6 ms·

> The catch is that you are required to sell to anyone who offers your declared value. This sounds terrible for owners and perfect for governments and rich inv

> The catch is that you are required to sell to anyone who offers your declared value. This sounds terrible for owners and perfect for governments and rich investors. Governments would love it because it forces people to over-value their property to avoid the risk of their property being snatched from them against their wishes. If you can effectively be evicted from your home just because someone else wants to buy it, there's absolutely no security and you might as well rent, rather than own property. Rich investors would love it, because they can go around snapping up more properties that happen to be "undervalued" and make quick money of it, in a way that's simply not possible for normal people. Say someone bought a house for $100k, declare its value as such, and then demand increases in the area and 6 months later the market rate is $110k. A property investor could then rock up and demand to buy it for $100k and immediately flip it for 10% profit and then move on to the next target. This inevitable consequence is that people would be forced to "value" their house at the maximum they think it might be worth in 12 months time or risk losing their home, or even higher to signal that they really don't want to leave their home, all the while paying more tax than they need to because the actual market price for houses would be lower. Of course, this might also force the purchase prices for housing to be forced higher, so stopping people getting on the property market. All in all, it sounds like a terrible system for most people.

deleted 3y ago
[deleted]
_nalply 3y ago
Offer a loop-hole? If someone went as far as putting the money in an escrow account to buy out your asset, you could retroactively increase the declared value. This of course has a price: You need to retroactively pay the tax for a few years and a surcharge for the expenses of your buyer. This could be repeated, similar to an auction.
mschuster91 3y ago
Homes where one lives in are usually exempt from a lot of taxes in many jurisdictions of the world. For rental properties, I'd love to see this happen, it would IMHO significantly drive down prices from the current overvaluation.
OrvalWintermute 3y ago
> This sounds terrible for owners and perfect for governments and rich investors. I live in a blue area where the tax appraisals deviate from the for-sale listings by hundreds of thousands to millions, 4 million is the highest deviation I've seen thus far. Thought a fairer system would be for appraisals to raise to the highest listing price, or most recently sold price, automatically.
- freeone3000 3y ago
  This sounds so obvious that I see no downside. The a very good estimate of the value of a property is the price it last sold for.
  - thinkharderdev 3y ago
    Unless the last sale was 25 years ago
    - freeone3000 3y ago
      Even so! This is usually closer than the assessor estimate! Assessor estimates are wildly off, mine by nearly $400k, or more than 60% of the total value.
      - thinkharderdev 3y ago
        That is nuts. I wish the assessors in my state were that incompetent :)
- toast0 3y ago
  I've looked at property taxes in different states and some states have a system where tax appraisals are roughly based on actual fair market value, possibly with adjustments which may be distorting (Prop 13, for instance), and those will usually take a completed sale price as evidence of fair market value. Other states have systems where tax appraisal is routinely 10% of fair market value, and there's some justification for that that never made sense to me. Typically the published tax rates are then much higher than in states with fair market value appraisals. Tax rates as a % of actual market value tend to be roughly similar across states though.
AdamN 3y ago
You're right but usually there is a spread for any transaction and so the government could step back in and define a safe spread (something high like 20%) or the crazy (but efficient) option would be to allow the owner to define the spread. There would be a tax rate on the value and a different tax rate on the spread (possibly zero if the spread is set by the government)
thinkharderdev 3y ago
Yeah, like I said it has obvious practical problems when applied to things like primary residence so I don't think it would actually be a workable system for replacing existing property taxes.
oatmeal1 3y ago
The issues you describe could all be nullified by making a simple change - The price the person can purchase your property for must be X% greater than the fair value you declare. If you set X at 10% then there is no chance for property investors in your example to flip if the price increases by 10% during the year. You could even make X dependent on market conditions - If all the housing market moves up in your area, X is increased for everyone by that amount. I could see X being quite high. What we really want to avoid is just those situations where someone will not take any price to move, and therefore an entire railroad has to be diverted miles around because the path in one spot is blocked.
- devonbleak 3y ago
  And as the housing market moves 20%+ in a year in some places all you've done is kick the can down the road to figuring out a value of X that is high enough that no forced turnover of property happens so you're not violating the principles of property ownership. But also low enough that there's still a threat of exactly that happening. Ultimately all this does is accelerate the accumulation of wealth for folks that already have the capital to profit off this system while forcing people out of their property. No thank you.
  - ReactiveJelly 3y ago
    So there might need to be time lag where you can refuse a sale by agreeing to pay extra tax? Then it's vulnerable to malicious buyers putting in fake bids. There is probably a good reason this hasn't been implemented.
    - hellojesus 3y ago
      It still seems like a bad idea to me. Anyone under the current market can make a bid for an off-market property, but it's not their property. They cannot force an owner to sell. Tbey can only entice them with lucrative offers. Under the proposal, lucrative offers can still lure buyers into selling, but the security of private property is removed. You have to live under constant threat of a whale, e.g. Blackrock, swooping in and offering marginally above (market + e), forcing you to sell. But you still need somewhere to live. And now you have (market + e) dollars, but the market just got redefined by Blackrock and you cannot afford to buy your neighbors house because it is now priced at (market2 + e) where market < market2. Blackrock does this sequentially and can manage to legally steal private property from entire cities, just because they had more starting capital.
schmorptron 3y ago
You could modify it so you have to sell it at that price you listed if you decide to sell it at any point. Of course you'd need a system to feature in normal price appreciation but that can all be worked out, like not being able to change the price year-on-year by more than a certain percentage and then being forced to sell at the 3-year low price or smth like that.
- eganist 3y ago
  Yeah but then you can just underdeclare until you're willing to sell.
  - schmorptron 3y ago
