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The Middle-Class Squeeze

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Re: The Middle-Class Squeeze

#51

Post by tcbawo »

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).

Given the large pension shortfalls we are routinely seeing, the inevitable federal bailout will result in a federal tax liability. In a society where people routinely move, having ones property taxes collected and distributed at the national level might make sense. Of course, it could never grow very large -- you have to rely on local assessors to properly set basis levels.

Re: The Middle-Class Squeeze

#52

Post by tcbawo »

kasey_junk wrote: post #23
ppereira wrote: post #10

Earlier quoted context omitted.

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.

A national property tax might be "progressive" at the city level. I'm not sure if this is desirable or not, but it might create an incentive for development in other cheaper/value locales.

Re: The Middle-Class Squeeze

#53

Post by tcbawo »

paulpauper wrote: post #8
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…

exactly. it punishes risk takers.

We have to decide as a society whether speculative home buying is something we want to encourage.

Re: The Middle-Class Squeeze

#54

Post by douche »

go1979 wrote: post #21
euroclydon wrote: post #5

Earlier quoted context omitted.

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…

You could take that downpayment and buy a house outright, cash in hand, in the 99% of the country that isn't completely fucking bonkers.

Re: The Middle-Class Squeeze

#55

Post by prostoalex »

douche wrote: post #12
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).

Or you could tax capital gains at the same rate as income. Poor people generally don't have capital to have gains on.

People say that but I've never seen the number that moves the needle much.

For one, capital gains are voluntary, and sellers more or less choose when to accrue them (and time them against losses in portfolio to minimize the impact).

For two, bulk of the money in the market is paying capital gains tax of 0%, as it belongs to a retirement account, charitable foundation, pension fund, foreign entity, university endowment, trust fund or some other tax-exempt structure. US-affiliated taxable accounts are not the majority in the market (source on this is Ken Fisher's Debunkery http://www.ken-fisher-debunkery.com/ published in 2011, I'm not sure whether situation changed since then).

Re: The Middle-Class Squeeze

#56

Post by prostoalex »

muhfuhkuh wrote: post #38
douche wrote: post #12

Earlier quoted context omitted.

Or you could tax capital gains at the same rate as income. Poor people generally don't have capital to have gains on.

This is never brought up with any kind of seriousness, and the lack of discussion baffles me. I don't understand how we talk about salaries when the top 5% usually do not draw a major salary. They live off capital gains from selling stocks and bonds. It just seems to be a 3rd rail that is untouchable, neither here nor in conservative or liberal blogosphere. It's always about that progressive 1040 taxation. That, or p…

> They live off capital gains from selling stocks and bonds.

That is also not entirely true. Sales of publicly traded stock by large shareholders is public information, and as an example, Mark Zuckerberg, sold a $2.3 billion chunk of shares in 2012 post-IPO when he became eligible http://www.theguardian.com/technology/2013/dec/19/facebook-m... and has not sold a single share ever since https://finance.yahoo.com/q/it?s=fb except for a disposition (charitable contribution). He probably doesn't need to either, there's a long wait before that bank account gets depleted.

It does not make sense for 1% to be transacting heavily in the assets they own, and if they're company officers they're frequently sending negative signals by doing that.

Re: The Middle-Class Squeeze

#57

Post by prostoalex »

zeroonetwothree wrote: post #30
ppereira wrote: post #10

Earlier quoted context omitted.

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).

> Even if you rent you are still paying the property tax implicitly via higher rents.

There's a conundrum here where higher property tax rate decreases the rental's attractiveness to potential landlords purely by biting into the cashflow, which then creates a negative impact on the property price and the base it's taxed at.

US states with higher property tax rates (typically those with low or no income tax rates) do not generally have higher rents, and countries with higher property taxes (Germany) do not typically have significantly higher rents than their counterparts https://lareviewofbooks.org/essay/why-your-rent-is-so-high-a...

Re: The Middle-Class Squeeze

#58

Post by prostoalex »

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.

It punishes living in today's homes at today's prices. Downsizing to a smaller abode or choosing between owning vs renting in a retirement community is part of retirement planning.
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