Wealth taxation

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ucim
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Re: Wealth taxation

Postby ucim » Wed Nov 15, 2017 9:21 pm UTC

sardia wrote:For example, the stereotype of the homeowners blocking a high rise from being built or increasingly the cost of red tape. The homeowners get higher home values while prospective buyers get priced out.
Or the other example: the developer that muscles his way into a community of single-family homes and builds a high-rise? Where the property values go down, and the developer gets the benefit of the devaluation by selling (or renting) a lot of apartments?

Jose
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Re: Wealth taxation

Postby sardia » Thu Nov 16, 2017 12:55 am UTC

ucim wrote:
sardia wrote:For example, the stereotype of the homeowners blocking a high rise from being built or increasingly the cost of red tape. The homeowners get higher home values while prospective buyers get priced out.
Or the other example: the developer that muscles his way into a community of single-family homes and builds a high-rise? Where the property values go down, and the developer gets the benefit of the devaluation by selling (or renting) a lot of apartments?

Jose

When the supply of homes rises, the demand (value) for homes does go down, all else equal. Both cases illustrate the gray area of property rights. Saying your property rights ends at the property line is all nice and dandy until you see development happening.

Isn't the estate tax a form of wealth taxation? Not that it's very effective, but still, it's very illustrative of the perils of wealth taxation.

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Re: Wealth taxation

Postby ucim » Thu Nov 16, 2017 1:10 am UTC

sardia wrote:When the supply of homes rises, the demand (value) for homes does go down, all else equal.
But all else is most definitely not equal in these scenarios. It's not builders building more of the same, it's builders changing the character of the neighborhood. It is that, not supply/demand, that lowers property values. To illustrate, if you build nicer homes in an area, the whole area goes up in value despite the increased supply.

sardia wrote:Isn't the estate tax a form of wealth taxation? Not that it's very effective, but still, it's very illustrative of the perils of wealth taxation.
AIUI, it's kind of (problematic) counter to the stepped-up basis that also occurs upon death. Also, it's more of a (hefty) transaction tax than a wealth tax.

Jose
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Re: Wealth taxation

Postby CorruptUser » Thu Nov 16, 2017 3:36 pm UTC

sardia wrote:
ucim wrote:
sardia wrote:For example, the stereotype of the homeowners blocking a high rise from being built or increasingly the cost of red tape. The homeowners get higher home values while prospective buyers get priced out.
Or the other example: the developer that muscles his way into a community of single-family homes and builds a high-rise? Where the property values go down, and the developer gets the benefit of the devaluation by selling (or renting) a lot of apartments?

Jose

When the supply of homes rises, the demand (value) for homes does go down, all else equal. Both cases illustrate the gray area of property rights. Saying your property rights ends at the property line is all nice and dandy until you see development happening.

Isn't the estate tax a form of wealth taxation? Not that it's very effective, but still, it's very illustrative of the perils of wealth taxation.


The PRICE goes down. The demand curve doesn't shift, at least not in the short term. In the long term, well, if people get used to large living spaces the demand curve shifts up, not to mention that the size of the home seems to have some impact on birth rates which definitely affect demand.

As for the estate tax, I'm kinda meh on the whole thing. Rich people avoid most of it by making the grandkids the heirs (so it isn't taxed a second time when the kid dies) and other tricks, and the really wealthy offshore it or hide it entirely, so sadly it's not doing its job as an equalizer. Personally I think the estate tax (and capital gains) should be rolled into the income tax, possibly with the ability to spread it over say 5 years, e.g., you inherit $100k, counts as $20k income each year.

But the point of property tax isn't "well you have property so fuck you, pay up you rich bastard" but "your property needs to be protected by the police and fire departments, it's made more valuable by roads and schools, so you should pay your fair share".

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Re: Wealth taxation

Postby Tyndmyr » Thu Nov 16, 2017 7:28 pm UTC

sardia wrote:Property rights gets since the people who currently live there set the rules for people who work there. For example, the stereotype of the homeowners blocking a high rise from being built or increasingly the cost of red tape. The homeowners get higher home values while prospective buyers get priced out.

There's a further inequality of property taxes. Apparently richer folks can hire lawyers to appeal home appraisals, while poorer people generally can't. The end result is poor people subsidizing richer people's property taxes.
http://www.chicagotribune.com/news/watc ... story.html


That makes sense. Laws, no matter how equal, are more easily leveraged by the folks with lawyers. Harder to get over that one time hump, so you end up paying more in the long run. So, all things considered, I think I'd prefer no property taxes at all. Sure, we're gonna end up paying those taxes some other way, but

I'm actually fairly okay with the gas tax. It may not be *perfect*, but if you want some kind of correlation between use and payment, with a side order of emphasizing efficiency, it's reasonably good. Seems more elegant than many systems, in that you get pretty decent outcomes for a low complexity cost.

Welcome back to you forums. I thought you had moved to greener forums.


