The Middle-Class Squeeze • Hacker News Board

Re: The Middle-Class Squeeze

#21

Post by go1979 » Sun, Sep 27, 2015, 1:56 AM UTC

euroclydon wrote: post #5

prostoalex wrote: post #2

A lot of the ails mentioned in the article seem to arise from Western societies' preference on income taxation vs property taxation. Low property taxes force the governments to finance its expenditures mainly through sales and income taxes. The former are optional, the latter happen to penalize those who elect to participate in the workforce (which large property owners can safely sit out).

Property taxes also punish retired people. When your wages disappear after retirement, it's a lot more difficult to pay the taxes on your home.

The recent run up in property prices in most major western cities makes me think the home owning class isn't in too bad of a shape. If you own a house in Vancouver, the Bay area, Toronto, London etc. you basically won the lottery. If you are a young adult, well ... hope your parents help you out?

My parents were immigrants and not savvy enough to buy a house. I'm wondering how I can ever afford a 200K down payment on a million dollar house, and if that is in any way a reasonable idea. Taxing income is the wrong approach since people getting income are contributing to society. The lottery winners who happened to own houses in the right place .. I'm not sure what they contributed.

Re: The Middle-Class Squeeze

#22

Post by themartorana » Sun, Sep 27, 2015, 1:59 AM UTC

djrobstep wrote: post #11

prostoalex wrote: post #2

A lot of the ails mentioned in the article seem to arise from Western societies' preference on income taxation vs property taxation. Low property taxes force the governments to finance its expenditures mainly through sales and income taxes. The former are optional, the latter happen to penalize those who elect to participate in the workforce (which large property owners can safely sit out).

Absolutely. What would be great is a high land value tax, used to fund a basic income and/or lower income taxes. It would help fix inequality, reward hard work, punish idle land rentiers and punish urban sprawl, all at the same time. What's not to like?

Property taxes? I'm not a fan of the idea that the property I "own" is basically just the right to rent it from the government. There's no true land-ownership anymore. Also, as noted above, property taxes can be a huge burden on those retired/on a fixed income.

Not to mention, property taxes fluctuate wildly and are incredibly hard to predict and plan for. "Reassessments" happen randomly, seem to be applied haphazardly/unequally (see Philadelphia for a recent example) and can in a few short years move home ownership from affordable to unaffordable for the same person with an unchanging situation.

It's hardly a silver bullet. You can never actually pay off a piece of property.

Re: The Middle-Class Squeeze

#23

Post by kasey_junk » Sun, Sep 27, 2015, 2:06 AM UTC

ppereira wrote: post #10

bluedevil2k wrote: post #3

Earlier quoted context omitted.

Property taxes are the most regressive form of taxation there is - it actually punishes good investments. If I buy a great house in a down market, when the market rebounds now I'm going to be punished year after year with higher taxes based on the financial "gains" that I haven't even realized yet. With a sales tax, good investments are rewarded by only taxing consumption, which can be avoided for those that wish to…

Incorrect. "Regressive" does not just mean "bad" according to some arbitrary definition of bad. If the poor pay more of a tax than the rich as a percentage of their income or wealth, then the tax is regressive. Otherwise, it is progressive. The word regressive is used to describe the incidence of a tax on a population. A property tax is generally progressive because the poor do not own real property. The rich pay mor…

It is controversial whether property taxes are regressive or progressive. Your view is common but an alternate view is that property taxes are taxes on housing consumption and are thus regressive.

Re: The Middle-Class Squeeze

#24

Post by tangled » Sun, Sep 27, 2015, 2:11 AM UTC

bluedevil2k wrote: post #3

prostoalex wrote: post #2

A lot of the ails mentioned in the article seem to arise from Western societies' preference on income taxation vs property taxation. Low property taxes force the governments to finance its expenditures mainly through sales and income taxes. The former are optional, the latter happen to penalize those who elect to participate in the workforce (which large property owners can safely sit out).

Property taxes are the most regressive form of taxation there is - it actually punishes good investments. If I buy a great house in a down market, when the market rebounds now I'm going to be punished year after year with higher taxes based on the financial "gains" that I haven't even realized yet. With a sales tax, good investments are rewarded by only taxing consumption, which can be avoided for those that wish to…

In California, property taxes are usually only reassessed on sale. There is also an inflation linked increase, but it's capped at a maximum of 2%. So you can end up with people who have been living in houses for 20 or 30 years who are paying an order of magnitude less in property tax than if they'd just bought the same house today. This also means that if you buy a house in a down market then you're likely to save a lot in terms of property taxes. Disclaimer: I am not a tax adviser etc.

Re: The Middle-Class Squeeze

#25

Post by [deleted] » Sun, Sep 27, 2015, 2:14 AM UTC

fweespeech wrote: post #9

prostoalex wrote: post #2

A lot of the ails mentioned in the article seem to arise from Western societies' preference on income taxation vs property taxation. Low property taxes force the governments to finance its expenditures mainly through sales and income taxes. The former are optional, the latter happen to penalize those who elect to participate in the workforce (which large property owners can safely sit out).

