5 ms·

Taxing the rich is good for us whatever happens, mostly because it will collapse the sky-high cost of property (and consequently rents).

Asbostos 11y ago
I'd argue that rents are high because too many people want to live near each other. Property that people want is a scarce resource so something has to stop people getting it - if not price then what? A waiting list? A lottery? If you set up your lifestyle so you're not dependent on being a short taxi ride from 100,000 other people, then you don't have to pay high rents at all. If you are dependent on that, then you must be doing something fantastically productive so you can afford to pay high rent.
- dalke 11y ago
  > because too many people want to live near each other Your market analysis is incomplete. For example, http://www.theguardian.com/business/2014/feb/01/rich-overseas-investors-uk-eu-housing-market http://www.theguardian.com/business/2014/feb/01/rich-oversea... says "only 27% of new homes in central London went to UK buyers, while more than half were sold to residents of Singapore, Hong Kong, China, Malaysia and Russia." These are not people who live there, but want to invest in the London real estate market. By taking housing out of the market, they also increase the market rates through artificial scarcity. > if not price then what Different taxation for residents vs. non-residents. Rich people tend to have large places, so taxation based on square footage per resident. Set up building requirements that give preference to low-cost housing. There are many ways to tweak the economic landscape. > If you set up your lifestyle .. You make it sound so easy. Why not just set up your life to earn another $100K/year? > you must be doing something fantastically productive Why does that follow? If I inherited my $1 billion, I'm certainly able to afford a quaint $10 million penthouse in San Francisco even if just leave the money in an index fund. If I am a dictator who funneled money out of the country into my personal foreign bank account, leaving the country in poverty, would you say I was productive? Or if someone discovers oil on my land, and I exchange the drilling rights in exchange for 1% of the extracted revenue, making me rich enough to, say, move to Beverley Hills, was I really doing something fantastically productive?
  - Asbostos 11y ago
    As long as people are living in them, what does it matter where the owner lives? I'd agree with you if they're leaving them empty, waiting to sell again, and perhaps some investors are. But otherwise it's a way to allocate houses to people who want them the most (as shown by how much they're willing to pay). I agree that allowing low cost, high density housing would be great in many cities. But the people living there don't generally agree, and they have more power. If we're stuck with a finite supply of property, then market prices are a reasonable way of allocating that to people. As I mentioned, without high rents, how else would houses be allocated to residents? More people will want them than can get them. Would you prefer a waiting list? Or only allow ownership transfer by inheritance - excluding newcomers entirely?
    - jacalata 11y ago
      In London specifically, a significant percentage of foreign investors are absolutely leaving the houses empty. http://www.theguardian.com/uk-news/2015/jan/25/its-like-a-ghost-town-lights-go-out-as-foreign-owners-desert-london-homes http://www.theguardian.com/uk-news/2015/jan/25/its-like-a-gh...
      - eru 11y ago
        See http://www.economist.com/blogs/freeexchange/2015/04/land-value-tax http://www.economist.com/blogs/freeexchange/2015/04/land-val... for how to combat that (and raise a ton of revenue without market distortion).
    - crdoconnor 11y ago
      >As long as people are living in them, what does it matter where the owner lives? I am personally not a fan of paying 40% of my income as taxes to Russian oligarchs. When property taxes are lower than the value of the land (and in London they are virtually nil), you effectively have a privatized land tax. The proceeds of those taxes tend to fund kleptocratic billionaires.
  - rfrey 11y ago
    "I exchange the drilling rights in exchange for 1% of the extracted revenue, making me rich enough to, say, move to Beverley Hills, was I really doing something fantastically productive?" To be fair, Jed did discover the oil himself, so he could be said to have contributed productively to the economy. We'd have to subtract the contribution the missed rabbit would have made though.
- crdoconnor 11y ago
  >I'd argue that rents are high because too many people want to live near each other. So your theory is that people have gotten more and more desperate over the last 35 years to live near each other? What? >Property that people want is a scarce resource Is exactly why the ultra wealthy have been buying it all with their tax free profits and using it as a savings account. Guess what happens to prices when that 'demand' increases?
- skybrian 11y ago
  The obvious solution to high rents is to build taller buildings, but people don't seem to want that either.
refurb 11y ago
Huh? You'd have to have a tax rate of 90%+ to reduce the cost of housing. If you make a million per year, paying another 20% isn't really going to drastically affect your choice of housing.
- dalke 11y ago
  Between the 1940s and 1960s the US had 90%+ marginal tax rate for the highest income bracket, so it's not an impossible or untenable situation.
  - dllthomas 11y ago
    In today's dollars, that marginal tax rate would surely start somewhere above one million.
- crdoconnor 11y ago
  That isn't the point. The ultra wealthy are using all that extra cash to buy expensive apartments and housing and leaving them empty or renting them out. This 'demand' for property raises the price of it. Since rents track property prices, rents go up too. As soon as the ultra wealthy have a fat tax bill due all that property comes on the market again. Together. Crash time. Sane prices once again.
grinnbearit 11y ago
Why do you think house prices and rents are very correlated? People buy houses as an investment which can very quickly raise the price while rents depend on housing demand which depends on different factors. I did this analysis for where I live (Pune, India) where the house prices are ridiculous and, after adjusting for inflation, found that house prices have doubled in 10 years while rents have stayed flat.
- crdoconnor 11y ago
  https://1.bp.blogspot.com/-urzOpwgCvBk/VCsZEjOfwwI/AAAAAAAARqo/uXwVl1hcSb4/s1600/House%2Bprice%2Bvs%2Brent.jpg https://1.bp.blogspot.com/-urzOpwgCvBk/VCsZEjOfwwI/AAAAAAAAR...

