I think the point of the article is correct; the issue with CA is everyone wants to live there, including rich people. If we try and tax them then they'll leave just long enough to not pay state income tax, if we tax property values then the state actually gets the tax and doesn't miss out on job creation or future revenue.
Red states have implemented low income tax with heavy property taxes (think Texas) with great results. and although I'm sure California would just manage to mess it up it's a great idea.
I would not frame Texas as having great results. If anything places should get as little like Texas as they possibly can. I mean they send you to jail for an abortion or a gram of weed. It's living under Shari-yall law.
The lack of a progressive income tax structure gives texas few levers to ameliorate budget issues without cutting services or raising property taxes. It doesn't help the current governor seems to be pushing city budgets to the brink by also cutting off the property tax lever.
Out of curiosity, why couldn't property taxes be progressive? What stops Texas from having different tax rates based on the value of the property?
It even seems like it avoids a lot the pit falls the uber-wealthy use to avoid most progressive income taxes. Its easy to disguise income as something else. Property, though, is right out in the open. The state can easily audit and value property and send the bill. No matter how fancy the accounting, that bill will eventually reach the person "consuming" that property.
In practice, at least from what I've read, in TX, the largest/wealthiest companies get the biggest/best tax breaks (eg Tesla), and end up paying proportionally less, so it's somewhat regressive.
I think the idea is that if the market demand is such that it allows them to raise rents, they'd already have done it, whether or not expenses justify it.
It won't grind to a halt. The owner will sell, because they can't make the business work.
At what price will they sell? At whatever price a buyer who thinks will make it work. And by "work" there are many definitions, from continuing operation at current rents, to building more units on the land so that it generates enough income to pay the tax.
Land value taxes shift tax burden away from productive use of land and on to unproductive uses of land. The people who pay more are land speculators and those with empty lots, and the people who pay less are those productively using the land, which is 99% of homeowners and businesses.
So what happens then? High enough property taxes could in theory result in a situation like Detroit where the land value drops so low that properties are abandoned, with no buyers. But that seems unlikely in California?
At less of an extreme, there are still buyers, but they offer less money so they can still make a profit. So, the property tax basically comes out of land values. The current owners lose money on the property. It's the opposite of the windfall profits that California property owners have gotten from rising land values, taken out of whoever owns the land now.
For the next owner, their mortgage expense is lower, their property tax is higher, and maybe rents and profit margins stay about the same.
Notice that if the demand is there, falling land values doesn't result in lower rents. If your complaint is that the rent is too damn high, higher property taxes won't fix it. Only more housing does that.
I'm a bit skeptical that it would really work out that way. In California, we can have the odd situation where the current owner pays low property taxes, the new owner will pay higher property taxes, and yet property prices get bid up, and whoever buys it has to pay both more property tax and a higher mortgage. But they can still afford it, because there are a lot of rich people out there.
If the assessed land value is actually correct, then someone can make that land work profitably, by definition. That might mean bulldozing a single-family home and building a 4-unit building, for example, but it's doable.
If the assessed land value is incorrect, then that would need to be fixed.
Did tariffs raise prices? Or did prices stay the same because "if the market demand is such that it allows them to raise [prices], they'd already have done it"?
Yeah, that's unlikely. There are certain classes of renters it can't be passed on to during their rental term, but I'm guessing it can and likely would in general.
People can also sell their land/homes and move. It's less liquid than other assets, but less doesn't mean people won't sell/leave.
In Massachusetts it’s legal to pass on real property tax increases during the term of a residential lease, provided the lease contains specific clauses. (Most leases do, as a result.) And most commercial leases are triple-net, meaning the tenant is also on the hook for increases.
I would be surprised if most land consumption taxes (whether structured as property or land) would not get directly passed through to the beneficial consumers of that land quite quickly, or for their privilege to consume that land to be terminated/non-renewed at the expiration.
In California some percentage of certain developments need to be rental controlled, so those are exempt from increases for those lower income folks, but I'm sure the difference would be spread out among everyone who isn't rent controlled.
One of the benefits of a land value tax is that it has zero dead weight loss: because there's a fixed supply of land, the tax won't cause less of it to be around, and you don't lose out on the beneficial transactions that property tax can prevent.
There are several key benefits and I like the theoretical soundness.
My primary concern is that there are generally no market comparables for undeveloped land in developed areas.
If I believe it’s over-stated, I can appeal my property tax assessment by using comparables for nearby developed property. There is no equivalent market-based process for land values alone.
This is a reasonable and common concern, and one I shared until I looked into it in fine detail. Turns out it's far easier to estimate the value of land that things sit on than the entire property value, and most of the country actually operates on continually updated estimates of total property value rather than just land.
There's several anchoring sales nearby, you can regress out from all sales, etc. etc. And it's smoothly varying for nearby parcels, with very little change!
I will read that link later tonight (thanks!), but this still seems like a system where a particular property owner could be “targeted” (politically or economically) and suffer without reasonable legal recourse.
It's actually much harder to target a particular owner, because it's based only on land area, and the value of land in a general area! Property taxes are much much more susceptible to targeting as individual properties are much more variable and there's far more judgement about individual buildings and the potential value of a building.
I hope we agree that we need more taxes, it doesn't matter if they are taxes on billionaires, taxes on property, taxes on sales, taxes on crypto, or taxes on the poor. Without taxes we can't have a civilized society.
Taxes aren’t 0 right now, nor particularly close for anyone being taxed. Your statement supports taxes as a concept at all, but what’s the specific argument that they must be more than they are today?
The number of different taxes is constantly increasing, obfuscating the total tax burden, and making democratic accountability almost impossible. Additionally, tax collections are already at a historical high, while government deficits world-wide are also at record levels, with services on the decline, and no realistic prospect of balancing budgets. This is true for most western countries.