Property and sales taxes are both the most regressive forms of taxation in practice. The reality is, as much as everyone bitches about income taxes, a progressive tax system [regardless of the exact source, you could do a "progressive sales tax" for instance] is critical to prosperity. Property taxes are in many ways effectively a tax on owning rental property which translates into higher rents [up to the market's wi…

[deleted]

Re: The Middle-Class Squeeze

#26

Post by tw04 » Sun, Sep 27, 2015, 2:24 AM UTC

bluedevil2k wrote: post #3

prostoalex wrote: post #2

A lot of the ails mentioned in the article seem to arise from Western societies' preference on income taxation vs property taxation. Low property taxes force the governments to finance its expenditures mainly through sales and income taxes. The former are optional, the latter happen to penalize those who elect to participate in the workforce (which large property owners can safely sit out).

Property taxes are the most regressive form of taxation there is - it actually punishes good investments. If I buy a great house in a down market, when the market rebounds now I'm going to be punished year after year with higher taxes based on the financial "gains" that I haven't even realized yet. With a sales tax, good investments are rewarded by only taxing consumption, which can be avoided for those that wish to…

Which works right up until the point that the amount you spend is only a fraction of your income. Then suddenly your effective tax rate is a fraction of someone who is poor.

Consumption tax is 100% broken.

Re: The Middle-Class Squeeze

#27

Post by ubernostrum » Sun, Sep 27, 2015, 2:26 AM UTC

tomohawk wrote: post #19

Most of the squeezing seems to come down to cronyism, which is a problem in just about any system. For example, the government pushing of subprime mortgages (at the urging of cronies) over-inflated housing prices, and then when the balloon burst, the cronies won again by having the government take over their debt. The question should primarily be how to restrain cronyism, and thereby provide the best outcome for the…

The issue, at least with the government, is that you can't win.

Whenever you hear people complain about how impossible it is to comply with all the procedures and processes and regulations for getting a government contract to develop some software, it's a safe bet that those procedures and processes and regulations were all put in place by well-intentioned people who wanted to prevent corruption. But as people found more inventive ways of being corrupt, the countermeasures had to grow more complex and invasive, until finally they reached the point where only a handful of companies would actually bother to achieve compliance, guaranteeing them a steady stream of contracts regardless of performance. Which is precisely the result that wasn't supposed to happen.

Also, the mixed socialist/capitalist economies of Europe seem to do better, on average, than our much more capitalist-leaning system, largely because they aren't afraid to implement certain programs and regulations that in the US would be screamed down as creeping socialism even when they'd be more effective than what we actually do.

Re: The Middle-Class Squeeze

#28

Post by venomsnake » Sun, Sep 27, 2015, 2:27 AM UTC

fweespeech wrote: post #9

prostoalex wrote: post #2

A lot of the ails mentioned in the article seem to arise from Western societies' preference on income taxation vs property taxation. Low property taxes force the governments to finance its expenditures mainly through sales and income taxes. The former are optional, the latter happen to penalize those who elect to participate in the workforce (which large property owners can safely sit out).

Property and sales taxes are both the most regressive forms of taxation in practice. The reality is, as much as everyone bitches about income taxes, a progressive tax system [regardless of the exact source, you could do a "progressive sales tax" for instance] is critical to prosperity. Property taxes are in many ways effectively a tax on owning rental property which translates into higher rents [up to the market's wi…

I think that in property taxes we should include not only real estate, but all property. Stocks, shares, securities, art, patents, IP

Re: The Middle-Class Squeeze

#29

Post by davidjnelson » Sun, Sep 27, 2015, 2:27 AM UTC

themartorana wrote: post #22

djrobstep wrote: post #11

Earlier quoted context omitted.

Absolutely. What would be great is a high land value tax, used to fund a basic income and/or lower income taxes. It would help fix inequality, reward hard work, punish idle land rentiers and punish urban sprawl, all at the same time. What's not to like?

Property taxes? I'm not a fan of the idea that the property I "own" is basically just the right to rent it from the government. There's no true land-ownership anymore. Also, as noted above, property taxes can be a huge burden on those retired/on a fixed income. Not to mention, property taxes fluctuate wildly and are incredibly hard to predict and plan for. "Reassessments" happen randomly, seem to be applied haphazard…

How about low property taxes for the 65+ crowd on their primary residence?

Re: The Middle-Class Squeeze

#30

Post by zeroonetwothree » Sun, Sep 27, 2015, 2:28 AM UTC

ppereira wrote: post #10

bluedevil2k wrote: post #3

Earlier quoted context omitted.

Property taxes are the most regressive form of taxation there is - it actually punishes good investments. If I buy a great house in a down market, when the market rebounds now I'm going to be punished year after year with higher taxes based on the financial "gains" that I haven't even realized yet. With a sales tax, good investments are rewarded by only taxing consumption, which can be avoided for those that wish to…

Incorrect. "Regressive" does not just mean "bad" according to some arbitrary definition of bad. If the poor pay more of a tax than the rich as a percentage of their income or wealth, then the tax is regressive. Otherwise, it is progressive. The word regressive is used to describe the incidence of a tax on a population. A property tax is generally progressive because the poor do not own real property. The rich pay mor…

Taxes on housing are very likely regressive. Even if you rent you are still paying the property tax implicitly via higher rents. And given that your need for housing is independent of your income, it's likely that low earners spend a much higher % of their income on housing (and hence on property tax).