or down....
Larry Page owns about 5% of Alphabet, which is worth $4T, so he has $200B give or take. Which part of that do you think reflects a "broken tax system"? Companies should get kneecapped if their market cap gets too high? Founders shouldn't be allowed to keep even a single digit percent of the company?
The broken part is that there is third world-level poverty on the streets outside Google’s offices, working class people cannot afford to live in the Bay Area, and a fifth of California lives in poverty.
I agree that that's the major problem; the poverty is inexcusable. But that's not caused by the $300B (or whatever) of equity. It's caused because the homeowners of the Bay Area decided that once they got a house, nobody else should, and that they should get to exclude others from the opportunities they had.
This same thing was observed during the Gold Rush in California in the 1800s; extreme wealth also resulted in extreme poverty. And there's a great way to solve this: tax the land and redistribute it equally to everyone. Land can't be moved, it's something that belongs to all of us, and you can't make more of it.
This is almost completely traceable to Californians' failure to allow sufficiently dense housing to be built on their doorsteps. The only thing Larry did was bring prosperity to the region.
Read somewhere that SF spends roughly 50k$-80k$ per homeless person per year.
Taxing more doesn't solve a massively inefficient system at it's core. Just like US education, we spend more than any country on earth, why is it still bad?
Answering that question with a "if only we had more money" is a really poor argument. The CA tax fundamentals are bad, pooring more cash onto the fire will not fix that.
And, many people who are poor have persistent mental/physical disabilities, so part of that spending is because many of these people have it the hardest.
With that said, we could likely fix all of these things and significantly unequal wealth distribution would still result in a lot of poverty.
You can't solve a shortage with demand subsidies. You need to expand supply. SF has too little housing relative to its population, and has perennially tried throwing money at the nonprofit industrial complex which has (obviously) perennially failed to solve the problem because it doesn't generate new housing units, it just bids up and reshuffles the existing ones (and steals a lot of money in the process).
This has basically nothing to do with with market cap of Google or Larry Page's percentage ownership of it; and the state government taxing it more will not make this situation any better.
that has ZERO to do with the tax system... You can't be serious? Have you looked at the data at all? have you seen how much money is spent "combatting" homelessness in San Francisco?
The part where he has access to essentially unlimited untaxed cashflow by borrowing against that asset. Especially with how the market has been lately, the gains erase any burden of the loan. Something has be done about this, at least. Otherwise broken sounds about right.
Larry has sold tons of Alphabet stock and paid lots of capital gains taxes. This is easily available public information. The whole buy-borrow-die thing is sort of a stupid myth. Actual centibillionaires diversify because the risk of having a huge concentrated position is much greater than the liability of having to pay some capital gains taxes.
> Companies should get kneecapped if their market cap gets too high?
Yes. They should be broken up because competition is good for consumers and society. If we had functional anti-trust enforcement Google would not have a near-monopoly on search ads where they own both the ad inventory and the marketplace where you have to buy those placements.
Yes perhaps there should be wealth caps. Did Larry Page really do 5% of all that labor that made google as big as it is? And should a single company get so big and have so much power? Yes, I get that they took risks and invested early, and we shouldn't take away that type of incentive, but perhaps it should have caps, or an S curve tax schedule.
Google doesn't have much power. It can't arrest you or pass laws or vote. It just happens to produce a lot of profits for its shareholders (who are, overwhelmingly, average people with 401Ks) and a lot of profits means a big market cap.
If we need revenue to fund useful government programs, great, let's tax Larry. But I don't understand what problem is solved by expropriation qua expropriation.
If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
And care about the rule of law. You cannot pass retroactive laws, you cannot pass laws that target individual people. If you pass a general law (which could very well have reasonable objections), people have to have a chance to leave.
"I'm passing this law that is effective the exact millisecond I sign it, tough shit if you don't like it" is tyranny and despotism. But based on your comment I think you know that.
> And care about the rule of law. You cannot pass retroactive laws, you cannot pass laws that target individual people. If you pass a general law...
A wealth tax is not a retroactive law, nor something that targets an individual person. It's a "general law" in your parlance. Think about it.
> If you pass a general law (which could very well have reasonable objections), people have to have a chance to leave.
I don't think so. By what legal authority is that required?
> "I'm passing this law that is effective the exact millisecond I sign it, tough shit if you don't like it" is tyranny and despotism. But based on your comment I think you know that.
No, it's not, and don't be ridiculous. When they passed laws against date-rape, would you have judged it "tyranny and despotism" unless the law was delayed to give the date-rapers time to finish up the date-rapes they'd planned?
There's no justice in giving the wealthy the maximum opportunity to pick and choose the laws that apply to them.
If the $100B+ was created through ownership of a company and is unrealized wealth, how would you have taxed it if not through a wealth tax? Nobody is getting to $100B by way of income.
I agree the proposed wealth tax is a bad idea, but raising property taxes is probably not viable. They are incredibly unfavorable to voters. No one who owns a home wants to pay rent, that's why you buy in the first place.
Personally, this is why I am fine with higher income or sales taxes.
Sales Taxes are the worst ones. Burden on seller, burden on buyer, regressive. Income is more fair but easy to mask-out for the wealthy. Property is meh, Wealth tax is the best one. Assuming all were well designed.
Some items taxable, some are not. Keep track. Some have different rates depending on who's buying, keep track. Buyers in different locations pay different rates, keep track. The rules change frequently, keep track. Collect money for the govt, keep track. Remit quarterly or face penalty.
There complexity and overhead on sales taxes; more than on an income, retained earnings or wealth taxes.
Also, sales taxes take more percent of wealth away from the lower wealth bracket than from the upper wealth bracket.
Whats wild is the commercial side didn’t get closed. I understand the argument for individuals or households (I don’t love it - I’m on the wrong side of it, but at least it’s somewhat defensible), but if you’re running a business and your income isn’t keeping up with inflation, that’s called failing.