Given the current situation, I do not agree that "we need more taxes", but would welcome your clarifying exactly what you mean.
For a long time I agreed with you, but seeing how the tax money is spent I cannot agree any longer. In most cases government is no longer even spending the money itself, instead it is giving the money to NGOs.
I would much rather see people keep more of their dollars and use them to 'vote' for the products and services that benefit them most, via their purchases.
It would be interesting to run the counter-factual on the EPA. Lawsuits around pollution were already increasing significantly prior to the EPA even company vs. company.
Would the resources have been better spent on a more efficient legal system, then leverage that?
You don’t understand the natural order of things: productivity for you(the worker constantly told to do more), not for me(governments of all sizes, middle management & execs, dumb owners).
I think we should start with changing taxes on corporations/companies, specifically being able to indefinitely write off expenses against income regardless of size/etc...
Most companies take profit eventually, but if it's possible for a company to decide to never take profit and grow/acquire perpetually without paying any taxes on gross income, that's a problem.
That'd be like individuals being able to deduct living expenses and having uncapped pre-tax 401k contributions.
The ratio of the economy that gets collected as taxes has only gone up over time. Do you have an idea for how much should be collected as some ideal ratio? At what point do the effects of taxation become counterproductive?
Well, the general economic consensus is that for income taxes, the revenue-maximizing peak of the Laffer curve is around 65-70% [1]. Revenue maximization isn't necessarily the right primary goal, though.
Same back at you. Clearly you think they’re too high. So what is the correct ratio?
The straightforward answer is there is no correct ratio. The best tax regime is the one that allows for sufficient funding of necessary and desired services and long-term economic investment while also balancing wealth creation with wealth inequality. That number isn’t fixed and it’s clear that it shouldn’t be evenly borne by the population as a whole.
I made no such claim. I simply asked someone who said that we can all agree taxes must go up to what level they were referring to and how they chose the number. If there is no fixed ratio such as you say, then their claim is clearly false.
Sorry, but this is bullshit. You’re not fooling anyone. If you think the GP needs to provide an ideal tax ratio, so do you. You don’t get to opt out and pretend you’re above it all.
But neglects to consider why it won a majority of votes. Why did it? And how does Prop 13 relate to the more recent Prop 19, which substantially weakened it?
Old voters like the house they brought 20 years ago for 100k being worth 1.5 million today. They also like not paying taxes on that 1.4m in wealth accumulation.
I think not wanting to pay some yearly tax on that $1.4 million because the government pretends that the same as having $1.4M cash in the bank, or making $1.4M in a year, is fine.
Not wanting to pay the property taxes associated with a $1.5M home is the problem.
Which is why we also have things like a deferred property tax program! The way to "solve" the problems Prop 13 addresses would be to expand programs like that, but homeowners—disproportionately active middle- and upper-middle-class voters—want to have their cake and eat it too.
opposite, income taxes take place first. after a waiting period, its just capital gains. capital gains taxes are typically lower than income taxes so this encourage long term holding
Whats wild is the commercial side didn’t get closed. I understand the argument for individuals or households (I don’t love it - I’m on the wrong side of it, but at least it’s somewhat defensible), but if you’re running a business and your income isn’t keeping up with inflation, that’s called failing.
If the SEIU healthcare workers union is going to amend the state constitution, they should chip away at Proposition 13 instead of amending the constitution to make a bad tax that encourages capital flight.
It drives me crazy that California voters will wave through every single regressive sales tax hike that is placed in front of them, yet they will crawl through broken glass to vote against a property tax hike on corporations.
Wealth taxes are a symptom of a broken tax system. If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
And care about the rule of law. You cannot pass retroactive laws, you cannot pass laws that target individual people. If you pass a general law (which could very well have reasonable objections), people have to have a chance to leave.
"I'm passing this law that is effective the exact millisecond I sign it, tough shit if you don't like it" is tyranny and despotism. But based on your comment I think you know that.
And care about the rule of law. You cannot pass retroactive laws, you cannot pass laws that target individual people. If you pass a general law...
A wealth tax is not a retroactive law, nor something that targets an individual person. It's a "general law" in your parlance. Think about it.
If you pass a general law (which could very well have reasonable objections), people have to have a chance to leave.
I don't think so. By what legal authority is that required?
"I'm passing this law that is effective the exact millisecond I sign it, tough shit if you don't like it" is tyranny and despotism. But based on your comment I think you know that.
No, it's not, and don't be ridiculous. When they passed laws against date-rape, would you have judged it "tyranny and despotism" unless the law was delayed to give the date-rapers time to finish up the date-rapes they'd planned?
There's no justice in giving the wealthy the maximum opportunity to pick and choose the laws that apply to them.
What hyperbolic nonsense, just because something doesn't affect me doesn't mean it can't be bad policy. Wealth taxes are a fool's errand and serve only to damage and slow the economy.
ah yes, all the tech billionaires of this era, had they been given the heads up that there success would have led to a level of concentration of wealth and power previously unknown to humanity, and that the populace would likely call for some changes to tax law to address the largely unforeseeable structural economic effects of this level of change they brought, would certainly have opted out, leaving the US, and moving to another less tyrannical part of the world, where, by the unique magnitude of their genius, they would have brought all their great works to the glory of other nations and not to America with its overly entitled peasants and social media sharecroppers; clearly the rule of law in Europe and China would have allowed them to fully manifest their unparalleled vision of technological greatness without any concern of a rug-pull by authorities challenging their well-deserved hegemony
If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system
This is to once again mistake net worth for money. Net worth is not real. It is not a good measure of the money someone may be able to realise. They do not have hundreds of billions. There is nothing to tax until they sell some shares.
