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This is itself misleading. There are many examples of government in the U.S. taxing unrealized gains. Prime one is property tax. The author claims: > most co

• teakettle42 5y ago
  > Prime one is property tax. Which is a horrendous injustice. I bought my house at a fixed amount. I have no desire or plans to move. My property taxes have increased by over $3k since I purchased my home, simply due to market conditions. Why should the size of the local municipalities coffers increase, at my expense, relative to the vagaries of the housing market, instead of according to actual budget needs? I have realized no value whatsoever; if I were to sell my home to try to realize that value, any home I'd buy in the area has similarly risen in price. The only way for me to realize that "wealth" is to sell my home and significantly downsize, or leave the area entirely, and buy somewhere cheaper.
  • R0b0t1 5y ago
    > Which is a horrendous injustice. It's basically feudalism. I'm not against taxes in general, but property tax means you never really own anything.
    • schoen 5y ago
      I think you can make the flip-side argument that private property in land is the least obviously defensible kind of property for people to really own (in an absolute sense), because nobody produced it and there is an inherently fixed amount of it (except for unusual cases like land reclamation). I remember feeling sympathetic to the argument that property tax means that you don't really own land but just rent it from a state, but if there's a particular kind of thing that you possibly shouldn't really be able to own but should just rent from some institution purportedly representing a community, it now seems like it's more plausible that that should be land, as opposed to movable property, labor, debt, and contractual interests.
      • R0b0t1 5y ago
        This is the best argument I've seen for property tax, but coupled with a lack of something like UBI it means you can't live a life apart from society. You must always participate in work to justify your continued existence.
    • nostrademons 5y ago
      You don't ever really own anything. The natural state is that some bandit with more guns comes and takes it from you, and if you want to possess something you better be the bigger bandit. Feudalism and the modern tax-supported state are two approaches to avoiding constant conflict. With feudalism, the king protects your holdings, and in return you owe him military service to support this protection. With a modern nation-state, the state holds a monopoly on physical violence, and you pay taxes to the state so they can maintain a standing army and legal system to enforce your property rights. Debates over which form of taxation is best are better framed in economic terms rather than moral terms. Which forms of taxation encourage beneficial pro-social behavior and discourage anti-social behavior? There's a good argument that wealth taxes (particularly when taxing natural resources like land, data, the electromagnetic spectrum, CO2 emissions, or pollution) are much more effective at this than income taxes.
      • specialist 5y ago
  • md_ 5y ago
    Well, no, you could take a reverse mortgage. The US does substantially favor “primary residences” vs other forms of capital ownership, basically for the reasons you give. Renters, typically, receive fewer such protections (but this depends on the state).
    • teakettle42 5y ago
      > Well, no, you could take a reverse mortgage. Borrowing against a potential future gain is not realizing that gain, and such a loan incurs the risk of losing some (or all) of my equity in the home.
      • op00to 5y ago
        I’m sorry. Exactly where do “profits” come from if not your equity?
        • teakettle42 5y ago
          Not sure I follow. My equity is illiquid until I sell the home. I could, in theory, borrow against it, but that carries risk.
  • jlhawn 5y ago
    The real horrendous injustice is that when you purchase real estate your payment includes a large unearned increment to the previous owner over what they paid for it. A system where you pay the previous owner only for the value of improvements and make regular ground lease payments to the local municipality (instead of general property taxes) would be more ideal.