Old voters like the house they brought 20 years ago for 100k being worth 1.5 million today. They also like not paying taxes on that 1.4m in wealth accumulation.
opposite, income taxes take place first. after a waiting period, its just capital gains. capital gains taxes are typically lower than income taxes so this encourage long term holding
I think not wanting to pay some yearly tax on that $1.4 million because the government pretends that the same as having $1.4M cash in the bank, or making $1.4M in a year, is fine.
Not wanting to pay the property taxes associated with a $1.5M home is the problem.
Which is why we also have things like a deferred property tax program! The way to "solve" the problems Prop 13 addresses would be to expand programs like that, but homeowners—disproportionately active middle- and upper-middle-class voters—want to have their cake and eat it too.
But neglects to consider why it won a majority of votes. Why did it? And how does Prop 13 relate to the more recent Prop 19, which substantially weakened it?
If the tax is calculated based on residency at the time it was earned or granted rather than when it vested or was sold then it doesn’t matter if they leave.
I think the point of the article is correct; the issue with CA is everyone wants to live there, including rich people. If we try and tax them then they'll leave just long enough to not pay state income tax, if we tax property values then the state actually gets the tax and doesn't miss out on job creation or future revenue.
Red states have implemented low income tax with heavy property taxes (think Texas) with great results. and although I'm sure California would just manage to mess it up it's a great idea.
1. If wealth was only motivated by taxes and was going to leave, it would've left already. Fact is, billionaires don't want to live in Tennessee;
2. Nobody is doing the right thing to tackle any of this, including California.
The article mentions California has land and that's the key point. Unfortunately, California homeowners have been coopted into voting against their own interests to raise property values. If the house you bought in SF in 1975 for $80,000 is now worth $3M, you still only own 1 housing unit's worth of wealth. And that housing cost is an input into everything you need to buy because all the workers required for those things have to be paid high enough to pay those exorbitant rents.
Let me repeat that: high housing costs are an input into everything that you buy.
So what needs to happen? We need to stop treating housing as a speculative asset. It's simply stealing from the next generation. Worse, it's diverting investment capital from productive output because land has become the asset with the best tax treatment, highest returns and most government protections. So what does this look like?
1. Some form of land value tax. The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable;
2. Punitively tax land hoarding including second homes. We could give discounted rates to primary residences of state residents. Nobody else should get a discount. This would mean repealing Prop 13 and that's never going to happen. As an example of this, I'll bring up Prop 19. In CA you can inherit a preferential property tax rate. Prop 19 proposed to limit this to only one property could inherit this preferential rate and it barely passed (51% IIRC). Do we think that 49% of California voters have multiple properties that have property tax rates set 40+ years ago? Of course they don't. It's an example of how people vote against their own interests;
3. Part of what sold Prop 13 originally was the idea of pushing seniors out of their homes with property taxes. Well, that gave Disneyland a tax rate that was set in the 1960s. California should do what Texas does: you can defer your property taxes until you die if you're a senior but there's no capped property tax rates like incumbent SF residents have and no inherited preferential property tax rates;
4. Wind back the preferential collateralization of property for mortgage debt over time. Residential property lending now dominates bank lending and earnings. It's significantly harder to get finance for any form of productive output;
5. Wind back over time preferential tax treatment for home ownership.
Do I think any of this will happen? No.
Oh, one of the worst things to do is transaction taxes, often called stamp duty. This is where you pay a percentage of the value on purchase. This really hurts mobility. I guess it's fine if it's only on the luxury end of the market (CA's is at $5M+?) but it's not a good idea regardless.
The other part of this is to provide social housing like Vienna. The government should be a significant supplier of affordable quality housing.
> We need to stop treating housing as a speculative asset.
This kind of assumes the only reason a house appreciates in value is because people are "treating it as an asset" rather than "the house I bought 30 years ago in the middle of nowhere is now smack dab in the middle of a very desirable area." At that point it's simple supply and demand, not some homeowner being greedy.
> The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable
This makes the fatal assumption that just because a house is worth dramatically more than what you paid for it many years ago that your income must have risen just as dramatically. "Oh well, too bad, sell your house and deal with it." Maybe people kind of like living where they've put down roots and don't want to be punished for something outside of their control? Any proposal that boils down to "pay more or fuck off" is not going to go over very well.
> We need to stop treating housing as a speculative asset.
Something I've been yelling from the rooftops.
Housing can either be affordable, or it can be an investment that's bought, rented, and sold for the sole purpose of profit. It's not possible for it to be both.
People expect their house to appreciate faster than inflation, but all that does is rob the next generation of home ownership.
I think the idea is that if the market demand is such that it allows them to raise rents, they'd already have done it, whether or not expenses justify it.
So what happens then? High enough property taxes could in theory result in a situation like Detroit where the land value drops so low that properties are abandoned, with no buyers. But that seems unlikely in California?
At less of an extreme, there are still buyers, but they offer less money so they can still make a profit. So, the property tax basically comes out of land values. The current owners lose money on the property. It's the opposite of the windfall profits that California property owners have gotten from rising land values, taken out of whoever owns the land now.
For the next owner, their mortgage expense is lower, their property tax is higher, and maybe rents and profit margins stay about the same.
Notice that if the demand is there, falling land values doesn't result in lower rents. If your complaint is that the rent is too damn high, higher property taxes won't fix it. Only more housing does that.
I'm a bit skeptical that it would really work out that way. In California, we can have the odd situation where the current owner pays low property taxes, the new owner will pay higher property taxes, and yet property prices get bid up, and whoever buys it has to pay both more property tax and a higher mortgage. But they can still afford it, because there are a lot of rich people out there.
It won't grind to a halt. The owner will sell, because they can't make the business work.
At what price will they sell? At whatever price a buyer who thinks will make it work. And by "work" there are many definitions, from continuing operation at current rents, to building more units on the land so that it generates enough income to pay the tax.
Land value taxes shift tax burden away from productive use of land and on to unproductive uses of land. The people who pay more are land speculators and those with empty lots, and the people who pay less are those productively using the land, which is 99% of homeowners and businesses.
Yeah, that's unlikely. There are certain classes of renters it can't be passed on to during their rental term, but I'm guessing it can and likely would in general.