    That's true. You'd slow it down a bit with the limited price increase & lowest-price-in-a-certain-timeframe rule, but you'd need some other remedy to plug that loophole.
  - deleted 3y ago
    [deleted]
gwd 3y ago
These "problems" assume that the "tax value" will actually be similar to the "market value". What's the difference between "0.1% on the declared tax value, you have to sell it for the declared tax value" and "0.2% on the declared tax value, you have to sell it for twice the declared tax value"? I'll give you a hint: the numbers come out to be the same. And there was never any requirement that you put the house on the market for the declared tax value. When you don't want to sell, you make the declared tax value twice (or three times) the market value; when you want to sell, you set it to a bit above the market value, and then put it on the market. Maybe to make the arguments easier you can encode the second one into law. But the basic math ends up the same.
- thinkharderdev 3y ago
  The point is that everything is always implicitly on the market at all times. So if you declare your house to be worth $X then you have to accept on offer of $X (or else declare a new, higher value going forward). When you're talking about people's home then obviously this would not be a practical system for many, many reasons. But in other domains it seems like a reasonable idea.
  - gwd 3y ago
    > The point is that everything is always implicitly on the market at all times. I understand that point; but that's not what GGP said. He explicitly laid out: 1. Government benefiting from "overpricing". But there's no "overpricing" if the tax is set assuming you're going to add a large multiple to the declared value. If the institution setting the pricing assumes that a $100k house is going to be priced at $200k (or $500k), then they can set the tax rate appropriately. 2. Investors performing arbitrage: i.e., someone sets the declared tax value at $100k, market value of house goes up to $110k, investor buys house for $100k and "flips" for a quick 10% profit. But if it's expected that a $100k house is going to be listed for $200k (or $500k), then that problem goes away -- nobody is going to buy a $200k house that hey can only sell for $130k. And nobody's property is going to go up 5x in a single year. Or alternately, you have people declare it at the market rate of $100k, but then write into law that anyone can sell it for 5x. The math works the same, but people feel less cheated for having to "overvalue" their house. (And people have less sympathy for those who write down a "declared tax value" of $25k on their $100k house.) What happens if your house goes up 5x in market value, to the point where you either have to sell or can't afford the taxes? Well that already happens, and it's not great, but there's an argument that this is an inefficient allocation of resources. I understand why a 90-yer-old lady wants to live alone in her 4-bedroom family home a few block from downtown, but is that really better for society as a whole? And if, as a society, we really want to protect that situation, we could always make an exception for a single house that you're currently occupying (as is already done for lots of things -- treating second+ properties different than first properties). > When you're talking about people's home then obviously this would not be a practical system for many, many reasons So taking into account the "sell for 5x" factor, other than the "you're forced to sell if you really can't afford it", what makes it not a practical system? I'm genuinely interested -- this idea has been kicking around my head for some time, and the main thing I like about it is that it makes taxation symmetric. The problem I have with taxation in general is that I recognize that it's necessary, but the way it's normally done, by taxing money moving around (i.e., sales, income, and estate taxes) always seemed kind of arbitrary to me. Since property is depriving society of some potentially shared resource, and taxation is paying society for shared resources, having those be symmetric has a satisfying property to me.
thinkharderdev 3y ago
> This inevitable consequence is that people would be forced to "value" their house at the maximum they think it might be worth in 12 months time or risk losing their home, or even higher to signal that they really don't want to leave their home, all the while paying more tax than they need to because the actual market price for houses would be lower. This is mostly a thought experiment so there is not an actual detailed implementation plan by the authors. But my sense was that it's not that you actually have to sell immediately but more like someone can offer to buy at $X and then you either have to sell or $X becomes the new declared value for future tax payments.
- politician 3y ago
  Extortion is a risk in this modified implementation. "Is that a $1 house? I'll buy it for $100. No? Enjoy your tax bill. If you want the bill to go away, sell it to me for $0.50." If I had to propose a mechanism, I'd suggest using prediction markets instead.
  - s1artibartfast 3y ago
    Yeah, it sounds like an optimal whipping algorithm for maximizing slave labor.
  - thinkharderdev 3y ago
    But for that to work you have to actually be willing to buy at $100. So you can come along and try and buy my house for 2x the market rate, but then I can just sell it to you and you're screwed. Of course in the real world there would need to be some way to prevent "predatory" offers (where the "buyer" can't or won't actually close the deal if you accept the offer) but that seems solvable to me. You may have to put down a non-refundable deposit or escrow the sale price, etc.
    - politician 3y ago
      If the solution requires the full payment to be in escrow before the seller is even aware of this particular unsolicited buyout order, it will become difficult for lenders to provide mortgages since they will have no guarantee that the seller isn't already in a negotiation with another buyer. So it might be better to establish a prediction market for any such asset that settles on the owner of the asset on, say, a quarterly basis. Instead of predicting the value of the asset, it predicts the owner of the asset at a particular price level. Instead of presenting the current owner with a bid directly, ownership transfers and tax payments would be handled exclusively through the market platform. ... That said, this is all getting pretty complex.
crotchfire 3y ago
It's a terrible idea for houses because your house has high (and asymmetric!) transaction costs. Moving is painful. But patents are intangibles. They have no transaction cost. This might work for intangibles.
minkzilla 3y ago
It also completely ignores the personal aspect of value. If I lived next door to my sister that is value for me since she can watch the kids if I need to run out for something but she won't do that for anyone else. Likewise sentimental value, a 4th generation home can influence people's price a lot.
fiedzia 3y ago
I know of two use cases for this system: 1. There are races of cheap cars in UK, the prices of cars are kept low because everyone has to declare car value and anyone can buy it at said price (this is intended to keep the prices low). 2. I do not remember where I read about it, but some medieval town near the river used this system for collecting taxes, any passing ship would be taxed on declared value, but tax collector had the right to buy cargo for declared price.