There is no way to take anything like that. Net worth is quite similar with me saying you are worth 1 billion dollars, but you have zero money in the bank. What do you take, super-rich billionaire person?
The net worth is simply the sum of assets minus the sum of liabilities. Take away the assets and you take away the net worth. I can't think of an asset category that you can't transfer if you are willing to sacrifice its value (which presumably doesn't matter, because it's not real anyways)
In the rare cases where contract law makes the transfer impossible legally the government could trivially step in to make it possible
Why not? Net worth is the estimated sell value of a list of assets. It is entirely possible to take those assets, or charge a tax based on that estimated sell value. Why would it even be a little difficult, let alone impossible?
And certainly ceejayoz was being a bit glib by suggesting we take all of it, but it would not be remotely insurmountable to tax billionaire wealth.
Because that would involve seizing assets? The parent meant it's not "real" in the simple-minded sense that people think it is: the average person imagines Elon Musk and other billionaires have a checking account that keeps increasing by tens of thousands of dollars per second because that's the only frame of reference they have. The reality is the wealth is mostly tied up in assets that ain't exactly liquid. Yes yes, they apparently have access to this supposed infinite money glitch where banks will endlessly loan them money without requiring interest payments (which would require liquidating assets for payment and therefore triggering a taxable event, the very thing people think never happens for billionaires). But the fact of the matter is the wealth isn't money in a bank, and therefore not "real" in the sense the parent was referring to. But it is at the same time something they would miss if it was just "taken away", much the same way you'd miss the numbers in your 401k if voters decided you had a few too many millions saved up for retirement.
the government seizes dollars in the form of taxes, which are still assets, no?
these other assets like musk's stocks are still quite divisible, and theyre as liquid as the government wants them to be. just because musk hasnt written the liquidity into his government sponsored contracts doesnt mean the government cant say yes, 10% of your private spaceX stock is liquid and belongs to donald trump now
I dont know why it's so complicated to just say "Money is Money when it's Liquid, tax it then". Any loans on wealth should be taxed..nationwide.
But even in California's case this doesn't feel like anything anybody would object to. Given how much California Billionaires liquidate using loans on their wealth, I bet, they could do a middle class tax cut too to offset it a little bit too.
I am little baffled as to why the politicos haven't latched on to this whole-heartedly. You can still proudly say you're taxing Billionaire wealth. Because you are! Just more sensibly.
You will find that the centi-billionaires will find a different way to turn their illiquid wealth into personal power and value in a way that avoids that tax.
Well one thing is, they'd sell shares to pay the taxes. Then dilute their own ownership of the thing (Tesla, Amazon) and it would serve as another form of wealth distribution.
Charitably speaking: I suspect the commenter above you was indicating that the government should have a stock portfolio you can transfer stocks to to pay taxes in a non-taxable event type scenerio.
If you're taxing wealth (and not income) then switching stocks into cash doesn't change the wealth. Then use the cash to pay the taxes which reduces the wealth.
It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes. If "net worth is not real" neither is equity in real estate.
The only reason it works with real estate is because they can put a lien on the house and block the sale of it. They don't have any useful mechanism to stop the sale of a share of stock, but since the government is involved in the transfer (due to the registering of the new house deed) of a house, they can stop that one.
Why can't govt block the sale of stocks? It's not like you would be selling non digitalized assets, govts often freeze and reverse stock sales/trades when they find it to be illegal already.
It's harder for private companies sure, but who will stand in the way of govts if they said we will sanction your if you buy X or Y company?
They don't have any useful mechanism to stop the sale of a share of stock
The SEC exists. As do many other mechanisms by which the government regulates direct and brokered securities trades and sales. You can make the case that some of those controls are poorly/ineffectively implemented, but you can’t claim that it’s not something the government routinely regulates, intervenes in, and sometimes prohibits outright.
Society has deemed it "ok" for a real estate transaction to take days or weeks to process and mountains of paperwork, probably because it is done so rarely in an average person's life. But stock trades are expected to be done quickly in minutes or even milliseconds with high frequency trading. It just isn't feasible to inject government paperwork in the middle of a transaction. Wall Street would revolt if they even tried.
The main reason real estate taxes work so well is that tax evasion is very difficult.
Because the building is standing right where it is, in the open, lit by the sun every day. If you don't pay your tax, the government can just take it.
This compensates for the several philosophical and moral problems with it, and I've seen several economists declare it the best form of taxation there is.
If I sell my house, there's a reasonable expected range of money I can expect for it.
If a majority stock holder in a company sells all of their stock, the price first the first share sold is likely going to be completely different (and substantially less!) than the last share sold.
"It's difficult to accurately value" isn't an argument against taxing net worth. It's like the old (likely apocryphal) Winston Churchill joke, "We already established what type of woman you are, now we are just haggling over price". Just take whatever the proposal is, cut in half, quarter, or whatever fraction you want and you no longer have an argument against it.
Personally my favorite idea for this stuff that I have heard thrown around is to allow people to self value everything. However, that self valuation then becomes a price tag. Let a billionaire's accountants put their own evaluation on their equity in a business. But that becomes a binding offer and some other billionaire could come along and buy them out at that valuation. That creates pricing pressure in both directions, the person is prevented from underpricing their assets due to the threat of another buyer coming in and a person is prevented from overpricing because it increases their taxes. And suddenly all the problems regarding how the government appraises these things disappears.
Forcing people to write a call option on their property without an offsetting risk premium only sounds like a good idea if you neither understand the implications nor the math. Asset values would collapse because risk would go to the moon.
And that ignores that it trivially enables large-scale exploitation and looting by construction.
The market determines the risk, not the asset owner. The owner has no special knowledge of what the risk actually is separate from the market pricing it. You explicitly want them to accurately price it outside of a market, which is effectively impossible, ignoring that the price is highly fluid and dynamic.