People can also sell their land/homes and move. It's less liquid than other assets, but less doesn't mean people won't sell/leave.
In Massachusetts it’s legal to pass on real property tax increases during the term of a residential lease, provided the lease contains specific clauses. (Most leases do, as a result.) And most commercial leases are triple-net, meaning the tenant is also on the hook for increases.
I would be surprised if most land consumption taxes (whether structured as property or land) would not get directly passed through to the beneficial consumers of that land quite quickly, or for their privilege to consume that land to be terminated/non-renewed at the expiration.
One of the benefits of a land value tax is that it has zero dead weight loss: because there's a fixed supply of land, the tax won't cause less of it to be around, and you don't lose out on the beneficial transactions that property tax can prevent.
There are several key benefits. My primary concern is that there are generally no market comparables for undeveloped land in developed areas.
If I believe it’s over-stated, I can appeal my property tax assessment by using comparables for nearby developed property. There is no equivalent market-based process for land values alone.
In California some percentage of certain developments need to be rental controlled, so those are exempt from increases for those lower income folks, but I'm sure the difference would be spread out among everyone who isn't rent controlled.
I hope we agree that we need more taxes, it doesn't matter if they are taxes on billionaires, taxes on property, taxes on sales, taxes on crypto, or taxes on the poor. Without taxes we can't have a civilized society.
The number of different taxes is constantly increasing, obfuscating the total tax burden, and making democratic accountability almost impossible. Additionally, tax collections are already at a historical high, while government deficits world-wide are also at record levels, with services on the decline, and no realistic prospect of balancing budgets. This is true for most western countries.
Given the current situation, I do not agree that "we need more taxes", but would welcome your clarifying exactly what you mean.
For a long time I agreed with you, but seeing how the tax money is spent I cannot agree any longer. In most cases government is no longer even spending the money itself, instead it is giving the money to NGOs.
I would much rather see people keep more of their dollars and use them to 'vote' for the products and services that benefit them most, via their purchases.
It would be interesting to run the counter-factual on the EPA. Lawsuits around pollution were already increasing significantly prior to the EPA even company vs. company.
Would the resources have been better spent on a more efficient legal system, then leverage that?
Taxes aren’t 0 right now, nor particularly close for anyone being taxed. Your statement supports taxes as a concept at all, but what’s the specific argument that they must be more than they are today?
I think we should start with changing taxes on corporations/companies, specifically being able to indefinitely write off expenses against income regardless of size/etc...
Most companies take profit eventually, but if it's possible for a company to decide to never take profit and grow/acquire perpetually without paying any taxes on gross income, that's a problem.
That'd be like individuals being able to deduct living expenses and having uncapped pre-tax 401k contributions.
The ratio of the economy that gets collected as taxes has only gone up over time. Do you have an idea for how much should be collected as some ideal ratio? At what point do the effects of taxation become counterproductive?
Well, the general economic consensus is that for income taxes, the revenue-maximizing peak of the Laffer curve is around 65-70% [1]. Revenue maximization isn't necessarily the right primary goal, though.
The effectiveness of other taxes aside, the argument that billionaires will leave if taxed at a higher rate isn't compelling.
Billionaires are not struggling to meet their expenses. If you raise their taxes, they aren't suddenly unable to afford things. They don't need to change their behavior just to get by. A carbon tax forces average people to drive less, but doesn't affect billionaires at all.
Billionaires live where they want to because they can afford to. They're not going to let themselves be chased from jurisdiction to jurisdiction because of numbers that have zero impact on their daily lives. That's what happens to poor people. If California raises taxes on Billionaires, very few will actually leave. They're where they want to be and they can afford to stay there. What's the point of having a really big number in your bank account if you have to move to the middle of nowhere in Alabama to keep it that high?
Land, as apposed to the property on it, is raw nature. If we view raw nature as a common inheritance of mankind, then paying a tax on land is how the exclusionary use of it, balances with the common interest in it.
Economist Henry George in the 1800's, pointed out that taxing land, but not the property on it, incentivizes efficient use of land, because holding land for its passive (parasitic) return even when underused, becomes unprofitable when the land is taxed in proportion to the value it can enable.
And in turn, only taxing land, not property, incentivizes increased development, as higher property investment amortizes land tax against higher returns.
So many things align for higher growth in ways that more evenly benefit everyone. But our relationship with land is over-complicated, and that is both the reason for change, but the reason change is so hard.
Small attempts have failed, but then, for the rich who can hold land and reap growth in value that outpaces the taxes they pay on it, that remains another tilted economic success.
> The land value tax can’t be dodged by leaving nor can it be passed on to renters.
In what sense can't it be passed to renters? Esp if all landlords in the market were faced with a new land tax that they had not previously planned for, why would it not be passed on?
Rent is a function of supply and demand, not a landlord's costs, otherwise we would expect changes in e.g. mortgage interest costs to be passed on to, but in practice we don't see this effect. We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
> otherwise we would expect changes in e.g. mortgage interest costs to be passed on
These aren't a universal cost. When rates change, some landlords' costs go up. But some don't. That lets the latter set the marginal price.
If everyone's costs go up the same amount, it's collusion without communication. In an inelastic market like San Francisco's, you'd expect prices to rise.
Landlord costs impact supply.
If mortgage expenses go down and property tax expenses go up, it's basically a wash.
But for that to happen, land values need to go down. Landlords need to bid less.
Of housing, but not of land.
Rents are already as high as renters can bear. If a tax is introduced, you'd expect landlord competition to drive down the landlord margins, not increase rents.
And if margins are decreased, then... (what happens to new supply?)
That cost will, of course, be passed on to renters unless the rental prices cannot be raised at all.
If they can't be raised, and the costs end up being ruinous to the landlords, they will find other solutions like mass arson. That isn't hyperbole; this was a serious problem in the 1970s: https://en.wikipedia.org/wiki/1970s_South_Bronx_building_fir...
That was obviously not acceptable... but it was predictable.
All legal proposals should be viewed like a chess move. Presume others will respond, and make sure you're ok with that response.
