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>PROPERTY TAXES, INCLUDING BOTH TAXES ON INDIVIDUALS AND BUSINESS TAXES, ARE USUALLY SOMEWHAT REGRESSIVE. On average, poor homeowners and renters pay more of th

by Aunche 4y ago

>PROPERTY TAXES, INCLUDING BOTH TAXES ON INDIVIDUALS AND BUSINESS TAXES, ARE USUALLY SOMEWHAT REGRESSIVE. On average, poor homeowners and renters pay more of their incomes in property taxes than do any other income group They are very wrong about property taxes, which calls their entire analysis into question. Renters aren't the ones paying property tax, especially for expensive areas like SF. The savings property taxes from prop 13 absolutely does not get passed to the renters. If anything, it does the opposite because it disincentivises home sales.

Apocryphon 4y ago
Aren't rental prices influenced in part by property taxes. Surely the owner would want rent to cover both their mortgage and their tax.
- caylus 4y ago
  In general yes, but I think Prop 13 complicates matters, because it's not just a lower tax rate, but rather applies unequally to different properties based on their transaction history. (e.g. a property built or sold recently gets high taxes, while one that's been unchanged remains low) So we can divide the rental market into high-tax and low-tax properties. The landlords of high-tax properties must incorporate the tax into the rent. Meanwhile, the landlords of low-tax properties can set their rents just as high, since they compete in the same market, and pocket the tax difference. In contrast, a flat property tax reduction would increase the profit margins of all landlords equally, and any one of them could start undercutting the others and be undercut in return, which over time in an efficient market will tend to lower prices back to a similar margin before the tax reduction.
- jltsiren 4y ago
  It's primarily an indirect effect. Landlords won't buy/build new houses if the expenses would be too high relative to the rent the market is willing to pay. That lowers the supply and raises the rents in the long term. However, if you have an existing property, there are no guarantees that you can find a tenant who is willing to pay enough to cover your interest, taxes, and other expenses.
- larsiusprime 4y ago
  There's good empirical evidence that the portion of property taxes that falls on the unimproved value of the land (ie, the location's value minus the value of the building), is not passed on to the renter: http://gameofrent.com/content/can-lvt-be-passed-on-to-tenants http://gameofrent.com/content/can-lvt-be-passed-on-to-tenant...
UncleMeat 4y ago
Renters pay property tax indirectly because most landlords select rents high enough to cover their mortgage, insurance, maintenance, and property tax.
- yellowapple 4y ago
  Not if the tax is specifically on the unimproved value of land (i.e. property value minus buildings or other improvements). Landlords are already charging as much in rent as they can get away with; raising rent even further would increase vacancies - and a land value tax would directly penalize keeping units vacant.
  - UncleMeat 4y ago
    Sure if we change the way that property tax is assessed then it’ll no longer be true that renters are indirectly paying property tax. But that’s not relevant to the thread topic.
    - yellowapple 4y ago
      It's very relevant to the thread topic. If the goal is to minimize the regressiveness of our tax system, then a land value tax is very hard to beat. The only one better from a wealth redistribution standpoint is maybe a wealth tax, but unlike other forms of wealth you can't exactly move land to an offshore account.
wskinner 4y ago
Some percentage of property taxes (and the savings from lower property taxes) will be passed through to the renter in the form of higher (lower) rent. That percentage will be between zero and one. What is your justification for asserting that percentage is exactly zero?
- Aunche 4y ago
  I'd argue that this percentage is near-zero in high-demand places like NYC and the bay area. Rent is simply set at what the market will bear. For example, during the height of the pandemic, landlords had no choice, but to significantly lower their rents in NYC even if they had to do so at a loss.
legitster 4y ago
> REGRESSIVE FEATURES: Imposes a gross receipts tax in lieu of a corporate profits tax Similarly, how is a corporate profit tax less regressive than a sales tax? Won't the price be passed on to consumers all the same?
- _-david-_ 4y ago
  Sales taxes usually are not applied on some items like food. Corporate taxes are usually on all corporations regardless of their industry (excluding charities).
  - lotsofpulp 4y ago
    Only unprepared foods are exempt from sales tax when there are exemptions.

by Aunche 4y ago

Apocryphon 4y ago

Aren't rental prices influenced in part by property taxes. Surely the owner would want rent to cover both their mortgage and their tax.

caylus 4y ago
In general yes, but I think Prop 13 complicates matters, because it's not just a lower tax rate, but rather applies unequally to different properties based on their transaction history. (e.g. a property built or sold recently gets high taxes, while one that's been unchanged remains low) So we can divide the rental market into high-tax and low-tax properties. The landlords of high-tax properties must incorporate the tax into the rent. Meanwhile, the landlords of low-tax properties can set their rents just as high, since they compete in the same market, and pocket the tax difference. In contrast, a flat property tax reduction would increase the profit margins of all landlords equally, and any one of them could start undercutting the others and be undercut in return, which over time in an efficient market will tend to lower prices back to a similar margin before the tax reduction.
jltsiren 4y ago
It's primarily an indirect effect. Landlords won't buy/build new houses if the expenses would be too high relative to the rent the market is willing to pay. That lowers the supply and raises the rents in the long term. However, if you have an existing property, there are no guarantees that you can find a tenant who is willing to pay enough to cover your interest, taxes, and other expenses.
larsiusprime 4y ago
There's good empirical evidence that the portion of property taxes that falls on the unimproved value of the land (ie, the location's value minus the value of the building), is not passed on to the renter: http://gameofrent.com/content/can-lvt-be-passed-on-to-tenants http://gameofrent.com/content/can-lvt-be-passed-on-to-tenant...

UncleMeat 4y ago

Renters pay property tax indirectly because most landlords select rents high enough to cover their mortgage, insurance, maintenance, and property tax.

yellowapple 4y ago
Not if the tax is specifically on the unimproved value of land (i.e. property value minus buildings or other improvements). Landlords are already charging as much in rent as they can get away with; raising rent even further would increase vacancies - and a land value tax would directly penalize keeping units vacant.
- UncleMeat 4y ago
  Sure if we change the way that property tax is assessed then it’ll no longer be true that renters are indirectly paying property tax. But that’s not relevant to the thread topic.
  - yellowapple 4y ago
    It's very relevant to the thread topic. If the goal is to minimize the regressiveness of our tax system, then a land value tax is very hard to beat. The only one better from a wealth redistribution standpoint is maybe a wealth tax, but unlike other forms of wealth you can't exactly move land to an offshore account.

wskinner 4y ago

Some percentage of property taxes (and the savings from lower property taxes) will be passed through to the renter in the form of higher (lower) rent. That percentage will be between zero and one. What is your justification for asserting that percentage is exactly zero?

Aunche 4y ago
I'd argue that this percentage is near-zero in high-demand places like NYC and the bay area. Rent is simply set at what the market will bear. For example, during the height of the pandemic, landlords had no choice, but to significantly lower their rents in NYC even if they had to do so at a loss.

legitster 4y ago

> REGRESSIVE FEATURES: Imposes a gross receipts tax in lieu of a corporate profits tax Similarly, how is a corporate profit tax less regressive than a sales tax? Won't the price be passed on to consumers all the same?

_-david-_ 4y ago
Sales taxes usually are not applied on some items like food. Corporate taxes are usually on all corporations regardless of their industry (excluding charities).
- lotsofpulp 4y ago
  Only unprepared foods are exempt from sales tax when there are exemptions.