If the owner is required to invent a fake risk premium then it virtually guarantees that the risk will be mis-priced. Forced rampant mis-pricing is an exploitable arbitrage opportunity of epic proportions. Every quant worth a damn will make a fortune looting this. No serious policy can ignore this defect. It has the additional political downside that no one can ever own anything anymore in a meaningful way, which won’t be popular.
No one takes this idea seriously because anyone with a modicum of finance math background can see that the math doesn’t math. Political ideology doesn’t even figure into it.
Society has already decided that we can compel people to sell their private property for fair compensation via eminent domain. Plus getting the assets in the hands of people who value them more certainly creates utility and presumably increases the tax base via further development.
This type of forced sale happens all the time with public companies. For example, only like 60% of Twitter shareholders approved the sale to Musk, but the other 40% were forced to go along with it regardless of their preference. If Musk can do that to other people, why should some hypothetically richer person not be able to do it to Musk?
And to repeat myself for a third time, we don't need to haggle over price. If we only want this to apply to billionaires, assets worth $50 million, or whatever, that's fine. If one of the people impacted truly doesn't want to sell, let them set the price as high as makes them feel safe. I'm not going to lose any sleep over taxing the emotional desires of billionaires.
People absolutely make that argument about property taxes. That's where deferrals or abatements for e.g. elderly or low-income homeowners, or caps on property tax increases come from. Someone may own a home that property taxes price them out of, forcing them to leave their community because they can't actually conjure money from a higher priced home.
I think a lot of tax authorities also don't really aggressively reassess that regularly without a sale, so it also kind of ends up baked in that if you didn't pay that much for the property, it's only theoretically worth that much.
This is all conceding the argument already. Many of us would happily accept these sorts of limitations on a wealth tax if it means there is a wealth tax.
It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes.
I don't like property taxes either, and at minimum would rather they were called something else, and preferably replaced with per-service charges where possible.
But either way they exist to pay for things, and not to just degrade the value of your property simply because you worked to own it.
It's interesting to see the level of discourse change across time as these same points are brought up again and again.
It seems there are many many more people heavily invested in preventing land tax all of a sudden and are very informed whereas when that guy made a land tax visualizer a few months ago... crickets.
Absolutely ridiculous statement, it's not an accurate measure but it's definitely a good measure of money.
If you have 100B to your name even if it's post IPO stock in a possibly ponzi company that's your current wealth and you can easily convert a staggering portion of it into material realized wealth depending on several factors.
If I use cash to buy 1B dollars in Microsoft shares today, am I not worth a Billion dollars...?
The value may not be exactly convertible agreed so let's just force everyone to book all gains every year, and force sell a net percent of your share.
Not 100B$ of share, but 2% of 100 Million units of stock that you own. Why does this not work?
If I take 2% of your shares why can't it work the same way? I can then pick and sell it over the next year or two however I see fit, in case of govt they can slowly sell back this share to not affect the prices too much.
I am baffled by the fact that we have a tractible quantity and people call it hard to use to measure money.
Paintings, Jewels, etc. are what's truly the hard part of the wealth equation not the stocks, which is over 99% of what a wealthy billionaire owns.
I am not even considering pro or against taxes on billions people make but it's ridiculous to say stocks aren't money? Then what is money really... Currency is also traded, it's value can also go up or down....
even still, the government can propose a value, and if the owner thinks its worth less than that, the government can immediately confiscate the asset and pay that price as compensation.
if the owner thinks its worth more than what the government proposes, they can pay tax on the higher amount.
You are ignoring the most common approach, borrow against the asset. In that case the sufficient assets turn into essentially unlimited untaxed cashflow. Especially with how the market has been lately, the gains erase any burden of the loan. Sounds like a broken tax system to me.
That may be a perfectly viable solution. Seems like an easier path to me, at least. But the point is that these assets are a lot more fungible than you imply.
It is not a good measure of the money someone may be able to realise.
And as such, when you get into the higher ranges, net worth is quite a good indicator.
What evidence do you have that people borrow against assets as some tax avoidance strategy? What are the details of this brilliant, often repeated plan? In particular, where do you get interest rates that are low enough to make it worth it to avoid capital gains even with an asset that's grown 100x over its cost basis (and are you accounting for reinvestment of income like dividends that can't indefinitely defer taxes, creating regular tax lots with higher basis that you could sell first)? e.g. are they getting better interest than SOFR somewhere?
The framing was slightly glib, and you're correct that current rates impacts the equation, but there has been real damage caused by how extremely attractive this strategy has been over the past decade. We sitting on an unprecedented peace time deficit due to a failure to properly tax an economy that has been massively prosperous during this same period. This strategy is small part of it, but it is a real part.
It wasn't extremely attractive if you actually think it through. e.g. if rates are lower and you're willing to carry investments with leverage (that's the idea, right? Your investments will grow faster than interest?), why aren't you already leveraged up to your risk tolerance? I don't think there's actually a world where this plan works. It seems like this is a reddit meme for people who have never actually considered a securities loan.
In theory, maybe, but in practice that is not what happened over the past decade(s). Instead our retirement funds are paying it back.
When the market grows it makes the collateral worth more, which lets the borrower keep refinancing the debt instead of selling assets and realizing taxable gains. As long as the assets appreciate faster than the debt grows, the borrowing can effectively roll forward for decades. Eventually the estate pays the debt out of the assets themselves, but this is not necessarily out of taxable income earned during the person's lifetime. The US markets has seen exceptional genuine growth, but the trillions of 401(k), IRA, etc money flowing in to them over the last 40 years is no small consideration.