That’s one of the ideas of LVT actually: building apartments in land doesn’t increase tax burden, burning the apartments doesn’t lower it
Feel free to quote in the article what supports your summary given the article doesn't actually talk about that
In fact it mentions insurance fraud as the cause...
Additionally it certainly wasn't increasing cost but reduced income which is a very different issue
Yeah. Arson-induced insurance fraud. Hope this helps.
> they will find other solutions like mass arson.
Or the more likely option is they will no longer do investment properties as the return it too low vs the risk.
It is quite disingenuous to attribute the South Bronx fires as a result of landlords unable to raise rental prices. I mean that is technically true, but your comment makes it sound like it was a result of a particular legal proposal. It was not. It was a period of urban decay in NYC and many cities in the United States. It was the continuation of white flight into suburbs that started in earlier decades. It was a large demographic change with complex causes.
Arson would be irrelevant for land taxes.
If landlords can already raise the price of rent, why haven’t they?
This is the problem with governments who think they can synthesize value. They think all businesses can too.
If these communists succeed, they will use the very fact that a landlord cannot synthesize money to prove the landlord passed the cost to the tenant and seize the land.
LVT is incoherent, it pretty much only benefits people who are cash rich and land poor. Which is why it gets so much oxygen from tech elites with lots of cash and an inability to buy a house somewhere like mill valley, or wherever.
Essentially taken to the logical conclusion, there will be people competing for more cash to pay their increasing taxes on the same land, it doesn't fundamentally solve the problem. It's such a joke.
It completely solves the problem. I recommend you read “progress and poverty” to get a better understanding of it.
You don’t seem to understand how it works or what it does.
The idea is that valuable land will be utilized better.
"utilized better" in that context just means that the owner of the land can support the taxes on it, it doesn't mean suddenly we are going to put skyscrapers in el cerrito.
Wealth taxes are a symptom of a broken tax system. If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
> If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system
This is to once again mistake net worth for money. Net worth is not real. It is not a good measure of the money someone may be able to realise. They do not have hundreds of billions. There is nothing to tax until they sell some shares.
The actual mistake is pretending like they can't leverage those shares to access fiat, for example securities-backed loans. The proceeds aren't taxable income, the bank gets its interest, and the latter is typically substantially cheaper than realizing the shares and paying capital gains tax. Meanwhile, they keep the assets, which on average continue appreciating.
It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes. If "net worth is not real" neither is equity in real estate.
> It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes.
I don't like property taxes either, and at minimum would rather they were called something else, and preferably replaced with per-service charges where possible.
But either way they exist to pay for things, and not to just degrade the value of your property simply because you worked to own it.
The only reason it works with real estate is because they can put a lien on the house and block the sale of it. They don't have any useful mechanism to stop the sale of a share of stock, but since the government is involved in the transfer (due to the registering of the new house deed) of a house, they can stop that one.
Exactly... that's why sales tax and VAT don't exist anywhere -- because there's no way to stop the purchase of goods or services.
> They don't have any useful mechanism to stop the sale of a share of stock
The SEC exists. As do many other mechanisms by which the government regulates direct and brokered securities trades and sales. You can make the case that some of those controls are poorly/ineffectively implemented, but you can’t claim that it’s not something the government routinely regulates, intervenes in, and sometimes prohibits outright.
Why can't govt block the sale of stocks? It's not like you would be selling non digitalized assets, govts often freeze and reverse stock sales/trades when they find it to be illegal already.
It's harder for private companies sure, but who will stand in the way of govts if they said we will sanction your if you buy X or Y company?
This entire argument doesn't really hold IMHO
The main reason real estate taxes work so well is that tax evasion is very difficult.
Because the building is standing right where it is, in the open, lit by the sun every day. If you don't pay your tax, the government can just take it.
This compensates for the several philosophical and moral problems with it, and I've seen several economists declare it the best form of taxation there is.
People absolutely make that argument about property taxes. That's where deferrals or abatements for e.g. elderly or low-income homeowners, or caps on property tax increases come from. Someone may own a home that property taxes price them out of, forcing them to leave their community because they can't actually conjure money from a higher priced home.
I think a lot of tax authorities also don't reassess that regularly without a sale, so it also kind of ends up baked in that if you didn't pay that much for the property, it's only theoretically worth that much.
Predatory property taxes were a part of how so many black American farmers lost their land: https://archive.is/exkhR
If I sell my house, there's a reasonable expected range of money I can expect for it.
If a majority stock holder in a company sells all of their stock, the price first the first share sold is likely going to be completely different (and substantially less!) than the last share sold.
It's like saying cash isn't real until you spend it. Which is true in one sense but not what they mean.
That’s just a decision we made about what is taxable.
Purely an accounting artifact. We can pass a wealth tax tomorrow and it’ll suddenly be taxable.
Net worth is real money, and is usually a very accurate measure of what people can realize. There are a few outliers who own so much that they’d move the market if they sold it all. Selling 2% to cover taxes? Not going to move the market very much.
> Net worth is not real.
Good way to find out it this is the case: take it away. Not real, right? Why would they mind?
There is no way to take anything like that. Net worth is quite similar with me saying you are worth 1 billion dollars, but you have zero money in the bank. What do you take, super-rich billionaire person?
Why not? Net worth is the estimated sell value of a list of assets. It is entirely possible to take those assets. Why would it even be a little difficult, let alone impossible?
And certainly ceejayoz was being a bit glib by suggesting we take all of it, but it would not be remotely insurmountable to tax billionaire wealth.
The net worth is simply the sum of assets minus the sum of liabilities. Take away the assets and you take away the net worth. I can't think of an asset category that you can't transfer if you are willing to sacrifice its value (which presumably doesn't matter, because it's not real anyways)
In the rare cases where contract law makes the transfer impossible legally the government could trivially step in to make it possible
You take control of the shares and distribute the proceeds and make it impossible to leverage them for loans, credit etc.
Is it Zuck's networth or salary that makes it possible for him to own his ranch in Hawaii?
