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> Warren Buffett likes to regularly point out that the Fed's rates act like gravity on stock valuations. The lower the rates, the less gravity. The same is larg

by mcny 7y ago

> Warren Buffett likes to regularly point out that the Fed's rates act like gravity on stock valuations. The lower the rates, the less gravity. The same is largely true of how housing is affected by the Fed's rates. If you want to absolutely crush housing prices, push Fed rates back up to where mortgage rates are at 15-20% again. What that all really means is, the lower the rates, the more asset valuation inflation occurs. It's just that for amusingly convenient reasons (ie to pretend inflation is lower than it is), most economists like to pretend that asset inflation doesn't count as real inflation in their models. I know what you're proposing will be very unpopular but I have an idea that will be even more unpopular: a federal property tax on land + buildings at (five percent of property valuation) per year. There will be absolutely no exceptions for anyone. Everyone must pay. This money will mostly go back to local governments, toward infrastructure and utilities (mass transit, water, electricity, fiber Internet, sewage, garbage collection, education, ... ideally automated as much as possible) and a portion will go to supplement VAT to pay for supplemental universal basic income (in addition to the freedom dividend) that more than covers the new property tax on a one bedroom somewhere in the continental United States (so not necessarily midtown Manhattan). The key difference in what I propose is the lack of exceptions. Everyone must pay regardless of whether it is a strip club or a church. You don't pay, you get evicted within fifteen years or however long we decide. I recommend eviction should happen when unpaid taxes reaches 100% of property value. My Hope is that this will absolutely crash the housing market and stop this irrational speculation in the housing market.