And even so, you could say it all settles out in the end, but that ignores the fact that there have constant constant efforts (and successes) in eroding away the e̶s̶t̶a̶t̶e̶ ̶t̶a̶x̶ "death tax" during this same period.
However, the bank is happy to extend the loan infinitely for people with enough assets. It's questionable that whether such loans are cash flow neutral.
Try this - go to a bank and say “I’d like to borrow money using my 401k/Roth IRA as collateral. If I fall behind in payments you can liquidate the entire thing, including penalties, and make yourself whole.”
You’d think they’d jump over each other to lend money against such a stable, secure asset right?
Except they’ll say “sorry, this isn’t allowed. IRS treats borrowing against an untaxed retirement account as an early withdrawal, even if the asset itself stays untouched.”
Turns out the government fully understands the concepts of stocks, gains, unrealized net worth and more, and has laws on the books to make sure you are being taxed appropriately for them.
Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth. Because it’s “paper money”. It doesn’t exist. There’s nothing to tax. Just cannot be done, or it’ll bend the laws of spacetime.
Incredibly terrible example because you are allowed to borrow money against a 401k, up to $50000 with no penalties as long as you pay yourself back at whatever schedule you have determined for yourself
No but he’s also not borrowing against his 401k? You and I can also go and borrow against stocks held in regular accounts? https://us.etrade.com/bank/line-of-credit
Your 401k/Roth IRA (subtracting early withdrawal penalty) amortized over the loan period literally do count when considering qualifying income for a conventional mortgage. This is not a taxable event. You do not actually have to make distributions. It's just standard procedure that it counts when determining whether you can pay the loan.
Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth.
Quite the opposite: Socialist politicans and their media lapdogs have dishonestly convinced you that wealthy people are escaping taxes en-masse by taking out loans and that this can only be stopped by eye watering wealth taxes. They frequently use a motte and bailey confusing unrealized gains (which certainly exist in huge amounts but are also significantly fiction) with tax escape via loans collateralized by securities.
But it's not true: were there meaningful tax escape that way it could be addressed by establishing rules with conditions where taking a loan against securities can be treated as realizing gains (and adjusting cost basis accordingly). Doing so would be minimally disruptive and distorting and have relatively little legal complication (at least compared to wealth taxes!).
But the reality is that the claimed tax escape isn't happening (at least not at any significant scale) particularly in the current interest rate environment, so a reasonable policy change to address it would be a no-op.
... and to grow and maintain their political standing they specifically need to push a NON-SOLUTION because they can't campaign on something that was simply done and solved, and to retain your (highly monetizable) attention they need to rile you up against an Enemy, and certainly never address the state's addiction to wasteful spending and buying votes with tax dollars as one half of the revenue vs expenses equation.
wealth taxes solve the problem that the ultra-wealthy will find a way to make their income untaxable, and focusing on these loans is a red herring. its how theyre doing it now, but not how theyll do it an hour after you add this tax. That the ultra-wealthy propose this as the solution means theyve already planned the next work around.
they dislike wealth taxes, which are an old roman concept predating socialism, because the wealth tax covers all the work arounds they can think of.
it is a proper solution to the overall problem which is extreme wealth concentration.
the obvious alternative is nationalization of all assets worth more than 100M.
DOGE has pretty conclusively proved that the government has been incredibly efficient with spending and doesnt have an addiction to wasteful spending. instead the problem is wasteful monopolization and wealth concentration. society writ large has an addiction to giving a small cadre too much power and control, and they arent the government
Another thing with taxing unrealized gains is that no one in the government is willing to return any money if the unrealized losses happened. Somehow it's all hunky-dory when someone loses 1M in stock value, but as soon as someone's stock went up 1M they all want to tax it right away.
That’s just a decision we made about what is taxable.
Purely an accounting artifact. We can pass a wealth tax tomorrow and it’ll suddenly be taxable.
Net worth is real money, and is usually a very accurate measure of what people can realize. There are a few outliers who own so much that they’d move the market if they sold it all. Selling 2% to cover taxes? Not going to move the market very much.
The actual mistake is pretending like they can't leverage those shares to access fiat, for example securities-backed loans. The proceeds aren't taxable income, the bank gets its interest, and the latter is typically substantially cheaper than realizing the shares and paying capital gains tax. Meanwhile, they keep the assets, which on average continue appreciating.
Which currently require interest payments of ~6-8% APR. Meaning that you need to be able to invest that money that is being borrowed back into the economy to hopefully get a return more than that. And if your investment fails you will have to realize a different investment. The interest being paid doesn't get hoarded either and is used to make other investments, pay employees, build products, etc.
The idea that a bunch of people are just hoarding their money and not reinvesting it back into the system is flawed. Taxes actually have the opposite effect to contributing to the system. Taxes are like if someone was to come and start hoarding money under their mattress for himself and not contribute back to society.
Yeah, it's all illiquid illusory non-wealth when they have to pay taxes, but when they want to buy a newspaper or social network they suddenly have 40 billion in hand.
Forced liquidation hurts more than the sticker price, but with billionaire taxes, that's a feature, not a bug. They make the most sense as a check on concentrated power rather than a revenue driver.
If you have $2bn worth of the same listed stock and go sell half of those, now you have a net worth of $1400m because your gargantuan order drained the order depth, tanked the stock value and triggered a panicked selloff at the stock market which further drove down that stock's price.
You can't take net worth away because it's just an estimate of what someone is worth. It may eventually be possible to turned into dollars and cents without losing too much in the process, but almost universally it can't immediately be exchanged in such a fashion.