Because that would involve seizing assets? The parent meant it's not "real" in the simple-minded sense that people think it is: the average person imagines Elon Musk and other billionaires have a checking account that keeps increasing by tens of thousands of dollars per second because that's the only frame of reference they have. The reality is the wealth is mostly tied up in assets that ain't exactly liquid. Yes yes, they apparently have access to this supposed infinite money glitch where banks will endlessly loan them money without requiring interest payments (which would require liquidating assets for payment and therefore triggering a taxable event, the very thing people think never happens for billionaires). But the fact of the matter is the wealth isn't money in a bank, and therefore not "real" in the sense the parent was referring to. But it is at the same time something they would miss if it was just "taken away", much the same way you'd miss the numbers in your 401k if voters decided you had a few too many millions saved up for retirement.
> Because that would involve seizing assets?
Oh, are those real now?
You are ignoring the most common approach, borrow against the asset. In that case the sufficient assets turn into essentially unlimited untaxed cashflow. Especially with how the market has been lately, the gains erase any burden of the loan. Sounds like a broken tax system to me.
So why isn't the suggestion to tax the loan instead of the asset (that is 10x more volatile than say property)?
That may be a perfectly viable solution. Seems like an easier path to me, at least. But the point is that these assets are a lot more fungible than you imply.
> It is not a good measure of the money someone may be able to realise.
And as such, when you get into the higher ranges, net worth is quite a good indicator.
Try this - go to a bank and say “I’d like to borrow money using my 401k/Roth IRA as collateral. If I fall behind in payments you can liquidate the entire thing, including penalties, and make yourself whole.”
You’d think they’d jump over each other to lend money against such a stable, secure asset right?
Except they’ll say “sorry, this isn’t allowed. IRS treats borrowing against an untaxed retirement account as an early withdrawal, even if the asset itself stays untouched.”
Turns out the government fully understands the concepts of stocks, gains, unrealized net worth and more, and has laws on the books to make sure you are being taxed appropriately for them.
Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth. Because it’s “paper money”. It doesn’t exist. There’s nothing to tax. Just cannot be done, or it’ll bend the laws of spacetime.
Your 401k/Roth IRA (subtracting early withdrawal penalty) literally do count when considering qualifying income for a conventional mortgage. This is not a taxable event. It's just standard procedure for loans.
Incredibly terrible example because you are allowed to borrow money against a 401k, up to $50000 with no penalties as long as you pay yourself back at whatever schedule you have determined for yourself
Another thing with taxing unrealized gains is that no one in the government is willing to return any money if the unrealized losses happened. Somehow it's all hunky-dory when someone loses 1M in stock value, but as soon as someone's stock went up 1M they all want to tax it right away.
I’d be willing to take some of the “not real” money.
I dont know why it's so complicated to just say "Money is Money when it's Liquid, tax it then". Any loans on wealth should be taxed..nationwide.
But even in California's case this doesn't feel like anything anybody would object to. Given how much California Billionaires liquidate using loans on their wealth, I bet, they could do a middle class tax cut too to offset it a little bit too.
I am little baffled as to why the politicos haven't latched on to this whole-heartedly. You can still proudly say you're taxing Billionaire wealth. Because you are! Just more sensibly.
Simply let them pay the tax with shares. Problem solved!
Well one thing is, they'd sell shares to pay the taxes. Then dilute their own ownership of the thing (Tesla, Amazon) and it would serve as another form of wealth distribution.
Absolutely ridiculous statement, it's not an accurate measure but it's definitely a good measure of money.
If you have 100B to your name even if it's post IPO stock in a possibly ponzi company that's your current wealth and you can easily convert a staggering portion of it into material realized wealth depending on several factors.
If I use cash to buy 1B dollars in Microsoft shares today, am I not worth a Billion dollars...?
The value may not be exactly convertible agreed so let's just force everyone to book all gains every year, and force sell a net percent of your share.
Not 100B$ of share, but 2% of 100 Million units of stock that you own. Why does this not work?
If I take 2% of your shares why can't it work the same way? I can then pick and sell it over the next year or two however I see fit, in case of govt they can slowly sell back this share to not affect the prices too much.
I am baffled by the fact that we have a tractible quantity and people call it hard to use to measure money.
Paintings, Jewels, etc. are what's truly the hard part of the wealth equation not the stocks, which is over 99% of what a wealthy billionaire owns.
I am not even considering pro or against taxes on billions people make but it's ridiculous to say stocks aren't money? Then what is money really... Currency is also traded, it's value can also go up or down....
I hate this argument.
Would you rather have 1M dollars in cash or 10B in stock that you can't sell?
Depends -- can I use the 10B as collateral?
Nah, just make them pay taxes when it's valued as collateral and it's over a certain amount. Anyone saying you can't do that is lying to you.
Larry Page owns about 5% of Alphabet, which is worth $4T, so he has $200B give or take. Which part of that do you think reflects a "broken tax system"? Companies should get kneecapped if their market cap gets too high? Founders shouldn't be allowed to keep even a single digit percent of the company?
The broken part is that there is third world-level poverty on the streets outside Google’s offices, working class people cannot afford to live in the Bay Area, and a fifth of California lives in poverty.
I agree that that's the major problem; the poverty is inexcusable. But that's not caused by the $300B (or whatever) of equity. It's caused because the homeowners of the Bay Area decided that once they got a house, nobody else should, and that they should get to exclude others from the opportunities they had.
This same thing was observed during the Gold Rush in California in the 1800s; extreme wealth also resulted in extreme poverty. And there's a great way to solve this: tax the land and redistribute it equally to everyone. Land can't be moved, it's something that belongs to all of us, and you can't make more of it.
This is almost completely traceable to Californians' failure to allow sufficiently dense housing to be built on their doorsteps. The only thing Larry did was bring prosperity to the region.
(I'm in agreement with the thesis of the article)
More taxes should solve that.
Read somewhere that SF spends roughly 50k$-80k$ per homeless person per year.
Taxing more doesn't solve a massively inefficient system at it's core. Just like US education, we spend more than any country on earth, why is it still bad?
