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I agree with you that tax incentives are the way to tackle it. I think the issue with this specific proposal is for people on low/fixed incomes (typically retir

by ericd 9y ago

I agree with you that tax incentives are the way to tackle it. I think the issue with this specific proposal is for people on low/fixed incomes (typically retirees). I think the normal way to do this is via a high property tax and then a "homestead exemption" that you take if you live in the property.

alkonaut 9y ago
> "homestead exemption" that you take if you live in the property. Exactly. But the idea is that it's very hard to check whether someone lives in a property, so you check for the next best thing: whether you have income in the country. So if you have income tax in the country then you can get exempt from one property tax. Otherwise you end up having things like "self reporting" where you live, or local governments trying to check water/electricity use to see whether buildings are occupied etc, which are obviously both expensive and futile.
- elyobo 9y ago
  No exemptions, tax them all. Homes will, ironically, be cheaper if they're taxed because it will further drive out speculative money.
  - alkonaut 9y ago
    Yes I'm not saying property taxes are inherently bad, but this would need to be pretty high, such as property taxes of e.g. 5-10% of the market value. Probably a bit hard to swallow for e.g. people who have retired and have bought their homes ages ago for say $100k and it's now worth $1M and the pensions doesn't cover the $50k annual property. Moving would net the couple $900k minus a hefty chunk in profit tax, after which they can't afford buying a new home. We had this situation here and it's not good. You could have a 10% market value property tax, and a deduction of 90% of that amount, for one home, on your income tax, then 75% for a second property etc, to make it both prohibitively expensive for foreigners, and a bit progressive for those owning multiple homes.
    - elyobo 9y ago
      OK,fair call; I don't want to drive people out of their homes, I want to a) crash prices and b) keep them low, so I'd prefer to tax gains (even paper ones) in combination with other speculative disincentives (mainly the removal of the current incentives and special treatment). In an ideal situation no revenue is collected from capital gains because there are none to tax...
      - akadruid1 9y ago
        Your policy of "crash prices and keep them low" has the greatest impact on owner-occupiers. If you look at historic collapse of housing bubbles, it's the negative equity / underwater owner-occupiers who suffer losing their home or losing their mobility. Speculators simply shrug it off since they have the flexibility to move their investments. An increase in average wage growth would support both owner-occupiers and first time buyers.
        ericd 9y ago
        There are deep structural reasons for the lack of wage growth, so that's not a feasible near-term solution.
        elyobo 9y ago
        It's not a solution over any time period, because without fixing the drivers of the price growth in the property market any increase in purchasing power will be met with property price growth to absorb it.
        ericd 9y ago
        Good point, I agree.
        elyobo 9y ago
        Most owners are not impacted by "crash prices and keep them low" because they have experienced enormous capital growth. Auckland prices have doubled in the last four years; a 50% crash would leave almost everyone in the property market before then no worse off. Speculators can move their investments, but they have to accept the loss in order to do that. An increase in wages without fixing the underlying drivers for property price growth will not support owner occupiers or first time buyers at all, because property price growth will match or exceed that growth. Crash prices, keep them low and stable after, it will be rough and unpopular for a while but will eventually be the best outcome.
  - conanbatt 9y ago
    The goal is not cheap housing, its the amount of people that get homes.
- naasking 9y ago
  > So if you have income tax in the country then you can get exempt from one property tax. This is easily gamed if Chinese millionaires are truly at fault. They just set up a numbered corporation and "employ" their nephew whose living there.
  - alkonaut 9y ago
    Seems to be more difficult than leaving the tap on at least. Further, if people are actually employed and paid, they also pay income taxes. So now the property is even higher cost. Since to pay a person a minimum wage over the year (and the taxes and added costs that gives) is probably more than the property tax for foreigners would have been. Most importantly, the cost of either the property tax or the income tax solution should be higher than any expected gains in the property value (or at least enough to make it useless as an investment). The best way to game this system would probably be to shadow own it behind some 18year old that has a full time job but lives at home. They have the tax space to make the deduction.
- ericd 9y ago
  Good point. So what if homes have to have a single name/id attached to them, and a single identity can only claim one homestead exemption statewide (and ideally states would share data) and you have to file state income taxes to get them. No homestead exemption for company held houses, no second exemptions if you're a dependent or you file married/jointly. Still not sure how one could handle the case where someone lives in a state but pays no tax, since you can do that for nearly free in a state you don't live in. Maybe it could take age into account.

