American Equity • Hacker News Board

Re: American Equity

#441

Post by user5994461 » Tue, Nov 28, 2017, 2:16 AM UTC

AznHisoka wrote: post #432

user5994461 wrote: post #216

Earlier quoted context omitted.

Pardon me but the solution you claim is already in place, well understood and totally ineffective. Income is already taxable, including rental income. On top of that there are various taxes for owning/occupying a property. It varies with what state/country you live in. Generally speaking, a property is a poor investment if you already have the money, they have poor returns and they don't grow in value outside of a fe…

"Generally speaking, a property is a poor investment if you already have the money, they have poor returns and they don't grow in value outside of a few bubbles." Real estate is a great investment for the risk averse (probably the best one too). Housing usually grows at the same rate as inflation if not a bit more and people will always need it. It doesnt drop 10% overnight unlike stocks. What other investments did y…

>>> It doesnt drop 10% overnight unlike stocks.

You can tell that to the people in Houston who lost their home overnight. Home ownership is not risk free. ;)

I am not familiar with the entirety of the US territory. If you look at properties outside of the major cities, they should be relatively stable, renters have no jobs to sustain ever increasing rent. In the far country side, properties should be deflating because de industrialization.

Agreed that it is great for a diversified portfolio. Especially the primary home, it's self sustaining because you'd have to pay rent anyway. A second home is safe, it can host your child now or yourself after retirement, then it's lower returns.

There are a lot of index funds with various risk profiles. There is no general strategy. It depends on your personal situation, how much there is, where your live, and you family.

Now, that might sound stupid. If you own your home and have some savings, you can basically retire. There aren't much expenses outside of the rent.

Re: American Equity

#442

Post by SkyMarshal » Tue, Nov 28, 2017, 2:16 AM UTC

This is an interesting line of thought that needs to be more fully explored, especially as we move into an era where things like UBI are a more serious consideration.

Off the top of my head I'm not sure how such a thing could be structured without allocating some non-trivial portion of tax revenue to it, and then figuring out how to sell that to Congress who seem to prefer more targeted things like deductions + pork that let them more actively micromanage where the funds go.

But worth brainstorming about and not ruling out any idea just yet.

Re: American Equity

#443

Post by BatFastard » Tue, Nov 28, 2017, 2:21 AM UTC

oarsinsync wrote: post #385

majormajor wrote: post #368

Earlier quoted context omitted.

And the marginal effects of having 100M in the bank over 10M in the bank over 1M over 100K are all still huge for any feasible tax scheme I could imagine. What does your world look like where you'd be too taxed to bother wanting to be financially independent?

#define financially independent That phrase means different things to different people. In some parts of the world, $50k could consider you to be financially independent. $500k in others, and in some parts, you'd need $5m - $50m. What if I told you it cost $5/day to rent a luxury hotel room with cleaning, full board, and high speed broadband provided as standard? What if I told you it cost $1500/month for a small stu…

Where can I get a luxury hotel room for 5 USD a day?

Re: American Equity

#444

Post by kaybe » Tue, Nov 28, 2017, 2:22 AM UTC

santiagogo wrote: post #373

derefr wrote: post #176

Earlier quoted context omitted.

From the perspective of trying to get the budget balanced, taxing wealth is probably the single most efficient way to do it. From the perspective of the tax code as an incentive system , taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy, and thereby causes fewer GDP-building things to happen! (This is also, for a similar reason, why economists don't like corporate taxes or trade…

Since a couple years back, we have a 1% tax on wealth in Colombia, which applies to anyone who has above approx. 330,000 USD in assets I don't think it has disincentivated anybody from becoming less wealthy and/or working less. It just incentivizes tax evasion, but even that is not significant. On the other hand, a large number of social programs have been built around this new tax. Anybody in the country could get c…

How much is a normal house in Colombia?

Re: American Equity

#445

Post by paloaltokid » Tue, Nov 28, 2017, 2:22 AM UTC

Sincere question: how is this different from communism? UBI seems like the same thing.

I am not against communism or socialism, it just seems like that’s what Sam is describing here.

Re: American Equity

#446

Post by sokoloff » Tue, Nov 28, 2017, 2:25 AM UTC

geofft wrote: post #387

derefr wrote: post #176

Earlier quoted context omitted.

From the perspective of trying to get the budget balanced, taxing wealth is probably the single most efficient way to do it. From the perspective of the tax code as an incentive system , taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy, and thereby causes fewer GDP-building things to happen! (This is also, for a similar reason, why economists don't like corporate taxes or trade…

> taxing wealth is a strange thing—it makes people feel less interest in becoming wealthy If we're talking about how people feel about their tax system, I think we need to talk about how a huge portion of the US misunderstands "tax brackets", and seems to think that paying more taxes when they're "bumped to a higher tax bracket" is a thing, and that there's some strategy in avoiding getting paid marginally more than…

> Why does a tax on wealth cause fewer GDP-building things to happen? The rational thing to do given a tax on wealth is to spend your extra wealth on services you're interested in, donate it to charities you support, etc.