Answering that question with a "if only we had more money" is a really poor argument. The CA tax fundamentals are bad, pooring more cash onto the fire will not fix that.
Sure. A lot of that money doesn't even make it to intended recipients because of corporate welfare and inefficiencies in government.
https://youtu.be/YKAD7l1a9hc
In addition, there should probably be changes to laws/regulations to address companies that exploit the poorest.
https://youtu.be/U9Rls-_7LdQ
And, many people who are poor have persistent mental/physical disabilities, so part of that spending is because many of these people have it the hardest.
With that said, we could likely fix all of these things and significantly unequal wealth distribution would still result in a lot of poverty.
I think it's hitting 96k per homeless person a year now. But yes, it's the tax system's fault.
If money isn't solving the problem, you're just not using enough.
You can't solve a shortage with demand subsidies. You need to expand supply. SF has too little housing relative to its population, and has perennially tried throwing money at the nonprofit industrial complex which has (obviously) perennially failed to solve the problem because it doesn't generate new housing units, it just bids up and reshuffles the existing ones (and steals a lot of money in the process).
This has basically nothing to do with with market cap of Google or Larry Page's percentage ownership of it; and the state government taxing it more will not make this situation any better.
that has ZERO to do with the tax system... You can't be serious? Have you looked at the data at all? have you seen how much money is spent "combatting" homelessness in San Francisco?
The part where he has access to essentially unlimited untaxed cashflow by borrowing against that asset. Especially with how the market has been lately, the gains erase any burden of the loan. Something has be done about this, at least. Otherwise broken sounds about right.
Larry has sold tons of Alphabet stock and paid lots of capital gains taxes. This is easily available public information. The whole buy-borrow-die thing is sort of a stupid myth. Actual centibillionaires diversify because the risk of having a huge concentrated position is much greater than the liability of having to pay some capital gains taxes.
Yes. No one person should have assets worth as much as the GDP of Qatar.
Sure, yeah, but which of the two numbers I was multiplying together is, in your mind, too big, and should be made smaller, and by what mechanism?
> Companies should get kneecapped if their market cap gets too high?
Yes. They should be broken up because competition is good for consumers and society. If we had functional anti-trust enforcement Google would not have a near-monopoly on search ads where they own both the ad inventory and the marketplace where you have to buy those placements.
Then you'd have two (or three, or four) companies that Larry owns 5% each of that are collectively worth $4T.
Yes perhaps there should be wealth caps. Did Larry Page really do 5% of all that labor that made google as big as it is? And should a single company get so big and have so much power? Yes, I get that they took risks and invested early, and we shouldn't take away that type of incentive, but perhaps it should have caps, or an S curve tax schedule.
Google doesn't have much power. It can't arrest you or pass laws or vote. It just happens to produce a lot of profits for its shareholders (who are, overwhelmingly, average people with 401Ks) and a lot of profits means a big market cap.
If we need revenue to fund useful government programs, great, let's tax Larry. But I don't understand what problem is solved by expropriation qua expropriation.
This fundamentally misunderstands how this paper wealth actually works.
> it’s already too late.
Absolutely not. 100% you can take it.
If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
It's only too late if you're timid and wimpy.
And care about the rule of law. You cannot pass retroactive laws, you cannot pass laws that target individual people. If you pass a general law (which could very well have reasonable objections), people have to have a chance to leave.
"I'm passing this law that is effective the exact millisecond I sign it, tough shit if you don't like it" is tyranny and despotism. But based on your comment I think you know that.
> And care about the rule of law. You cannot pass retroactive laws, you cannot pass laws that target individual people. If you pass a general law...
A wealth tax is not a retroactive law, nor something that targets an individual person. It's a "general law" in your parlance. Think about it.
> If you pass a general law (which could very well have reasonable objections), people have to have a chance to leave.
I don't think so. By what legal authority is that required?
> "I'm passing this law that is effective the exact millisecond I sign it, tough shit if you don't like it" is tyranny and despotism. But based on your comment I think you know that.
No, it's not, and don't be ridiculous. When they passed laws against date-rape, would you have judged it "tyranny and despotism" unless the law was delayed to give the date-rapers time to finish up the date-rapes they'd planned?
There's no justice in giving the wealthy the maximum opportunity to pick and choose the laws that apply to them.
The richest people in the world sure are lucky to have good people like you out here fighting to protect their rights
the FTB is anything but timid and wimpy
if the voters and legislature have the “bravery” to pass the wealth tax law, it will be aggressively enforced by the FTB
the second-order effects, whatever they may be, would be clearly visible within a couple years.
Or if people can easily move. Or if you want the next generation of startups to operate in your state.
If the $100B+ was created through ownership of a company and is unrealized wealth, how would you have taxed it if not through a wealth tax? Nobody is getting to $100B by way of income.
I agree the proposed wealth tax is a bad idea, but raising property taxes is probably not viable. They are incredibly unfavorable to voters. No one who owns a home wants to pay rent, that's why you buy in the first place.
Personally, this is why I am fine with higher income or sales taxes.
Sales Taxes are the worst ones. Burden on seller, burden on buyer, regressive. Income is more fair but easy to mask-out for the wealthy. Property is meh, Wealth tax is the best one. Assuming all were well designed.
why is it a burden when they are already collecting sales tax? They just change one number but nothing else changes.
Some items taxable, some are not. Keep track. Some have different rates depending on who's buying, keep track. Buyers in different locations pay different rates, keep track. The rules change frequently, keep track. Collect money for the govt, keep track. Remit quarterly or face penalty.
There complexity and overhead on sales taxes; more than on an income, retained earnings or wealth taxes.
Also, sales taxes take more percent of wealth away from the lower wealth bracket than from the upper wealth bracket.
Man discovers prop 13. News at 9.
Whats wild is the commercial side didn’t get closed. I understand the argument for individuals or households (I don’t love it - I’m on the wrong side of it, but at least it’s somewhat defensible), but if you’re running a business and your income isn’t keeping up with inflation, that’s called failing.
And it will never be repealed.
Old voters like the house they brought 20 years ago for 100k being worth 1.5 million today. They also like not paying taxes on that 1.4m in wealth accumulation.