deleted 3y ago

[deleted]

_nalply 3y ago

Offer a loop-hole? If someone went as far as putting the money in an escrow account to buy out your asset, you could retroactively increase the declared value. This of course has a price: You need to retroactively pay the tax for a few years and a surcharge for the expenses of your buyer. This could be repeated, similar to an auction.

mschuster91 3y ago

Homes where one lives in are usually exempt from a lot of taxes in many jurisdictions of the world. For rental properties, I'd love to see this happen, it would IMHO significantly drive down prices from the current overvaluation.

OrvalWintermute 3y ago

> This sounds terrible for owners and perfect for governments and rich investors. I live in a blue area where the tax appraisals deviate from the for-sale listings by hundreds of thousands to millions, 4 million is the highest deviation I've seen thus far. Thought a fairer system would be for appraisals to raise to the highest listing price, or most recently sold price, automatically.

freeone3000 3y ago
This sounds so obvious that I see no downside. The a very good estimate of the value of a property is the price it last sold for.
- thinkharderdev 3y ago
  Unless the last sale was 25 years ago
  - freeone3000 3y ago
    Even so! This is usually closer than the assessor estimate! Assessor estimates are wildly off, mine by nearly $400k, or more than 60% of the total value.
    - thinkharderdev 3y ago
      That is nuts. I wish the assessors in my state were that incompetent :)
toast0 3y ago
I've looked at property taxes in different states and some states have a system where tax appraisals are roughly based on actual fair market value, possibly with adjustments which may be distorting (Prop 13, for instance), and those will usually take a completed sale price as evidence of fair market value. Other states have systems where tax appraisal is routinely 10% of fair market value, and there's some justification for that that never made sense to me. Typically the published tax rates are then much higher than in states with fair market value appraisals. Tax rates as a % of actual market value tend to be roughly similar across states though.