    • roel_v 5y ago
      Why? (if your answer is going to include some form of 'but housing is an essential requirement to live', be aware that my next question will be how to differentiate housing from food, or some other essential requirements to living, which are also left to the market to the chagrin of only the most hardcore communist)
      • jlhawn 5y ago
        Sorry, I went to sleep before seeing your reply. There could be a lot of reasons 'why' but the biggest reason for me is that land/location value usually has nothing to do with the actions of the individual owners. There exists cheap/marginal land that can be had for almost nothing because it either has nothing or is near nothing while there also exists land which is rich in minerals, fertile virgin* cropland or forest, or other natural resources or is is valuable urban land which happens to be located near well paying jobs, good schools, good food, entertainment, accessible open space, or has really good weather or views. As the physical space of varying quality along all these different dimensions is in fixed in supply its price is determined by demand. Oxygen in the air is another "essential requirement to live" but fortunately it cannot be enclosed as easily as land can. Water is already somewhere in between. Land is differentiated from housing, food, and other essentials because there is no work required to produce and distribute it. It just exists and those who happen to own valuable locations are unjustly able to take the economic rent which is the common right of everyone. For a lot of things, you're right, it's often best to leave the production and allocation up to market forces and we end up with an abundance of food and other goods. But there is no real market for land and other natural opportunities because it's not something that can even be produced in the first place.** Questions to consider: - When someone claims a house costs more because the weather is mild and temperate (like coastal California), who should be paid for the good weather? Why pay the previous owner? - When someone claims a house costs more because the local schools are really good, why not pay the municipality more for the schools? Aren't you paying twice by first paying local taxes that fund the schools and then paying the previous owner? - When someone claims a house costs more because it is on a hillside with a panoramic view of mountains, bridges, bodies of water, and city skylines, who should you pay for the natural topography and shining lights? Why pay the previous owner? - When someone claims a house costs more because it is near a lot of high paying jobs or is close to shopping, doesn't it seem like a significant amount of profits and wages of the businesses and employees (particularly the least profitable businesses and least paid employees) are being siphoned off to land owners? - When someone claims a house costs more because it is close to a quality transit station/stop (and other public services) doesn't it seem like you are paying twice to access those services? Once as a fare or usage fee and again as rent or payment to the previous owner? * land that has never been farmed before or forest that hasn't been logged before as sustainable soil management and forestry do in fact carry a long-term cost for production. Still, there is location value as it relates to climate conditions, access to water, and access to markets for labor, processing, and distribution. ** even landfill (common in parts of the sf bay area, manhattan, and boston) are only done because the /location/ is so valuable that it is worth the cost of filling in with soil moved in from elsewhere. It's less common today not only because of higher costs of dredging and filling but because we also tend to be more aware of the cost of environmental externalities.
  • throw123123123 5y ago
    They don't change to the whims of the market, they change to the whims of the government. What is growing is the government expenditures.
  • Chris2048 5y ago
    Presumably, the aggregate effect of local municipalities coffers increases improves the local area, making it more desirable/valuable, which is increased value. You could indeed realise that value: by selling your house and buying one in an area with the same desirability that your current house had when you purchased it. So you can either hop around similar places and profit, or stay in one place that improves over time, and also pay more taxes over time.
• schoen 5y ago
  But property taxes aren't a tax on capital gains. In a jurisdiction where property values are regularly reassessed for property tax purposes, they could also go down rather than up, and so the owner's property tax liability could also fall over time. (For example, if there are new negative externalities or just decreased demand for property in that area. Maybe some San Francisco landlords will, for example, pay lower property taxes post-COVID compared to pre-COVID, or paid lower property taxes post-dot-com-crash than pre-dot-com-crash.) They also aren't a tax on capital gains because there is no form of "basis" for real estate taxes: it doesn't matter for the determination of the tax who the owner is or when the owner bought the property, or, in principle, at what price. Meanwhile, real estate sales are also subject to capital gains taxes, and I don't think you can detect property tax payments against the capital gain! I think you made the overall point correctly: in the U.S., ownership of an asset is generally not taxable at all, and therefore unrealized capital gains not only are not taxable but don't affect one's tax liability at all, except for assets whose ownership is itself taxable, which is the rare case rather than the common case today.
  • md_ 5y ago
    As ProPublica notes, taxation of wealth is rare, but far from unheard of. The historical basis for property taxes (in the 18th century) was that they were the primary source of wealth, so it's somewhat ahistorical for anyone to argue that taxation of "wealth" is novel or radical. Adam Smith argued for a "land value" tax in "The Wealth of Nations", after all. I think the ProPublica piece properly points out that such taxes are _unpopular_—justifiably or not; I have noted elsewhere that one of the primary concerns, of capital flight, is probably inapplicable to the US, which already has a global tax on residents and a burdensome reporting requirement in place.
  • mapgrep 5y ago
    > But property taxes aren't a tax on capital gains This is getting tautological though. The point of the ProPublica piece (generously read) is that there’s no reason we have to tax capital gains — or more to the point, wealth broadly — the way we do. And that the article isn’t “wrong” (as the link for this HN post seems to suggest) just because it seems to suggest that reality should perhaps be changed. Overall you seem to be reading my post as an argument to literally replace capital gains tax with property tax. That’s not the point, the point is there is precedent for taxing assets that have not sold. Issues like how to handle falling asset values under a wealth tax or how a wealth tax would intersect with any remaining capital gains tax would be policy mechanics subject to robust debate IF a decision was made to do a wealth tax. Update - oh hi Seth we met when you were at Berkeley and made a stand on the loyalty oath. Fan.