Is it not that the gains are unrealized? If they sold the house they would pay capital gains tax?
I'm not a finance person but I think capital gains kicks in if you sell early. Otherwise, just regular taxes?
opposite, income taxes take place first. after a waiting period, its just capital gains. capital gains taxes are typically lower than income taxes so this encourage long term holding
Property taxes are unrelated to income tax
I think not wanting to pay some yearly tax on that $1.4 million because the government pretends that the same as having $1.4M cash in the bank, or making $1.4M in a year, is fine.
Not wanting to pay the property taxes associated with a $1.5M home is the problem.
Which is why we also have things like a deferred property tax program! The way to "solve" the problems Prop 13 addresses would be to expand programs like that, but homeowners—disproportionately active middle- and upper-middle-class voters—want to have their cake and eat it too.
what reasonable persons wants to pay taxes? Just because you like to pay extra doesn't me we should.
I mean, I do too. Mine just happens to have been bought before the last inflationary cycle.
But let's be clear: Prop 13 is bad and is holding down property taxes on both commercial and residential land.
But neglects to consider why it won a majority of votes. Why did it? And how does Prop 13 relate to the more recent Prop 19, which substantially weakened it?
> News at 9.
The idiom is "film at 11."
> [C]ritics estimate the lost revenue would have to be made up by roughly doubling the state sales tax
It is possible to just ... stop spending ...
just make it federal, bump it to 20%, permanent, each year over shares they own... then they will still pay 20% less than the other 90% of USA
Coveting is a terrible basis for an economic system.
https://www.pangram.com/history/afa0fd9b-eeae-49d0-932a-24b8...
This is mostly slop. Don’t waste your time.
If the tax is calculated based on residency at the time it was earned or granted rather than when it vested or was sold then it doesn’t matter if they leave.
So they're dealing with the problem the rest of the country has been dealing with since everyone started wanting to move to California?
It's the single taxers again, with a new argument.
I'm not a single taxer.
"I'm livin' to keep warm, you livin' to pay rent [...] Bitch, I made my moves with shackled feet"
- some Kendrick guy
Narrator: Kendrick’s feet were never shackled.
I think the point of the article is correct; the issue with CA is everyone wants to live there, including rich people. If we try and tax them then they'll leave just long enough to not pay state income tax, if we tax property values then the state actually gets the tax and doesn't miss out on job creation or future revenue.
Red states have implemented low income tax with heavy property taxes (think Texas) with great results. and although I'm sure California would just manage to mess it up it's a great idea.
Two things:
1. If wealth was only motivated by taxes and was going to leave, it would've left already. Fact is, billionaires don't want to live in Tennessee;
2. Nobody is doing the right thing to tackle any of this, including California.
The article mentions California has land and that's the key point. Unfortunately, California homeowners have been coopted into voting against their own interests to raise property values. If the house you bought in SF in 1975 for $80,000 is now worth $3M, you still only own 1 housing unit's worth of wealth. And that housing cost is an input into everything you need to buy because all the workers required for those things have to be paid high enough to pay those exorbitant rents.
Let me repeat that: high housing costs are an input into everything that you buy.
So what needs to happen? We need to stop treating housing as a speculative asset. It's simply stealing from the next generation. Worse, it's diverting investment capital from productive output because land has become the asset with the best tax treatment, highest returns and most government protections. So what does this look like?
1. Some form of land value tax. The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable;
2. Punitively tax land hoarding including second homes. We could give discounted rates to primary residences of state residents. Nobody else should get a discount. This would mean repealing Prop 13 and that's never going to happen. As an example of this, I'll bring up Prop 19. In CA you can inherit a preferential property tax rate. Prop 19 proposed to limit this to only one property could inherit this preferential rate and it barely passed (51% IIRC). Do we think that 49% of California voters have multiple properties that have property tax rates set 40+ years ago? Of course they don't. It's an example of how people vote against their own interests;
3. Part of what sold Prop 13 originally was the idea of pushing seniors out of their homes with property taxes. Well, that gave Disneyland a tax rate that was set in the 1960s. California should do what Texas does: you can defer your property taxes until you die if you're a senior but there's no capped property tax rates like incumbent SF residents have and no inherited preferential property tax rates;
4. Wind back the preferential collateralization of property for mortgage debt over time. Residential property lending now dominates bank lending and earnings. It's significantly harder to get finance for any form of productive output;
5. Wind back over time preferential tax treatment for home ownership.
Do I think any of this will happen? No.
Oh, one of the worst things to do is transaction taxes, often called stamp duty. This is where you pay a percentage of the value on purchase. This really hurts mobility. I guess it's fine if it's only on the luxury end of the market (CA's is at $5M+?) but it's not a good idea regardless.
The other part of this is to provide social housing like Vienna. The government should be a significant supplier of affordable quality housing.
> We need to stop treating housing as a speculative asset.
This kind of assumes the only reason a house appreciates in value is because people are "treating it as an asset" rather than "the house I bought 30 years ago in the middle of nowhere is now smack dab in the middle of a very desirable area." At that point it's simple supply and demand, not some homeowner being greedy.
> The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable
This makes the fatal assumption that just because a house is worth dramatically more than what you paid for it many years ago that your income must have risen just as dramatically. "Oh well, too bad, sell your house and deal with it." Maybe people kind of like living where they've put down roots and don't want to be punished for something outside of their control? Any proposal that boils down to "pay more or fuck off" is not going to go over very well.
> We need to stop treating housing as a speculative asset.
Something I've been yelling from the rooftops.
Housing can either be affordable, or it can be an investment that's bought, rented, and sold for the sole purpose of profit. It's not possible for it to be both.
People expect their house to appreciate faster than inflation, but all that does is rob the next generation of home ownership.
Many, many years ago multiple generations would live in one home that may have even been built by a generation that is long dead.
>. The land value tax can’t be dodged by leaving nor can it be passed on to renters
ROFL what? I'd bet the author a lot of money that costs WILL roll downhill, the source matters not.
