4 ms·

There are two types of residents - owners and renters. The renter is just renting from a property owner, who will just pass on the tax. In this example, assum

There are two types of residents - owners and renters. The renter is just renting from a property owner, who will just pass on the tax. In this example, assume the mortgage payment is $1k / month. 1. If you own the home, you will pay $13,500 ($12k mortgage + $1500 taxes) per year. 2. If you own the home, and want to rent it to a tenant, you must charge the tenant at least $18,000 ($12k mortgage + $6k taxes) to break even. Renters are in generally less wealthy than owners. Why have this extremely regressive tax? Why should the poor renter subsidize the rich homeowner?

roel_v 10y ago
"Why should the poor renter subsidize the rich homeowner?" He's not subsidizing, is he? The tax just goes to the government. Essentially it's an extra tax on renting.
- ianferrel 10y ago
  If the renter pays a higher tax rate than the owner, and they both have the same right to government services, that could be seen as a subsidy.
  - woofyman 10y ago
    Landlords get their own subsidies. All maintenance and improvements are tax deductions. Plus they get to depreciate the property.
    - WalterBright 10y ago
      Suppose a business buys goods at $80 and sells them for $100. You're suggesting that his profit is $100 and he should be taxed on $100 income?
      - majormajor 10y ago
        That's how sales tax generally works, no? (Which suggests that the cost gets passed along and so it is a hit to the renter.)
        bzbarsky 10y ago
        > That's how sales tax generally works, no? Yes, which is why a VAT is much saner than a sales tax.
avn2109 10y ago
The point is to incentivize the populace to take on stable obligations, the proverbial two kids and a mortgage. A stable, indebted population is a governable and docile population. Somewhere there's a great quote about how "any man with a cottage of his own and a yard will never be a revolutionary, he's too busy" but I can't find it right now.
- humanrebar 10y ago
  Home ownership can also tie people down to a location when they should be considering relocating to places with more demands for their skills.
  - aminok 10y ago
    This is a typical unintended consequence of top-down economic planning. It turns out cookie cutter solutions imposed by fiat reduce people's welfare.
- digi_owl 10y ago
  More succinctly, homeowners do not riot. Picked it up from a talk by David Harvey, but not sure where he got it from.
- tdaltonc 10y ago
  A man always has two reasons for doing anything: a good reason and the real reason. That's a good reason to have the mortgage interest deduction. The real reason is that home owners vote, and promising them money is a good way to get them to vote for you.
mmanfrin 10y ago
Because if you own the home and want to rent it out, that implies you own another home that you are paying those taxes on, or are otherwise renting yourself.
- TheSpiceIsLife 10y ago
  How is that an argument for charging renters $6000 a year?
matwood 10y ago
You're completely ignoring the demand side. This tax, at least in my area, is a tax on the wealthy land owners. They could drop the tax to 0 tomorrow and rents will still go up.
stana 10y ago
"... property owner, who will just pass on the tax" Rental market is more of a market than say, buying a house. It is very much determine by salaries people make in the area. Unlike buying a property, which also has the element of credit availability and willingness of people to borrow, you cannot borrow to pay rent. The point being, owner can TRY to price tax into the rent, but if this prices property too high it will not rent out. (Edited: typo)
- abecedarius 10y ago
  All of the landlords must pay the tax. This means a constant displacement of the supply curve from the untaxed state. The demand curve is unchanged. The new equilibrium depends on elasticity, but I'd be surprised if it doesn't end up with most of the cost passed on to the renter.
tomjakubowski 10y ago
The Vancouver tax wouldn't affect properties rented under "long-term" (> 30 day) leases. from TFA: "Principal homes, as well as properties that are rented for at least six months of the year on 30-day minimum leases, won’t be taxed." I would be very surprised to learn that Vancouver renters who typically live in units with < 30-day leases turn out to be poor.
- sprocket 10y ago
  I believe that the requirement for > 30 day leases is also an attempt to block the proliferation of AirBnB rentals, which the city doesn't look favourably upon. ie) You can't claim your house has been occupied for 6 months because you've had 30 one-week AirBnB listings in there over a year.
emp 10y ago
You are thinking logically. It's not applied in Vancouver. I rent for just over 2k. If my place was put up for sale, it would be for just over 1 million. Factor in $300 a month strata fees, another $200 for insurance, if they owner has a typical long term mortgage they are renting for a loss. However they bought it 10 years ago, they have done well with the crazy appreciation.