by ericd 9y ago

alkonaut 9y ago

> "homestead exemption" that you take if you live in the property. Exactly. But the idea is that it's very hard to check whether someone lives in a property, so you check for the next best thing: whether you have income in the country. So if you have income tax in the country then you can get exempt from one property tax. Otherwise you end up having things like "self reporting" where you live, or local governments trying to check water/electricity use to see whether buildings are occupied etc, which are obviously both expensive and futile.

elyobo 9y ago
No exemptions, tax them all. Homes will, ironically, be cheaper if they're taxed because it will further drive out speculative money.
- alkonaut 9y ago
  Yes I'm not saying property taxes are inherently bad, but this would need to be pretty high, such as property taxes of e.g. 5-10% of the market value. Probably a bit hard to swallow for e.g. people who have retired and have bought their homes ages ago for say $100k and it's now worth $1M and the pensions doesn't cover the $50k annual property. Moving would net the couple $900k minus a hefty chunk in profit tax, after which they can't afford buying a new home. We had this situation here and it's not good. You could have a 10% market value property tax, and a deduction of 90% of that amount, for one home, on your income tax, then 75% for a second property etc, to make it both prohibitively expensive for foreigners, and a bit progressive for those owning multiple homes.
  - elyobo 9y ago
    OK,fair call; I don't want to drive people out of their homes, I want to a) crash prices and b) keep them low, so I'd prefer to tax gains (even paper ones) in combination with other speculative disincentives (mainly the removal of the current incentives and special treatment). In an ideal situation no revenue is collected from capital gains because there are none to tax...
    - akadruid1 9y ago
      Your policy of "crash prices and keep them low" has the greatest impact on owner-occupiers. If you look at historic collapse of housing bubbles, it's the negative equity / underwater owner-occupiers who suffer losing their home or losing their mobility. Speculators simply shrug it off since they have the flexibility to move their investments. An increase in average wage growth would support both owner-occupiers and first time buyers.
      - ericd 9y ago
        There are deep structural reasons for the lack of wage growth, so that's not a feasible near-term solution.
        elyobo 9y ago
        It's not a solution over any time period, because without fixing the drivers of the price growth in the property market any increase in purchasing power will be met with property price growth to absorb it.
        ericd 9y ago
        Good point, I agree.
      - elyobo 9y ago
        Most owners are not impacted by "crash prices and keep them low" because they have experienced enormous capital growth. Auckland prices have doubled in the last four years; a 50% crash would leave almost everyone in the property market before then no worse off. Speculators can move their investments, but they have to accept the loss in order to do that. An increase in wages without fixing the underlying drivers for property price growth will not support owner occupiers or first time buyers at all, because property price growth will match or exceed that growth. Crash prices, keep them low and stable after, it will be rough and unpopular for a while but will eventually be the best outcome.
- conanbatt 9y ago
  The goal is not cheap housing, its the amount of people that get homes.
naasking 9y ago
> So if you have income tax in the country then you can get exempt from one property tax. This is easily gamed if Chinese millionaires are truly at fault. They just set up a numbered corporation and "employ" their nephew whose living there.
- alkonaut 9y ago
  Seems to be more difficult than leaving the tap on at least. Further, if people are actually employed and paid, they also pay income taxes. So now the property is even higher cost. Since to pay a person a minimum wage over the year (and the taxes and added costs that gives) is probably more than the property tax for foreigners would have been. Most importantly, the cost of either the property tax or the income tax solution should be higher than any expected gains in the property value (or at least enough to make it useless as an investment). The best way to game this system would probably be to shadow own it behind some 18year old that has a full time job but lives at home. They have the tax space to make the deduction.
ericd 9y ago
Good point. So what if homes have to have a single name/id attached to them, and a single identity can only claim one homestead exemption statewide (and ideally states would share data) and you have to file state income taxes to get them. No homestead exemption for company held houses, no second exemptions if you're a dependent or you file married/jointly. Still not sure how one could handle the case where someone lives in a state but pays no tax, since you can do that for nearly free in a state you don't live in. Maybe it could take age into account.