AdamN 3y ago

You're right but usually there is a spread for any transaction and so the government could step back in and define a safe spread (something high like 20%) or the crazy (but efficient) option would be to allow the owner to define the spread. There would be a tax rate on the value and a different tax rate on the spread (possibly zero if the spread is set by the government)

thinkharderdev 3y ago

Yeah, like I said it has obvious practical problems when applied to things like primary residence so I don't think it would actually be a workable system for replacing existing property taxes.

oatmeal1 3y ago

The issues you describe could all be nullified by making a simple change - The price the person can purchase your property for must be X% greater than the fair value you declare. If you set X at 10% then there is no chance for property investors in your example to flip if the price increases by 10% during the year. You could even make X dependent on market conditions - If all the housing market moves up in your area, X is increased for everyone by that amount. I could see X being quite high. What we really want to avoid is just those situations where someone will not take any price to move, and therefore an entire railroad has to be diverted miles around because the path in one spot is blocked.

devonbleak 3y ago
And as the housing market moves 20%+ in a year in some places all you've done is kick the can down the road to figuring out a value of X that is high enough that no forced turnover of property happens so you're not violating the principles of property ownership. But also low enough that there's still a threat of exactly that happening. Ultimately all this does is accelerate the accumulation of wealth for folks that already have the capital to profit off this system while forcing people out of their property. No thank you.
- ReactiveJelly 3y ago
  So there might need to be time lag where you can refuse a sale by agreeing to pay extra tax? Then it's vulnerable to malicious buyers putting in fake bids. There is probably a good reason this hasn't been implemented.
  - hellojesus 3y ago
    It still seems like a bad idea to me. Anyone under the current market can make a bid for an off-market property, but it's not their property. They cannot force an owner to sell. Tbey can only entice them with lucrative offers. Under the proposal, lucrative offers can still lure buyers into selling, but the security of private property is removed. You have to live under constant threat of a whale, e.g. Blackrock, swooping in and offering marginally above (market + e), forcing you to sell. But you still need somewhere to live. And now you have (market + e) dollars, but the market just got redefined by Blackrock and you cannot afford to buy your neighbors house because it is now priced at (market2 + e) where market < market2. Blackrock does this sequentially and can manage to legally steal private property from entire cities, just because they had more starting capital.

schmorptron 3y ago

You could modify it so you have to sell it at that price you listed if you decide to sell it at any point. Of course you'd need a system to feature in normal price appreciation but that can all be worked out, like not being able to change the price year-on-year by more than a certain percentage and then being forced to sell at the 3-year low price or smth like that.

eganist 3y ago
Yeah but then you can just underdeclare until you're willing to sell.
- schmorptron 3y ago
  That's true. You'd slow it down a bit with the limited price increase & lowest-price-in-a-certain-timeframe rule, but you'd need some other remedy to plug that loophole.
- deleted 3y ago
  [deleted]

gwd 3y ago

These "problems" assume that the "tax value" will actually be similar to the "market value". What's the difference between "0.1% on the declared tax value, you have to sell it for the declared tax value" and "0.2% on the declared tax value, you have to sell it for twice the declared tax value"? I'll give you a hint: the numbers come out to be the same. And there was never any requirement that you put the house on the market for the declared tax value. When you don't want to sell, you make the declared tax value twice (or three times) the market value; when you want to sell, you set it to a bit above the market value, and then put it on the market. Maybe to make the arguments easier you can encode the second one into law. But the basic math ends up the same.

