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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 mar

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 take on the risk/reward of investment.

jMyles 11y ago
Well, that of course depends on the system of property value assessment.
paulpauper 11y ago
exactly. it punishes risk takers.
- chipsy 11y ago
  Good. Wall Street doesn't know how to safely derisk on its own.
- tcbawo 11y ago
  We have to decide as a society whether speculative home buying is something we want to encourage.
ppereira 11y ago
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 more property tax as a percentage of their income/wealth than the poor. A sales tax is the prototypical example of a regressive tax because the rich consume less (as a percentage of their income) than the poor. Therefore, the rich pay of a lower percentage of their total income to sales taxes than the poor. An income tax with higher marginal tax rates for higher incomes is the classic example of a progressive tax. Since Reagan, income taxes approximate a flat tax more than a progressive one.
- splat 11y ago
  > A property tax is generally progressive because the poor do not own real property. Won't those taxes still be passed to the poor as higher rent?
  - ProAm 11y ago
    How does rent control come into play here?
- pash 11y ago
  > 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. Although this is effectively the definition of progressive and regressive taxation today—because that's how the terms are almost always used by the large number of people who have only the most casual understanding of tax policy—it is a perversion of the original and long-standing textbook definition, and of the way in which the terms are still used by some economists. By the original definition, a progressive tax is simply one whose rate of assessment increases ("progresses") with the value subject to taxation [0]. Thus an import duty on bananas is progressive if it taxes them at a rate of 1% ad valorem for the first $1MM's worth, and then at a rate of 2% of their value above $1MM. Note that the original definition and the popular corruption coincide when the thing being taxed is a person's income. (Together with the mistaken association with "progressive" politics, this seems to be the source of the perversion of meaning.) But the two definitions often differ, and the term "progressive" in the context of taxation originally had nothing to do with how the burden of taxation is distributed across society. 0. This is also the definition given in the Wikipedia article, https://en.m.wikipedia.org/wiki/Progressive_tax https://en.m.wikipedia.org/wiki/Progressive_tax (and given by several of the cited sources), although much of the article anyway discusses the burden-of-taxation interpretation.
  - ppereira 11y ago
    This is an interesting generalization of my use of progressive/regressive. However, I would not go so far as to say that my definition is a "popular corruption". My restricted definition is frequently applied in the tax law, tax policy, and tax economics literature. According to the OED, the earliest noted use of "regressive" in the context of taxation is from Richard T. Ely's writings on political economy in 1891. He was the leader of the progressive movement. His use of the terms progressive/regressive would certainly have meant reform/acting in a backward direction. Do you have an earlier citation for your definition? I wonder if it is in fact a mathematical generalization of a progressive/populist definition.
tangled 11y ago
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.
tw04 11y ago
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.

jMyles 11y ago

Well, that of course depends on the system of property value assessment.

paulpauper 11y ago

exactly. it punishes risk takers.

chipsy 11y ago
Good. Wall Street doesn't know how to safely derisk on its own.
tcbawo 11y ago
We have to decide as a society whether speculative home buying is something we want to encourage.

ppereira 11y ago

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 more property tax as a percentage of their income/wealth than the poor. A sales tax is the prototypical example of a regressive tax because the rich consume less (as a percentage of their income) than the poor. Therefore, the rich pay of a lower percentage of their total income to sales taxes than the poor. An income tax with higher marginal tax rates for higher incomes is the classic example of a progressive tax. Since Reagan, income taxes approximate a flat tax more than a progressive one.

splat 11y ago
> A property tax is generally progressive because the poor do not own real property. Won't those taxes still be passed to the poor as higher rent?
- ProAm 11y ago
  How does rent control come into play here?
pash 11y ago
> 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. Although this is effectively the definition of progressive and regressive taxation today—because that's how the terms are almost always used by the large number of people who have only the most casual understanding of tax policy—it is a perversion of the original and long-standing textbook definition, and of the way in which the terms are still used by some economists. By the original definition, a progressive tax is simply one whose rate of assessment increases ("progresses") with the value subject to taxation [0]. Thus an import duty on bananas is progressive if it taxes them at a rate of 1% ad valorem for the first $1MM's worth, and then at a rate of 2% of their value above $1MM. Note that the original definition and the popular corruption coincide when the thing being taxed is a person's income. (Together with the mistaken association with "progressive" politics, this seems to be the source of the perversion of meaning.) But the two definitions often differ, and the term "progressive" in the context of taxation originally had nothing to do with how the burden of taxation is distributed across society. 0. This is also the definition given in the Wikipedia article, https://en.m.wikipedia.org/wiki/Progressive_tax https://en.m.wikipedia.org/wiki/Progressive_tax (and given by several of the cited sources), although much of the article anyway discusses the burden-of-taxation interpretation.
- ppereira 11y ago
  This is an interesting generalization of my use of progressive/regressive. However, I would not go so far as to say that my definition is a "popular corruption". My restricted definition is frequently applied in the tax law, tax policy, and tax economics literature. According to the OED, the earliest noted use of "regressive" in the context of taxation is from Richard T. Ely's writings on political economy in 1891. He was the leader of the progressive movement. His use of the terms progressive/regressive would certainly have meant reform/acting in a backward direction. Do you have an earlier citation for your definition? I wonder if it is in fact a mathematical generalization of a progressive/populist definition.

tangled 11y ago

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.

tw04 11y ago

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.