Even more so when we're talking shares in a company that is not yet public, e.g. a founder's shares. At that point the valuation is complete speculation, based on what the company may be worth in some hypothetical future IPO. There's no actual price discovery since there's no public trading of such shares.
as I said, if it were unreal you wouldn't mind losing it.
if it is illiquid, you clearly do.
economic illiteracy is not the best foundation for arguing against taxing the wealthy. by pretending the wealth "doesnt really exist" and "isnt there" to tax it highlights the underlying greed motivating the argument.
if you dont agree, perhaps elucidate on a more legitimate reason you might have had for confusing unreal with illiquid?
The lack of reality is mostly from how much net wealth is a guessestimate. The actual realizable wealth is largely unknowable. There isn't enough price information to give a certain answer.
But sure, how do you propose to pay taxes with assets that can't be liquidated and may not even be possible to valuate?
Even if you somehow pay taxes in assets that can't be liquidated, now the government has the same problem instead. What is the government gonna do, pay its employees in unlisted stocks, yachts and famous paintings? How will it even know how much taxes it's gathered?
If the tax isn't isn't just satisfying some sense of petty envy, and the tax is intended to cover some budget deficit, I don't see how this would help.
Net worth is usually not fully realizable unless it is in the form of cash. The larger the net worth, the smaller the realizable fraction usually is. In some cases, including some highly visible billionaires, the realizable fraction is likely tiny.
most people have very little illiquid wealth, and its generally in the form of a house.
billionaires are a tiny propertion of people, and their situation is as atypical as it comes. theres no reason to make super special accomodations for them, when theyre responsible for making their own dumb situation where they have too many assets to make them liquid on a hurry
There is a lot of literature on this. In the US, 2/3 of wealth is non-liquid so any attempt to price it is fiction. Of the 1/3 that is liquid, most is not realizable. Tax policy is effectively restricted to the liquid, realizable fraction, which is such a small percentage of the total that even modest-sounding percentages are a large percentage of what is practically taxable. Governments know this.
An overlooked issue in popular discourse is that notional asset values are tightly coupled to who owns them — it isn’t transferable. Concepts like “dead equity” have been in the finance literature for a very long time. Elon Musk’s equity only has the value it does because he owns it. He couldn’t convert it into cash even if he wanted to.
Well then why are people able to borrow against it and then also deduct taxes on the interest on that borrowed amount?
Also I pay property taxes. Somehow the worth of the property goes up every year and gets gets taxed accordingly. Then why can’t wealth get the same treatment?
They play a clever little game where they borrow against those shares to live on. Since there’s no realized gain, there’s no income (and the interest is deductible against any incidental gains that might happen along the line). Then when they die, the sale of shares to pay off the loan is a non-taxable event and the estate value is reduced so the heirs won’t pay as much (or any) estate tax.
that net worth is still power, which is even more valuable than money.
if you are claiming the high net worth, almost certainly you have raised significant actual money on things you own. a wealth tax means that if you dont actually think your business is worth a billion, you cant raise money as if it was.
thays a net good thing.
if peter theil is lying about being rich and he only has a couple hundred thousand bucks to his name, the publiv overall deserves to know, and it should cost him quite a lot to raise or borrow money.
these people are commiting fraud and should be forced into texas prisons without AC because theyre lying to banks about the value of their assets, and the bankers too beed to go to those same prisons because theyre defrauding their depositors.
this is only a good thing for routing how whos lying about their worth
There is nothing to tax until they sell some shares.
That's tautological. I mean, it's true under current federal tax law. It's obviously not true under new California law, which is what the article is about.
Clearly the government can tax non-cash assets, and they do all the time. People act like "wealth taxes" are some moral horror or logical impossibility, while tossing their mortgage statement into a big file and pretending to ignore the property tax line on the escrow account.
Are there practical problems like "wealth has feet"? Sure. Taxation is hard and all systems can be gamed. But let's not pretend that there's a greater principle at work here.
Larry Page owns about 5% of Alphabet, which is worth $4T, so he has $200B give or take. Which part of that do you think reflects a "broken tax system"? Companies should get kneecapped if their market cap gets too high? Founders shouldn't be allowed to keep even a single digit percent of the company?
The broken part is that there is third world-level poverty on the streets outside Google’s offices, working class people cannot afford to live in the Bay Area, and a fifth of California lives in poverty.
This has basically nothing to do with with market cap of Google or Larry Page's percentage ownership of it; and the state government taxing it more will not make this situation any better.
This is almost completely traceable to Californians' failure to allow sufficiently dense housing to be built on their doorsteps. The only thing Larry did was bring prosperity to the region.
Read somewhere that SF spends roughly 50k$-80k$ per homeless person per year.
Taxing more doesn't solve a massively inefficient system at it's core. Just like US education, we spend more than any country on earth, why is it still bad?
Answering that question with a "if only we had more money" is a really poor argument. The CA tax fundamentals are bad, pooring more cash onto the fire will not fix that.
You can't solve a shortage with demand subsidies. You need to expand supply. SF has too little housing relative to its population, and has perennially tried throwing money at the nonprofit industrial complex which has (obviously) perennially failed to solve the problem because it doesn't generate new housing units, it just bids up and reshuffles the existing ones (and steals a lot of money in the process).
And, many people who are poor have persistent mental/physical disabilities, so part of that spending is because many of these people have it the hardest.
With that said, we could likely fix all of these things and significantly unequal wealth distribution would still result in a lot of poverty.
96k$?! Those are rookie numbers. I propose a mclaren for every homeless person. We will weath tax all stocks in the fortune 500 to pay for it, crash the stocks and solve inequality.
I agree that that's the major problem; the poverty is inexcusable. But that's not caused by the $300B (or whatever) of equity. It's caused because the homeowners of the Bay Area decided that once they got a house, nobody else should, and that they should get to exclude others from the opportunities they had.