I think the idea is that if the market demand is such that it allows them to raise rents, they'd already have done it, whether or not expenses justify it.
If they can't raise rents to cover expenses plus "enough profit to make this PITA worth it" then things (slowly over time) grind to a halt.
So what happens then? High enough property taxes could in theory result in a situation like Detroit where the land value drops so low that properties are abandoned, with no buyers. But that seems unlikely in California?
At less of an extreme, there are still buyers, but they offer less money so they can still make a profit. So, the property tax basically comes out of land values. The current owners lose money on the property. It's the opposite of the windfall profits that California property owners have gotten from rising land values, taken out of whoever owns the land now.
For the next owner, their mortgage expense is lower, their property tax is higher, and maybe rents and profit margins stay about the same.
Notice that if the demand is there, falling land values doesn't result in lower rents. If your complaint is that the rent is too damn high, higher property taxes won't fix it. Only more housing does that.
I'm a bit skeptical that it would really work out that way. In California, we can have the odd situation where the current owner pays low property taxes, the new owner will pay higher property taxes, and yet property prices get bid up, and whoever buys it has to pay both more property tax and a higher mortgage. But they can still afford it, because there are a lot of rich people out there.
It won't grind to a halt. The owner will sell, because they can't make the business work.
At what price will they sell? At whatever price a buyer who thinks will make it work. And by "work" there are many definitions, from continuing operation at current rents, to building more units on the land so that it generates enough income to pay the tax.
Land value taxes shift tax burden away from productive use of land and on to unproductive uses of land. The people who pay more are land speculators and those with empty lots, and the people who pay less are those productively using the land, which is 99% of homeowners and businesses.
Economists for generations have agreed a land value tax is the least prone to this problem. You might want to take it up with Adam Smith.
Yeah, that's unlikely. There are certain classes of renters it can't be passed on to during their rental term, but I'm guessing it can and likely would in general.
People can also sell their land/homes and move. It's less liquid than other assets, but less doesn't mean people won't sell/leave.
In Massachusetts it’s legal to pass on real property tax increases during the term of a residential lease, provided the lease contains specific clauses. (Most leases do, as a result.) And most commercial leases are triple-net, meaning the tenant is also on the hook for increases.
I would be surprised if most land consumption taxes (whether structured as property or land) would not get directly passed through to the beneficial consumers of that land quite quickly, or for their privilege to consume that land to be terminated/non-renewed at the expiration.
One of the benefits of a land value tax is that it has zero dead weight loss: because there's a fixed supply of land, the tax won't cause less of it to be around, and you don't lose out on the beneficial transactions that property tax can prevent.
There are several key benefits. My primary concern is that there are generally no market comparables for undeveloped land in developed areas.
If I believe it’s over-stated, I can appeal my property tax assessment by using comparables for nearby developed property. There is no equivalent market-based process for land values alone.
In California some percentage of certain developments need to be rental controlled, so those are exempt from increases for those lower income folks, but I'm sure the difference would be spread out among everyone who isn't rent controlled.
I'm curious what costs you think will roll downhill and why
ohh look. a billionaire shill
I ctrl+f search for "gentrification" and nothing pops up. I close the Substack blog and proceed with my day.
why is that?
I hope we agree that we need more taxes, it doesn't matter if they are taxes on billionaires, taxes on property, taxes on sales, taxes on crypto, or taxes on the poor. Without taxes we can't have a civilized society.
The number of different taxes is constantly increasing, obfuscating the total tax burden, and making democratic accountability almost impossible. Additionally, tax collections are already at a historical high, while government deficits world-wide are also at record levels, with services on the decline, and no realistic prospect of balancing budgets. This is true for most western countries.
Given the current situation, I do not agree that "we need more taxes", but would welcome your clarifying exactly what you mean.
For a long time I agreed with you, but seeing how the tax money is spent I cannot agree any longer. In most cases government is no longer even spending the money itself, instead it is giving the money to NGOs.
I would much rather see people keep more of their dollars and use them to 'vote' for the products and services that benefit them most, via their purchases.
I’ve long thought if you doubled tax revenue or halved it the public services rendered would be the same. Tax revenue is not the problem.
How much of California's budget is "giving the money to NGOs"?
Congragulations you have just rediscovered conservatism.
…and how to never have any large infrastructure projects like highways or just services that run at a loss while being essential like the EPA
It would be interesting to run the counter-factual on the EPA. Lawsuits around pollution were already increasing significantly prior to the EPA even company vs. company.
Would the resources have been better spent on a more efficient legal system, then leverage that?
*Disclaimer: This definition not valid in American politics, consult your doctor before self-labeling.
Taxes aren’t 0 right now, nor particularly close for anyone being taxed. Your statement supports taxes as a concept at all, but what’s the specific argument that they must be more than they are today?
No thanks, I too much in taxes as it is. California has a spending problem, not a revenue problem.
Spending problem? What spending problem?
https://www.smartcitiesdive.com/news/california-high-speed-r...
I think we should start with changing taxes on corporations/companies, specifically being able to indefinitely write off expenses against income regardless of size/etc...
Most companies take profit eventually, but if it's possible for a company to decide to never take profit and grow/acquire perpetually without paying any taxes on gross income, that's a problem.
That'd be like individuals being able to deduct living expenses and having uncapped pre-tax 401k contributions.
this is the sadest assertion i've ever seen. if sucking the life out of people is the only way people can remain civilized then we are truely lost.
How else are we going to support public infrastructure and society?
More efficiency in spending? We have newer tools and equipment, technology, automation etc. Do more with less, that is called productivity.
The ratio of the economy that gets collected as taxes has only gone up over time. Do you have an idea for how much should be collected as some ideal ratio? At what point do the effects of taxation become counterproductive?
Well, the general economic consensus is that for income taxes, the revenue-maximizing peak of the Laffer curve is around 65-70% [1]. Revenue maximization isn't necessarily the right primary goal, though.
[1] https://en.wikipedia.org/wiki/Laffer_curve#Income_tax_rate_a...
haha. did you say taxes on the poor? I'd like to see you implement that.