Another rational thing to do is to create vehicles that store but temporarily impair the market value of that wealth as computed for wealth tax purposes. Put it into a private company and offer minority, non-controlling stakes in that private company to all comers and act surprised when only family members take you up on the offer. It's a minority stake without control rights; it's going to be worth less than the net asset value. Store the wealth there until you're ready to use it, then have the company directors make a distribution, or leave the transfer in place to your heirs, who will receive a controlling interest when their shares (that maybe they bought) are reunited with the shares that you will them upon death. Or invest in something illiquid and very hard to accurately value.

Technically, all of those things create GDP activity for lawyers and accountants as well, but it's hardly good public policy, IMO. (I'm not opposed to a reasonable wealth tax, say 0.25% annually on sums 10M-50M USD and 0.5% annually on sums above that. I don't think it's a tax without lossy consequences though.)

Re: American Equity

#447

Post by jerf » Tue, Nov 28, 2017, 2:25 AM UTC

robotresearcher wrote: post #390

jerf wrote: post #100

Earlier quoted context omitted.

This would address one (but not all) of my fundamental complaints about UBI though: What do you do when due to some disaster, you must pull back your UBI payments? Consider significant war losses, for instance. In this case the answer is that GDP would go down and so would the payment. (Though maybe we can't tie it to GDP per se, since in a war situation you can't afford to see your GDP rise due to forced constructio…

We reduce welfare spending when times are hard. Same deal. Not a substantial argument against welfare or UBI.

Bwuh? Citation needed; I'm pretty sure it went the other way around in the previous downturn.

Re: American Equity

#448

Post by sokoloff » Tue, Nov 28, 2017, 2:28 AM UTC

kelnos wrote: post #400

shawnee_ wrote: post #360

Earlier quoted context omitted.

"Pardon me" but rental income is deductible more than it is taxable; everything to do with owning a property and generating "investment income" from it is incentivized to be deductible; it's a great and super fast way to make lots of money. I don't know what you do for a living, but I have two graduate degrees in accounting and economics, as well a decade and a half researching and studying this very problem. The sol…

If we remove deductions on rental income, wouldn't that just cause property owners to charge higher rent? If so, then yes, that would of course generate more tax revenue, but at the expense of the renters.

Of course it would, either directly or via a reduced supply of profitable rental properties (and the resultant shift in supply-demand equilibrium).

There may be an offsetting overall reduction in the value of all real property, but it seems like reducing or eliminating these deductions[0] would be harmful to renters, not helpful.

[0] - Deductions like this, by the way, are available to all sorts of other profit seeking businesses for the equipment and supplies they use in the conduct of their business and I see no reason why a house should be different from a factory machine or laptop computer or airliner nor a minor repair to a house be different from a pad of paper or other consumable with regards to whether ordinary and necessary business expenses ought to be deductible against gross revenue when computing profit.

Re: American Equity

#449

Post by zBard » Tue, Nov 28, 2017, 2:31 AM UTC

saas_co_de wrote: post #348

newmanships wrote: post #110

Earlier quoted context omitted.

The rich aren't stashing most of their money under a mattress. Gates, Bezos, etc are worth billions, but that wealth is almost all based off of the stock prices in the companies they own percentagess of.

Yes they are. They are shifting trillions into tax free foundations, trillions offshore, and trillions into corporate stock buy backs. When you have trillions you just need a bigger mattress, like Ireland, for instance.

Who has trillions ?

Re: American Equity

#450

Post by sokoloff » Tue, Nov 28, 2017, 2:31 AM UTC

user5994461 wrote: post #435

kelnos wrote: post #400

Earlier quoted context omitted.

If we remove deductions on rental income, wouldn't that just cause property owners to charge higher rent? If so, then yes, that would of course generate more tax revenue, but at the expense of the renters.

It can't increase rent. Rent are capped by what tenants can pay, they are specifically set to "as much as the tenants can afford" because everyone needs a roof. Taxing the landlord doesn't give more moneys to the tenant. However, what could happen is that the rental income after tax is lower and not enough anymore to cover the mortgage or the maintenance costs, then the property has to be sold.

When that property is sold, from whom will the displaced tenant now rent? Market rents are set by supply and demand, just like most goods.

More supply of rental property? Rents go down so that landlords aren't stuck with vacancies. More demand for rental property? Rents go up so landlords can maximize their profits.