This same thing was observed during the Gold Rush in California in the 1800s; extreme wealth also resulted in extreme poverty. And there's a great way to solve this: tax the land and redistribute it equally to everyone. Land can't be moved, it's something that belongs to all of us, and you can't make more of it.
You sort of can make more land -- by building tall buildings. Unfortunately the Bay Area has mostly outlawed that, too. And we can't blame that just on homeowners. SF "tenant advocates" are just as violently allergic to developers building new structures as homeowners are. But the worst offenders are definitely Peninsula and South Bay homeowners.
That distinction between tall buildings and shorter buildings on the same plot of land is exactly why the land should be taxed.
Economic land is any capital that has a fixed amount, that you can't make more of. When the local governments in the Bay Area started capping the amount of buildable square feet, they greatly accelerated inequality by converting regular living space and working space into economic land, just like the real land it sits upon.
This is why economic inequality skyrocketed so much. Rentierism resulted in so much being stolen from anybody who doesn't own the land, and blocks out so many people from even having access to the economic system.
Tenant advocates recognize that eviction is an existential threat to their way of life and so understandably they are fighting for their short term future. I disagree with their efforts in the long term, but I understand why they'd do what they're doing.
In contrast when you have enormously wealthy people like Marc Andreessen fighting against higher density zoning there is no such excuse and it's pure greed. Nothing could actually be an existential disruption to the wealthy in the same way. There is no reason to listen to the rich like Andreessen at all.
The equitable thing would be to focus on redeveloping wealthy homeowner areas and limit redevelopment in areas occupied by poor renters, but somehow that option never seems to be on the table. Only the reverse.
I tend to keep quiet on the following critiques, because it can be counterproductive to larger goals to speak the truth sometimes, but something in this comment got to me and I need to share my truth. You're too kind on the "tenant" advocacy groups here. They are nearly 100% funded by wealth foundations that have exactly the same motivations as Marc Andreesen, and the people carrying out the wishes of the wealthy foundations are merely woke-washing really bad behavior. These "tenant" groups fight the types of change that would redevelop wealthy areas, precisely because of their funding sources, and they do it just as hard if not harder than stopping housing going up in other areas.
If anything, these "tenant" groups only advocate for the interests of a small subset of tenants, those who have their forever home, and do so at the expense of tenants in general. It's "pure greed" too, at the expense of others in their same general social, economic, and political class!
I say this as someone who continues to advocate alongside tenant groups on policy for better protections, for rent registries, etc. And as someone who spent many years giving small donations to local tenant advocacy groups. At least Andreesen is transparent in his greed, and not hiding it. I regret all those years of donations to the groups that hurt people, but when it comes to the few good things they do I'll be there with them still. Marc Andreesen and the wealthy funders of "tenant" groups are not harmed at all by better tenant protection policy, but boy are they harmed if real power were handed back to tenants in the form of having enough housing, and therefore ultimate power over the landlords.
Well I'm speaking from first hand experience knowing working people who live in such situations. Their existence is so precarious that a change in housing situation is indeed existential. So even if there are some disingenuous tenancy orgs out there, it doesn't change the reality that this is a real problem.
They are nearly 100% funded by wealth foundations that have exactly the same motivations as Marc Andreesen, and the people carrying out the wishes of the wealthy foundations are merely woke-washing really bad behavior.These "tenant" groups fight the types of change that would redevelop wealthy areas, precisely because of their funding sources, and they do it just as hard if not harder than stopping housing going up in other areas.
Certainly not the case in my jurisdiction of Vancouver, where such political groups (eg. COPE) have explicitly advocated for apartment development in the wealthiest areas of the city. Maybe this is the case somewhere but a big [citation needed] here. If there are somewhere tenant advocacy orgs that aren't in favour of turning low density detached homes into apartments for workers that's certainly not one I recognize.
If anything, these "tenant" groups only advocate for the interests of a small subset of tenants, those who have their forever home, and do so at the expense of tenants in general. It's "pure greed" too, at the expense of others in their same general social, economic, and political class!
Yes this is the point of my last comment. The solution is to increase the amount of people who have their forever home. The most equitable way to do that is to "destroy" the forever homes of the very rich for whom that is really no big disruptive deal, not to destroy the forever homes of the poor for whom it would be incredibly existentially disruptive. It is not "greedy" for people to want to keep their toehold on their long term home. To be clear the stakes here are not simply moving somewhere else but being priced out of the city entirely.
that has ZERO to do with the tax system... You can't be serious? Have you looked at the data at all? have you seen how much money is spent "combatting" homelessness in San Francisco?
just not his problem. not a single motherfucker on this website lives their life as if wealth disparities are a genuine problem anyways. you are motivated by resentment
Landlords could have collectively agreed to keep rents at $1K/month and not lobby against building more housing complexes, but they decided to be greedy instead.
Why does it matter how much the shares of his company are worth? They just represent ownership of a company. It's not like their existence is somehow holding back wealth from the market or from other people. And if he wants to sell the shares to make some cash, then he's going to have to pay taxes on that, which is good for everyone else. And he wouldn't do that unless he planned to spend or invest the cash receives, which is also good for everyone else. I fail to see the harm.
I think one could argue that taxation should be higher, and harder to dodge, and I would agree with that.
But once you start saying that some people shouldn't have more than others to some degree, that's a very slippery slope. Where do you draw the line? Why is it okay for middle class Americans to buy nicer clothes and move into bigger apartments when people are out there starving? If it's not okay for someone to have the net worth of Qatar, why would it be okay for someone to live in an apartment that's worth more than a poor township in South Africa?
At some point we have to accept that inequality exists, and that although almost everyone could do something to minimize it, there's an ethical and practical line that needs to also respect individuality to a large degree, if we want people to feel incentivized to do things, to feel ownership, to maintain autonomy. And where to draw that line is tough to say exactly, but it probably shouldn't be a line, it should probably be smooth, or at least smooth-ish. So I feel like we're just coming back around to progressive taxation. Which we already have.
