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Real estate is so expensive around the world now because of unfair tax policies. True wealth creation is taxed mercilessly via a multitude of income taxes, whil

Real estate is so expensive around the world now because of unfair tax policies. True wealth creation is taxed mercilessly via a multitude of income taxes, while gains from real estate are often not taxed at all, even though they're completely unproductive. A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else. How is that fair? The net result is an enormous redistribution from productive young people to (mainly) older owners and inefficient land use, a growth-killing policy. The solution is simple. Abolish all personal income taxes (or at least reduce their levels) and replace them with land value taxes (not property), something like 30% of value annually. Unproductive use of land would disappear. Retiring people with homes close to jobs would move out fast somewhere else, as short commute times have no value to them. Uneconomical building limits would disappear (more efficient use of land - multilevel housing - would have much smaller land tax per living surface area) which would reduce transport costs and time wasted. It's easy to imagine many more positive effects. Sadly that's never going to happen. edit: After some thought, never is too strong. If aging gets cured, something like that will be a certainty, because the alternative is the world in which - more numerous - generations after the invention don't own almost anything, which won't work for long.

doc_holliday 12y ago
Exactly, capital over the past couple of decades has been unfairly undertaxed vs labour which has been overtaxed to some degrees in places. If we don't alter this course we, I fear will end up at early 1900s distribution of ownership with a crippling economy because actual growth driven by labour will significantly decrease.
nextw33k 12y ago
I am fully with you on a capital tax. It would ensure a system of constant high utilisation. Where it gets shouted down is from old people that have lived in their homes for 50 years and seen their property prices rise to make them millionaires on paper but with no real income. They claim its unfair to force someone from their home. Having studied Alzheimer's disease, it's easier on the mind to live in one place for the majority of your life. Being forced to move later in life can be traumatic. Once you start taxing capitol you'll end up with no more overpriced valuations, conservative banking will be back in vogue.
ArkyBeagle 12y ago
I suspect that "productive use" of capital has simply worn away. What's left is buy and hold of property. Henry George is credited with land rents taxation as a theory. He built on Ricardo's work to posit a complete theory of taxation based purely on land rents.
prostoalex 12y ago
Extrapolating the data from the US http://taxes.about.com/od/statetaxes/a/property-taxes-best-and-worst-states.htm http://taxes.about.com/od/statetaxes/a/property-taxes-best-a... the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply. (The rates there are on "property value", so the rate for land value would be higher than indicated.) > A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else. For one, he took the opportunity risk of locking his liquid capital into a piece of land, which only accumulates property taxes, as opposed to owning a bond or a stock that pays dividend or interest. When you calculate the IRR, land doesn't necessarily come out ahead of S&P 500 over longer periods of time. For two, he took on the appreciation risk - the land is not guaranteed to go up in value all the time.
- duckingtest 12y ago
  >the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply These are property taxes, not land taxes, unless the article is lumping them. A property tax doesn't provide incentives for more efficient use of land, on the contrary actually. Even if they were land taxes, they would be way too small for a meaningful difference. Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most, and presumably invest the gain in whatever productive thing they're doing. >For one, he took the opportunity risk of locking his liquid capital into a piece of land >For two, he took on the appreciation risk There's nothing valuable in risk. Your argument works even better for buying a piece of a rock for a million dollars and expecting profits, as the opportunity risk and appreciation risk are way higher than buying a piece of land.
  - prostoalex 12y ago
    > These are property taxes, not land taxes, unless the article is lumping them. I am not sure I understand. The property tax in the US is the tax on land + additions, both subjects to appraised value, so yes, the rates listed do include both. > Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most How would this be sustainable for farmers or ranchers? If they have to radically increase their prices to account for new 30% land value tax, does the society benefit or lose? > There's nothing valuable in risk. He provided liquidity to the market when somebody was willing to sell that piece of land. If you're taxing someone for providing liquidity, the price of the underlying good will plummet, as that removes incentives for current buyers, and then you're back to square one - low tax revenues collected from land owners. > Your argument works even better for buying a piece of a rock for a million dollars and expecting profits People do invest in gold and silver.

doc_holliday 12y ago

Exactly, capital over the past couple of decades has been unfairly undertaxed vs labour which has been overtaxed to some degrees in places. If we don't alter this course we, I fear will end up at early 1900s distribution of ownership with a crippling economy because actual growth driven by labour will significantly decrease.

nextw33k 12y ago

I am fully with you on a capital tax. It would ensure a system of constant high utilisation. Where it gets shouted down is from old people that have lived in their homes for 50 years and seen their property prices rise to make them millionaires on paper but with no real income. They claim its unfair to force someone from their home. Having studied Alzheimer's disease, it's easier on the mind to live in one place for the majority of your life. Being forced to move later in life can be traumatic. Once you start taxing capitol you'll end up with no more overpriced valuations, conservative banking will be back in vogue.

ArkyBeagle 12y ago

I suspect that "productive use" of capital has simply worn away. What's left is buy and hold of property. Henry George is credited with land rents taxation as a theory. He built on Ricardo's work to posit a complete theory of taxation based purely on land rents.

prostoalex 12y ago

Extrapolating the data from the US http://taxes.about.com/od/statetaxes/a/property-taxes-best-and-worst-states.htm http://taxes.about.com/od/statetaxes/a/property-taxes-best-a... the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply. (The rates there are on "property value", so the rate for land value would be higher than indicated.) > A person holding a land in the city for 25 years didn't make anything new, their profit is a direct zero-sum transfer from someone else. For one, he took the opportunity risk of locking his liquid capital into a piece of land, which only accumulates property taxes, as opposed to owning a bond or a stock that pays dividend or interest. When you calculate the IRR, land doesn't necessarily come out ahead of S&P 500 over longer periods of time. For two, he took on the appreciation risk - the land is not guaranteed to go up in value all the time.

duckingtest 12y ago
>the states with highest property taxes (New Jersey, New Hampshire) don't seem to be the economic powerhouses compared to the states with ultra-low property rates as the theory would imply These are property taxes, not land taxes, unless the article is lumping them. A property tax doesn't provide incentives for more efficient use of land, on the contrary actually. Even if they were land taxes, they would be way too small for a meaningful difference. Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most, and presumably invest the gain in whatever productive thing they're doing. >For one, he took the opportunity risk of locking his liquid capital into a piece of land >For two, he took on the appreciation risk There's nothing valuable in risk. Your argument works even better for buying a piece of a rock for a million dollars and expecting profits, as the opportunity risk and appreciation risk are way higher than buying a piece of land.
- prostoalex 12y ago
  > These are property taxes, not land taxes, unless the article is lumping them. I am not sure I understand. The property tax in the US is the tax on land + additions, both subjects to appraised value, so yes, the rates listed do include both. > Also the biggest effect would come from replacing income tax with land tax, as the most productive people would gain the most How would this be sustainable for farmers or ranchers? If they have to radically increase their prices to account for new 30% land value tax, does the society benefit or lose? > There's nothing valuable in risk. He provided liquidity to the market when somebody was willing to sell that piece of land. If you're taxing someone for providing liquidity, the price of the underlying good will plummet, as that removes incentives for current buyers, and then you're back to square one - low tax revenues collected from land owners. > Your argument works even better for buying a piece of a rock for a million dollars and expecting profits People do invest in gold and silver.