Asbostos 11y ago

I'd argue that rents are high because too many people want to live near each other. Property that people want is a scarce resource so something has to stop people getting it - if not price then what? A waiting list? A lottery? If you set up your lifestyle so you're not dependent on being a short taxi ride from 100,000 other people, then you don't have to pay high rents at all. If you are dependent on that, then you must be doing something fantastically productive so you can afford to pay high rent.

dalke 11y ago
> because too many people want to live near each other Your market analysis is incomplete. For example, http://www.theguardian.com/business/2014/feb/01/rich-overseas-investors-uk-eu-housing-market http://www.theguardian.com/business/2014/feb/01/rich-oversea... says "only 27% of new homes in central London went to UK buyers, while more than half were sold to residents of Singapore, Hong Kong, China, Malaysia and Russia." These are not people who live there, but want to invest in the London real estate market. By taking housing out of the market, they also increase the market rates through artificial scarcity. > if not price then what Different taxation for residents vs. non-residents. Rich people tend to have large places, so taxation based on square footage per resident. Set up building requirements that give preference to low-cost housing. There are many ways to tweak the economic landscape. > If you set up your lifestyle .. You make it sound so easy. Why not just set up your life to earn another $100K/year? > you must be doing something fantastically productive Why does that follow? If I inherited my $1 billion, I'm certainly able to afford a quaint $10 million penthouse in San Francisco even if just leave the money in an index fund. If I am a dictator who funneled money out of the country into my personal foreign bank account, leaving the country in poverty, would you say I was productive? Or if someone discovers oil on my land, and I exchange the drilling rights in exchange for 1% of the extracted revenue, making me rich enough to, say, move to Beverley Hills, was I really doing something fantastically productive?
- Asbostos 11y ago
  As long as people are living in them, what does it matter where the owner lives? I'd agree with you if they're leaving them empty, waiting to sell again, and perhaps some investors are. But otherwise it's a way to allocate houses to people who want them the most (as shown by how much they're willing to pay). I agree that allowing low cost, high density housing would be great in many cities. But the people living there don't generally agree, and they have more power. If we're stuck with a finite supply of property, then market prices are a reasonable way of allocating that to people. As I mentioned, without high rents, how else would houses be allocated to residents? More people will want them than can get them. Would you prefer a waiting list? Or only allow ownership transfer by inheritance - excluding newcomers entirely?
  - jacalata 11y ago
    In London specifically, a significant percentage of foreign investors are absolutely leaving the houses empty. http://www.theguardian.com/uk-news/2015/jan/25/its-like-a-ghost-town-lights-go-out-as-foreign-owners-desert-london-homes http://www.theguardian.com/uk-news/2015/jan/25/its-like-a-gh...
    - eru 11y ago
      See http://www.economist.com/blogs/freeexchange/2015/04/land-value-tax http://www.economist.com/blogs/freeexchange/2015/04/land-val... for how to combat that (and raise a ton of revenue without market distortion).
  - crdoconnor 11y ago
    >As long as people are living in them, what does it matter where the owner lives? I am personally not a fan of paying 40% of my income as taxes to Russian oligarchs. When property taxes are lower than the value of the land (and in London they are virtually nil), you effectively have a privatized land tax. The proceeds of those taxes tend to fund kleptocratic billionaires.
- rfrey 11y ago
  "I exchange the drilling rights in exchange for 1% of the extracted revenue, making me rich enough to, say, move to Beverley Hills, was I really doing something fantastically productive?" To be fair, Jed did discover the oil himself, so he could be said to have contributed productively to the economy. We'd have to subtract the contribution the missed rabbit would have made though.
crdoconnor 11y ago
>I'd argue that rents are high because too many people want to live near each other. So your theory is that people have gotten more and more desperate over the last 35 years to live near each other? What? >Property that people want is a scarce resource Is exactly why the ultra wealthy have been buying it all with their tax free profits and using it as a savings account. Guess what happens to prices when that 'demand' increases?
skybrian 11y ago
The obvious solution to high rents is to build taller buildings, but people don't seem to want that either.

refurb 11y ago

Huh? You'd have to have a tax rate of 90%+ to reduce the cost of housing. If you make a million per year, paying another 20% isn't really going to drastically affect your choice of housing.

dalke 11y ago
Between the 1940s and 1960s the US had 90%+ marginal tax rate for the highest income bracket, so it's not an impossible or untenable situation.
- dllthomas 11y ago
  In today's dollars, that marginal tax rate would surely start somewhere above one million.
crdoconnor 11y ago
That isn't the point. The ultra wealthy are using all that extra cash to buy expensive apartments and housing and leaving them empty or renting them out. This 'demand' for property raises the price of it. Since rents track property prices, rents go up too. As soon as the ultra wealthy have a fat tax bill due all that property comes on the market again. Together. Crash time. Sane prices once again.

grinnbearit 11y ago

Why do you think house prices and rents are very correlated? People buy houses as an investment which can very quickly raise the price while rents depend on housing demand which depends on different factors. I did this analysis for where I live (Pune, India) where the house prices are ridiculous and, after adjusting for inflation, found that house prices have doubled in 10 years while rents have stayed flat.

crdoconnor 11y ago
https://1.bp.blogspot.com/-urzOpwgCvBk/VCsZEjOfwwI/AAAAAAAARqo/uXwVl1hcSb4/s1600/House%2Bprice%2Bvs%2Brent.jpg https://1.bp.blogspot.com/-urzOpwgCvBk/VCsZEjOfwwI/AAAAAAAAR...