Thanks! Just sort of took a hiatus post-election for a bit, spent less time talking politics in general.

ucim wrote:
sardia wrote:When the supply of homes rises, the demand (value) for homes does go down, all else equal.
But all else is most definitely not equal in these scenarios. It's not builders building more of the same, it's builders changing the character of the neighborhood. It is that, not supply/demand, that lowers property values. To illustrate, if you build nicer homes in an area, the whole area goes up in value despite the increased supply.


Sort of. That said, folks don't merely want to maintain the character of their neighborhood, they often want to actually improve values. It can lead to attempting to force out folks who don't "fit", ie, have less pretty homes, less classy businesses, etc.

Ultimately, what happens is that nobody wants to have the low-income housing anywhere near them. Doesn't much matter what the history of the area was.

And in practice, we have a significant need for low-income housing. Not everyone can *actually* live like they are upper crust, and own an expensive home. That's just unrealistic. So, they've got to have affordable housing *somewhere*.

So, I think there needs to be some limit on NIMBYism in practice. There's got to be some line between "they put in a factory next to me that pollutes ridiculously" and "they built a house much smaller than mine". The former is a reasonable exercise of property rights, and the latter seems to be excessive. More infringing on the rights of others to property than defending your own, yknow?

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Re: Wealth taxation

Postby Pfhorrest » Thu Nov 16, 2017 10:41 pm UTC

I've always felt that this "how it affects your property values" thing was a huge overreach of (and perversely, infringement upon) the concept of property rights. If Bob letting his yard look ugly "harms" his neighbor Alice, then can Bob plant an unusually beautiful garden in his own yard (without consulting the neighbors if they want it) and then charge Alice for the "improvement" to her property?

Pollution is one thing. If something from your property is getting onto mine, including into the air around it, that's just trespass. You're actually doing something to me property. But if you do something to your property and the only effect it has on my property is that other people's evaluation of my property's worth changes, you haven't actually done anything to me. That's the kind of mentality by which MAFIAA companies claim unrealized potential sales as "losses" to piracy.
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Re: Wealth taxation

Postby roflwaffle » Fri Nov 17, 2017 4:08 am UTC

ucim wrote:
roflwaffle wrote:but I support unifying/simplifying the tax rates for capital gains and earned income.
Why? Things should be as simple as possible, but no simpler. Capital gains are (mistakenly) seen as free money, as opposed to earned income. But it's not ~ capital gains come with risk - sometimes risk of total and complete loss of all the money that was =earned= in order to buy the stock that was hoped to generate some capital gains but things went south. It's not clear at all that they should be taxed the same.

Jose

Losses are possible, but those losses can be used to reduce future earned income and capital gains, which IMO is a reasonable incentive to compensate someone for that risk. It's also easier than ever to find low cost indexed investments, which minimize the chances of losing everything and maximize someone'a ability to capture the market's average return.

In general, my feeling is that any combination of tax policies and benefit programs that increase negative reallocation will increase income inequality and negatively affect the economy.

https://ergodicityeconomics.com/2017/08 ... est-rates/

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Re: Wealth taxation

Postby ucim » Fri Nov 17, 2017 4:24 am UTC

roflwaffle wrote:Losses are possible, but those losses can be used to reduce future earned income and capital gains,
Losses are not only possible, they are common, and sometimes quite large. But in any case, lost money is completely gone. Distinguish between loss of the capital and the tax consequences of having this loss. A "tax loss" is not free money.

And in the US, the losses can only be put against income $3000/year. If you have a $300,000 loss (which is not at all unusual for venture capitalists, who are the ones that allow significant sized businesses to begin in the first place), it would take 100 years of ordinary income to be able to make this up. Sure, you could put it against another capital gain, but if the loss is big enough (compared to your capital), you may not have another capital gain.

This is a real risk. It's the cost of aiming high. So those that aim high and reach it deserve their reward as much as anybody else does.

BTW, in New Jersey, if you have a capital gain and a capital loss in the same year, and they cancel out leaving you even (net zero), you pay tax on the gain and you do not get a deduction for the loss. It's quite punitive.

roflwaffle wrote:It's also easier than ever to find low cost indexed investments...
Sure, but "low cost indexed investments" don't drive the economy forward, and are highly unlikely to provide a big gain for the investor. In any case, stock picking advise is off topic here; the point is that people pick their investments and need to be fairly compensated for the risks they take. Money from investment isn't undeserved. I'll also add that, especially with long term investments, a lot of the return is often just inflation anyway.

Jose
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Re: Wealth taxation

Postby blob » Fri Nov 17, 2017 10:06 pm UTC

The easiest way to tax wealth is by printing money. The government gets more money, and the increase in the money supply causes inflation so everyone else's money is worth a little less. Voila, effectively a tax.
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Re: Wealth taxation

Postby Thesh » Fri Nov 17, 2017 10:08 pm UTC

That just taxes savings, not wealth.
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Re: Wealth taxation

Postby blob » Fri Nov 17, 2017 10:14 pm UTC

Thesh wrote:That just taxes savings, not wealth.