thinkharderdev 3y ago
The point is that everything is always implicitly on the market at all times. So if you declare your house to be worth $X then you have to accept on offer of $X (or else declare a new, higher value going forward). When you're talking about people's home then obviously this would not be a practical system for many, many reasons. But in other domains it seems like a reasonable idea.
- gwd 3y ago
  > The point is that everything is always implicitly on the market at all times. I understand that point; but that's not what GGP said. He explicitly laid out: 1. Government benefiting from "overpricing". But there's no "overpricing" if the tax is set assuming you're going to add a large multiple to the declared value. If the institution setting the pricing assumes that a $100k house is going to be priced at $200k (or $500k), then they can set the tax rate appropriately. 2. Investors performing arbitrage: i.e., someone sets the declared tax value at $100k, market value of house goes up to $110k, investor buys house for $100k and "flips" for a quick 10% profit. But if it's expected that a $100k house is going to be listed for $200k (or $500k), then that problem goes away -- nobody is going to buy a $200k house that hey can only sell for $130k. And nobody's property is going to go up 5x in a single year. Or alternately, you have people declare it at the market rate of $100k, but then write into law that anyone can sell it for 5x. The math works the same, but people feel less cheated for having to "overvalue" their house. (And people have less sympathy for those who write down a "declared tax value" of $25k on their $100k house.) What happens if your house goes up 5x in market value, to the point where you either have to sell or can't afford the taxes? Well that already happens, and it's not great, but there's an argument that this is an inefficient allocation of resources. I understand why a 90-yer-old lady wants to live alone in her 4-bedroom family home a few block from downtown, but is that really better for society as a whole? And if, as a society, we really want to protect that situation, we could always make an exception for a single house that you're currently occupying (as is already done for lots of things -- treating second+ properties different than first properties). > When you're talking about people's home then obviously this would not be a practical system for many, many reasons So taking into account the "sell for 5x" factor, other than the "you're forced to sell if you really can't afford it", what makes it not a practical system? I'm genuinely interested -- this idea has been kicking around my head for some time, and the main thing I like about it is that it makes taxation symmetric. The problem I have with taxation in general is that I recognize that it's necessary, but the way it's normally done, by taxing money moving around (i.e., sales, income, and estate taxes) always seemed kind of arbitrary to me. Since property is depriving society of some potentially shared resource, and taxation is paying society for shared resources, having those be symmetric has a satisfying property to me.

thinkharderdev 3y ago

> This inevitable consequence is that people would be forced to "value" their house at the maximum they think it might be worth in 12 months time or risk losing their home, or even higher to signal that they really don't want to leave their home, all the while paying more tax than they need to because the actual market price for houses would be lower. This is mostly a thought experiment so there is not an actual detailed implementation plan by the authors. But my sense was that it's not that you actually have to sell immediately but more like someone can offer to buy at $X and then you either have to sell or $X becomes the new declared value for future tax payments.

politician 3y ago
Extortion is a risk in this modified implementation. "Is that a $1 house? I'll buy it for $100. No? Enjoy your tax bill. If you want the bill to go away, sell it to me for $0.50." If I had to propose a mechanism, I'd suggest using prediction markets instead.
- s1artibartfast 3y ago
  Yeah, it sounds like an optimal whipping algorithm for maximizing slave labor.
- thinkharderdev 3y ago
  But for that to work you have to actually be willing to buy at $100. So you can come along and try and buy my house for 2x the market rate, but then I can just sell it to you and you're screwed. Of course in the real world there would need to be some way to prevent "predatory" offers (where the "buyer" can't or won't actually close the deal if you accept the offer) but that seems solvable to me. You may have to put down a non-refundable deposit or escrow the sale price, etc.
  - politician 3y ago
    If the solution requires the full payment to be in escrow before the seller is even aware of this particular unsolicited buyout order, it will become difficult for lenders to provide mortgages since they will have no guarantee that the seller isn't already in a negotiation with another buyer. So it might be better to establish a prediction market for any such asset that settles on the owner of the asset on, say, a quarterly basis. Instead of predicting the value of the asset, it predicts the owner of the asset at a particular price level. Instead of presenting the current owner with a bid directly, ownership transfers and tax payments would be handled exclusively through the market platform. ... That said, this is all getting pretty complex.

crotchfire 3y ago

It's a terrible idea for houses because your house has high (and asymmetric!) transaction costs. Moving is painful. But patents are intangibles. They have no transaction cost. This might work for intangibles.

minkzilla 3y ago

It also completely ignores the personal aspect of value. If I lived next door to my sister that is value for me since she can watch the kids if I need to run out for something but she won't do that for anyone else. Likewise sentimental value, a 4th generation home can influence people's price a lot.

fiedzia 3y ago

I know of two use cases for this system: 1. There are races of cheap cars in UK, the prices of cars are kept low because everyone has to declare car value and anyone can buy it at said price (this is intended to keep the prices low). 2. I do not remember where I read about it, but some medieval town near the river used this system for collecting taxes, any passing ship would be taxed on declared value, but tax collector had the right to buy cargo for declared price.