saurik 7y ago
Normally we use the term "evicted" to imply someone with a lease no longer gets usage of the property; but in this case, these people own the property, so what are you saying happens then? Does the property get given to the government, who then... sells it? I am not complaining (yet), I just want to understand what happens in your mind after the "eviction" as the term isn't clear for me in this context.
- mcny 7y ago
  > Normally we use the term "evicted" to imply someone with a lease no longer gets usage of the property; but in this case, these people own the property, so what are you saying happens then? Does the property get given to the government, who then... sells it? I am not complaining (yet), I just want to understand what happens in your mind after the "eviction" as the term isn't clear for me in this context. exactly. the property returns to the market to someone who is willing to pay the property tax.
0xffff2 7y ago
Why 5%? That's enough to very nearly double the recurring cost of my house (mortgage, insurance and taxes), which seems overly punitive. Does this get offset somewhere else? Looking at a few quick numbers from Google, just residential property alone would add 50% to current US tax revenues. I'm guessing that means we'd be in the ballpark of doubling Federal tax revenue. I guess that's not necessarily a bad thing, but how do you make sure that money actually goes to the things you listed instead of the military?
- sokoloff 7y ago
  It would likely halve the market value of property, causing a massive wave of strategic foreclosures and also mean the revenue would be more like 2.5% of current property valuation. It would also likely be a massive long-term boost to equity markets, though the transitional financial chaos would be a short-term drag.
  - 0xffff2 7y ago
    It would cause a massive wave of something. The more I think about it, the more insane this idea sounds. If I'm renting and my landlord's costs double, is she going to double my rent? Even if you eased in the tax at something like 0.5% per year, this seems like it would result in an absolute bloodbath in which renters and mortgage holders get wiped out and the lucky few with large cash reserves and no property-backed debt buy up all the land at fire sale prices.
- mcny 7y ago
  > Why 5%? I need to make it high enough to 1. make home ownership expensive enough that people who own "too much" pay their fair share 2. to pay for the supplemental basic income that covers this high tax for a modest one bedroom unit so I don't end up killing people who are willing to scale down. I actually wanted it to be slightly higher than seven percent so you end up paying the sticker price of the house once every about ten years but that seemed a little too extreme.
formercoder 7y ago
Why do so many plans such as this exist which serve to enrich our government with so much more funding when they are currently incredibly bad at spending what they have? The US spends more per capita on education than many countries who are ahead of us. Construction of public transportation is filled with corruption and inefficiency. So many tasks still require snail mail or physically going and waiting in a line when they could be done online. Why don’t we focus on getting our government to spend effectively before giving them more to spend?
- shawnz 7y ago
  Why can't we work on both problems at the same time?
  - deleted 7y ago
    [deleted]
  - 0xffff2 7y ago
    You're begging the question of whether both are problems. There are plenty of people who would argue that the US Federal government already has plenty of income.
pjc50 7y ago
I think "everyone must pay" is even more politically infeasible than setting the tax at 5%, sadly.
- mcny 7y ago
  > I think "everyone must pay" is even more politically infeasible than setting the tax at 5%, sadly. This surfaces how little say individuals have in our public policy. I specifically added a clause that would more than offset this tax for a modest one bedroom unit for each individual over the age of eighteen. However, I suspect you are right. However, there will be massive lobbying to kill this proposal before it can even gain any traction. Huge data centers, ware houses, grocery chains, malls, sports stadiums and all these things don't actually pay that much in property taxes and claim that they operate on such razor thin margins that they simply can't exist without a zero percent property tax. These institutions threaten to pull out from our communities if we don't give them rebates on property taxes. Well I'd like to see where they move to when we have a federal property tax!
  - sokoloff 7y ago
    Outside of the US is my guess for data centers.
corporate_shi11 7y ago
What you're describing would completely cripple the economy and raise rents rather than lower them, the opposite of what you hope for. A severe tax on property would simply force property owners to raise rents. This in turn would price people out of the market. The housing stock would suffer as property owners would have no excess funds to make improvements and repairs to property. Building of new property would slow as the market for property deteriorates. Beyond that... VAT has had disastrous effects on European economies (go look at the price of goods in Europe. Significantly higher in real terms than in the US). Part of this lies in the way VAT obscures the tax portion of cost, allowing governments to surreptitiously raise taxes. This has happened in most developed countries where VAT is implemented. You also mention government doing many wonderful things with its newfound revenue, but the reality is that government spending is usually wasted on bureaucratic bloat and other inefficient allocations.
- mcny 7y ago
  > A severe tax on property would simply force property owners to raise rents. This in turn would price people out of the market. The housing stock would suffer as property owners would have no excess funds to make improvements and repairs to property. Building of new property would slow as the market for property deteriorates. I am not an economist but this implies property owners are leaving money on the table right now. I don't think that is the case. The market already charges as much as renters can afford to pay. There is not much room for rent to go up. > You also mention government doing many wonderful things with its newfound revenue, but the reality is that government spending is usually wasted on bureaucratic bloat and other inefficient allocations. I absolutely agree with you on this one. This is why I want as much automation as possible. However, having worked in the private sector, I can assure you bloat and inefficiency happens in both public and private sector. The main difference I think is that things are much more transparent in the public sector.
- Ma8ee 7y ago
  In what way have the VAT had disastrous effects on European economies? Goods are more expensive, but that is no disaster.
jrs235 7y ago
Some other assets besides houses and stocks that you see inflation in are education and health...

by mcny 7y ago

saurik 7y ago

Normally we use the term "evicted" to imply someone with a lease no longer gets usage of the property; but in this case, these people own the property, so what are you saying happens then? Does the property get given to the government, who then... sells it? I am not complaining (yet), I just want to understand what happens in your mind after the "eviction" as the term isn't clear for me in this context.

mcny 7y ago
> Normally we use the term "evicted" to imply someone with a lease no longer gets usage of the property; but in this case, these people own the property, so what are you saying happens then? Does the property get given to the government, who then... sells it? I am not complaining (yet), I just want to understand what happens in your mind after the "eviction" as the term isn't clear for me in this context. exactly. the property returns to the market to someone who is willing to pay the property tax.