Well combined with a capital gains tax it does tax wealth ... eventually. Say you buy a house for $10k and it maintains the same inflation adjusted value. After some time you sell it for $20k, which is the present value of the $10k when you bought it. But even though you've gained no real value, you still have pay capital gains tax on the $10k increase. (Modulo exceptions for principle residences in the US, etc.)

If you want people to pay taxes every year you'd need a continuous capital gains tax, which is much trickier, since you'd have to do yearly assessments.

Of course most houses already have their own "wealth tax" - a property tax.
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Re: Wealth taxation

Postby CorruptUser » Fri Nov 17, 2017 10:41 pm UTC

Unless you do a transfer for the same type of asset, e.g., trade one building for another, in which case there's little capital gains to begin with.

Or their wealth is tied up in stock, which if you aren't selling but rather living off of dividends you are basically immune to inflation insofar as it doesn't harm the company.

Or you don't sell your buildings and just live off the rent.

Trying to tax people by printing money is a very stupid idea.

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Re: Wealth taxation

Postby blob » Fri Nov 17, 2017 11:55 pm UTC

CorruptUser wrote:Unless you do a transfer for the same type of asset, e.g., trade one building for another, in which case there's little capital gains to begin with.

Only because of laws that allow "1031 exchanges" to avoid taxes.

CorruptUser wrote:Or their wealth is tied up in stock, which if you aren't selling but rather living off of dividends you are basically immune to inflation insofar as it doesn't harm the company.

Dividends are taxed.

CorruptUser wrote:Or you don't sell your buildings and just live off the rent.

Rent is taxed.

CorruptUser wrote:Trying to tax people by printing money is a very stupid idea.

I never said it wasn't. I just said it was easy, which compared to creating a wealth tax by legislation, it undoubtedly is.
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Re: Wealth taxation

Postby CorruptUser » Sat Nov 18, 2017 4:19 am UTC

blob wrote:
CorruptUser wrote:Or their wealth is tied up in stock, which if you aren't selling but rather living off of dividends you are basically immune to inflation insofar as it doesn't harm the company.

Dividends are taxed.


You are missing the point. Assuming they are taxed at the same rate, inflation doesn't do a meaningful thing to them. If the price of everything doubles, they collect twice as much dividend and end up with twice as much after-tax income. So how in any meaningful sense did your little money-printing scheme result in a tax on them? All you've done is devalue savings (and loans), ignoring the part where massive inflation wrecks the economy, so all you've managed to do is hurt only the people that have most of their wealth tied up in money, i.e., everyone below the upper-middle class.

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Re: Wealth taxation

Postby Tyndmyr » Mon Nov 20, 2017 11:37 pm UTC

CorruptUser wrote:
blob wrote:
CorruptUser wrote:Or their wealth is tied up in stock, which if you aren't selling but rather living off of dividends you are basically immune to inflation insofar as it doesn't harm the company.

Dividends are taxed.


You are missing the point. Assuming they are taxed at the same rate, inflation doesn't do a meaningful thing to them. If the price of everything doubles, they collect twice as much dividend and end up with twice as much after-tax income. So how in any meaningful sense did your little money-printing scheme result in a tax on them? All you've done is devalue savings (and loans), ignoring the part where massive inflation wrecks the economy, so all you've managed to do is hurt only the people that have most of their wealth tied up in money, i.e., everyone below the upper-middle class.


All money is devalued by inflation, and pretty much any business tends to have some operating capital around. Significant inflation eats into that pretty rapidly.

Now, not every industry needs or wants the same amount of money on hand, but some do have a fair bit, and you start getting some odd after-effects, like debt becoming much more popular/expensive. This can create bubbles(if loans remain easily available), or result in loan costs climbing rapidly, and companies dependent on loans for operating capital or expansions may be in a tight space.

On the whole, rich people generally tend to own a great deal more stock, and own more companies in general, so, strictly speaking, they are going to be hurt more by this. However, this sort of thing helps poor people in the same way that lopping off the feet of the tall helps short people. Yes, just printing lots of money is, from a certain perspective, very easy, but it's a bad substitute for proper fiscal policy, and can be disastrous if taken to extremes. Yeah, it *is* like a tax in that value is transferred, but not all taxes are equally desirable in terms of side effects, and large amounts of inflation can be quite costly indeed.

Pfhorrest wrote:I've always felt that this "how it affects your property values" thing was a huge overreach of (and perversely, infringement upon) the concept of property rights. If Bob letting his yard look ugly "harms" his neighbor Alice, then can Bob plant an unusually beautiful garden in his own yard (without consulting the neighbors if they want it) and then charge Alice for the "improvement" to her property?


Exactly! There's an inconsistency there, which most seem entirely happy to overlook. Pollution, sure, I agree. That's actual damages. Painting my house pink, even if pink is unpopular in the neighborhood, is not actually damaging your house. Your house remains the same.

It sadly doesn't stop there. Folk building homes along the approach to an airport, and then complaining of noise from aircraft is ridiculously commonplace. This goes beyond being upset at changes, and ventures into demanding improvements. Always to be paid for by others, of course.


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