roel_v 10y ago

"Why should the poor renter subsidize the rich homeowner?" He's not subsidizing, is he? The tax just goes to the government. Essentially it's an extra tax on renting.

ianferrel 10y ago
If the renter pays a higher tax rate than the owner, and they both have the same right to government services, that could be seen as a subsidy.
- woofyman 10y ago
  Landlords get their own subsidies. All maintenance and improvements are tax deductions. Plus they get to depreciate the property.
  - WalterBright 10y ago
    Suppose a business buys goods at $80 and sells them for $100. You're suggesting that his profit is $100 and he should be taxed on $100 income?
    - majormajor 10y ago
      That's how sales tax generally works, no? (Which suggests that the cost gets passed along and so it is a hit to the renter.)
      - bzbarsky 10y ago
        > That's how sales tax generally works, no? Yes, which is why a VAT is much saner than a sales tax.

avn2109 10y ago

The point is to incentivize the populace to take on stable obligations, the proverbial two kids and a mortgage. A stable, indebted population is a governable and docile population. Somewhere there's a great quote about how "any man with a cottage of his own and a yard will never be a revolutionary, he's too busy" but I can't find it right now.

humanrebar 10y ago
Home ownership can also tie people down to a location when they should be considering relocating to places with more demands for their skills.
- aminok 10y ago
  This is a typical unintended consequence of top-down economic planning. It turns out cookie cutter solutions imposed by fiat reduce people's welfare.
digi_owl 10y ago
More succinctly, homeowners do not riot. Picked it up from a talk by David Harvey, but not sure where he got it from.
tdaltonc 10y ago
A man always has two reasons for doing anything: a good reason and the real reason. That's a good reason to have the mortgage interest deduction. The real reason is that home owners vote, and promising them money is a good way to get them to vote for you.

mmanfrin 10y ago

Because if you own the home and want to rent it out, that implies you own another home that you are paying those taxes on, or are otherwise renting yourself.

TheSpiceIsLife 10y ago
How is that an argument for charging renters $6000 a year?

matwood 10y ago

You're completely ignoring the demand side. This tax, at least in my area, is a tax on the wealthy land owners. They could drop the tax to 0 tomorrow and rents will still go up.

stana 10y ago

"... property owner, who will just pass on the tax" Rental market is more of a market than say, buying a house. It is very much determine by salaries people make in the area. Unlike buying a property, which also has the element of credit availability and willingness of people to borrow, you cannot borrow to pay rent. The point being, owner can TRY to price tax into the rent, but if this prices property too high it will not rent out. (Edited: typo)

abecedarius 10y ago
All of the landlords must pay the tax. This means a constant displacement of the supply curve from the untaxed state. The demand curve is unchanged. The new equilibrium depends on elasticity, but I'd be surprised if it doesn't end up with most of the cost passed on to the renter.

tomjakubowski 10y ago

The Vancouver tax wouldn't affect properties rented under "long-term" (> 30 day) leases. from TFA: "Principal homes, as well as properties that are rented for at least six months of the year on 30-day minimum leases, won’t be taxed." I would be very surprised to learn that Vancouver renters who typically live in units with < 30-day leases turn out to be poor.

sprocket 10y ago
I believe that the requirement for > 30 day leases is also an attempt to block the proliferation of AirBnB rentals, which the city doesn't look favourably upon. ie) You can't claim your house has been occupied for 6 months because you've had 30 one-week AirBnB listings in there over a year.

emp 10y ago

You are thinking logically. It's not applied in Vancouver. I rent for just over 2k. If my place was put up for sale, it would be for just over 1 million. Factor in $300 a month strata fees, another $200 for insurance, if they owner has a typical long term mortgage they are renting for a loss. However they bought it 10 years ago, they have done well with the crazy appreciation.