0xffff2 7y ago

Why 5%? That's enough to very nearly double the recurring cost of my house (mortgage, insurance and taxes), which seems overly punitive. Does this get offset somewhere else? Looking at a few quick numbers from Google, just residential property alone would add 50% to current US tax revenues. I'm guessing that means we'd be in the ballpark of doubling Federal tax revenue. I guess that's not necessarily a bad thing, but how do you make sure that money actually goes to the things you listed instead of the military?

sokoloff 7y ago
It would likely halve the market value of property, causing a massive wave of strategic foreclosures and also mean the revenue would be more like 2.5% of current property valuation. It would also likely be a massive long-term boost to equity markets, though the transitional financial chaos would be a short-term drag.
- 0xffff2 7y ago
  It would cause a massive wave of something. The more I think about it, the more insane this idea sounds. If I'm renting and my landlord's costs double, is she going to double my rent? Even if you eased in the tax at something like 0.5% per year, this seems like it would result in an absolute bloodbath in which renters and mortgage holders get wiped out and the lucky few with large cash reserves and no property-backed debt buy up all the land at fire sale prices.
mcny 7y ago
> Why 5%? I need to make it high enough to 1. make home ownership expensive enough that people who own "too much" pay their fair share 2. to pay for the supplemental basic income that covers this high tax for a modest one bedroom unit so I don't end up killing people who are willing to scale down. I actually wanted it to be slightly higher than seven percent so you end up paying the sticker price of the house once every about ten years but that seemed a little too extreme.

formercoder 7y ago

Why do so many plans such as this exist which serve to enrich our government with so much more funding when they are currently incredibly bad at spending what they have? The US spends more per capita on education than many countries who are ahead of us. Construction of public transportation is filled with corruption and inefficiency. So many tasks still require snail mail or physically going and waiting in a line when they could be done online. Why don’t we focus on getting our government to spend effectively before giving them more to spend?

shawnz 7y ago
Why can't we work on both problems at the same time?
- deleted 7y ago
  [deleted]
- 0xffff2 7y ago
  You're begging the question of whether both are problems. There are plenty of people who would argue that the US Federal government already has plenty of income.

pjc50 7y ago

I think "everyone must pay" is even more politically infeasible than setting the tax at 5%, sadly.

mcny 7y ago
> I think "everyone must pay" is even more politically infeasible than setting the tax at 5%, sadly. This surfaces how little say individuals have in our public policy. I specifically added a clause that would more than offset this tax for a modest one bedroom unit for each individual over the age of eighteen. However, I suspect you are right. However, there will be massive lobbying to kill this proposal before it can even gain any traction. Huge data centers, ware houses, grocery chains, malls, sports stadiums and all these things don't actually pay that much in property taxes and claim that they operate on such razor thin margins that they simply can't exist without a zero percent property tax. These institutions threaten to pull out from our communities if we don't give them rebates on property taxes. Well I'd like to see where they move to when we have a federal property tax!
- sokoloff 7y ago
  Outside of the US is my guess for data centers.

corporate_shi11 7y ago

What you're describing would completely cripple the economy and raise rents rather than lower them, the opposite of what you hope for. A severe tax on property would simply force property owners to raise rents. This in turn would price people out of the market. The housing stock would suffer as property owners would have no excess funds to make improvements and repairs to property. Building of new property would slow as the market for property deteriorates. Beyond that... VAT has had disastrous effects on European economies (go look at the price of goods in Europe. Significantly higher in real terms than in the US). Part of this lies in the way VAT obscures the tax portion of cost, allowing governments to surreptitiously raise taxes. This has happened in most developed countries where VAT is implemented. You also mention government doing many wonderful things with its newfound revenue, but the reality is that government spending is usually wasted on bureaucratic bloat and other inefficient allocations.

mcny 7y ago
> A severe tax on property would simply force property owners to raise rents. This in turn would price people out of the market. The housing stock would suffer as property owners would have no excess funds to make improvements and repairs to property. Building of new property would slow as the market for property deteriorates. I am not an economist but this implies property owners are leaving money on the table right now. I don't think that is the case. The market already charges as much as renters can afford to pay. There is not much room for rent to go up. > You also mention government doing many wonderful things with its newfound revenue, but the reality is that government spending is usually wasted on bureaucratic bloat and other inefficient allocations. I absolutely agree with you on this one. This is why I want as much automation as possible. However, having worked in the private sector, I can assure you bloat and inefficiency happens in both public and private sector. The main difference I think is that things are much more transparent in the public sector.
Ma8ee 7y ago
In what way have the VAT had disastrous effects on European economies? Goods are more expensive, but that is no disaster.

jrs235 7y ago

Some other assets besides houses and stocks that you see inflation in are education and health...