Yes perhaps there should be wealth caps. Did Larry Page really do 5% of all that labor that made google as big as it is? And should a single company get so big and have so much power? Yes, I get that they took risks and invested early, and we shouldn't take away that type of incentive, but perhaps it should have caps, or an S curve tax schedule.
Google doesn't have much power. It can't arrest you or pass laws or vote. It just happens to produce a lot of profits for its shareholders (who are, overwhelmingly, average people with 401Ks) and a lot of profits means a big market cap.
If we need revenue to fund useful government programs, great, let's tax Larry. But I don't understand what problem is solved by expropriation qua expropriation.
it does have monopoly power and anticompetitive power all over the place though.
google bans are quite intrusive, but google could pretty easily with their graph knowledge apply secondary or tertiary sanctions, at which point you would not be able to do much of anything, same as if the US government sanctioned you
Companies should get kneecapped if their market cap gets too high?
Yes. They should be broken up because competition is good for consumers and society. If we had functional anti-trust enforcement Google would not have a near-monopoly on search ads where they own both the ad inventory and the marketplace where you have to buy those placements.
The part where he has access to essentially unlimited untaxed cashflow by borrowing against that asset. Especially with how the market has been lately, the gains erase any burden of the loan. Something has be done about this, at least. Otherwise broken sounds about right.
Larry has sold tons of Alphabet stock and paid lots of capital gains taxes. This is easily available public information. The whole buy-borrow-die thing is sort of a stupid myth. Actual centibillionaires diversify because the risk of having a huge concentrated position is much greater than the liability of having to pay some capital gains taxes.
Well, why does something have to be done about this, exactly? Who is getting hurt here? It's not like borrowing is increasing his net worth. Just like anyone else, he has to pay back what he borrows, he immediately owes an equal debt. And that requires actual income, which gets taxed.
Just like anyone else, he has to pay back what he borrows, he immediately owes an equal debt. And that requires actual income, which gets taxed.
In theory, maybe, but in practice that is not what happened over the past decade(s). Instead our retirement funds are paying it back.
When the market grows it makes the collateral worth more, which lets the holder keep refinancing the debt instead of selling assets and realizing taxable gains. As long as the assets appreciate faster than the debt grows, the borrowing can effectively roll forward for decades. Eventually the estate pays the debt out of the assets themselves, but this is not necessarily out of taxable income earned during the person's lifetime. The US markets has seen exceptional genuine growth, but the trillions of 401(k), IRA, etc money flowing in to them over the last 40 years is no small consideration.
Well, why does something have to be done about this, exactly?
The something here is what's required to have a functional tax system. Without addressing this situation I do see an argument that we have one. How important that is to one is another question.
the people getting hurt is anyone who would have bought something but was outbit by larry page's free money glitch.
he doesnt necessarily have to pay it back either. he could just take out another loan against his same now higher valued assets to pay off the old loan
like, if a company's market cap gets too big, the law should stop applying to them? they should be allowed to start their own militaries and enforce martial law a la east india company?
how does a founder keep a single digit of their company after theyve been dead for a thousand years?
These arent nearly as absolute as you are making them to be.
a founder can keep their percent by paying their taxes with other money they have, or by decreasing the worth of their company. theyre a founder, they have control. Maybe founders wont be so keen to enshittify their products if theres a downside to continued growth forever. considering google dropped "dont be evil" in exchange for making larry page's 1% grow for the sake of growing, how's society at large benefiting from continuing to subsidize it?
If you taxed him half of that wealth he'd still have single digit percentage of the company.
The broken tax system is that I get taxed about 50% on my marginal income dollar --- the system doesn't wait for me to spend it first --- but when his stock portfolio appreciates by a dollar, he's not taxed! Not until he sells in order to spend. Why are we taxing labor so much more than capital?
And no, I don't think that inventing pagerank really entitles two people to $200B. Although in their case I don't think they've done as much harm with it as some other billionaires.
If the $100B+ was created through ownership of a company and is unrealized wealth, how would you have taxed it if not through a wealth tax? Nobody is getting to $100B by way of income.
I would care more about the broken tax system if the politicians didn't waste our tax money. Stop the fraud and the corruption and the incompetence and then let's talk about increasing taxes.
$24 B unaccounted for and lost that was supposed to be for homelessness.
$12 B already spent on high speed rail and they want $120 B more.
$50 B in EDD unemployment fraud during the pandemic.
This is just in California in the last year or two.
How much more fraud and corruption and incompetence is there that we just don't know about?
There is no way I will agree to any increase in taxes just to see it wasted and going to corruption and political buddies on every side of the aisle.
Stop the fraud and the corruption and the incompetence and then let's talk about increasing taxes.
Zero taxes is the only right answer. Any talk of taxation means that you have already given in to being exploited, because it's a slippery slope. Let's be realistic - corruption will never end. The only way to reduce it is to starve the beast.
We're in a situation where it's already "too late". We can't go back 100 years. How do you propose we fix it, assuming time machines won't get invented soon?
If you let someone get to hundreds of billions in net worth
"Let someone"? I guess the right to pursue one's happiness is not all that self-evident after all. One should first ask permission, and, if we are in a good mood, we might "let them" pursue their happiness.
1. If wealth was only motivated by taxes and was going to leave, it would've left already. Fact is, billionaires don't want to live in Tennessee;
2. Nobody is doing the right thing to tackle any of this, including California.
The article mentions California has land and that's the key point. Unfortunately, California homeowners have been coopted into voting against their own interests to raise property values. If the house you bought in SF in 1975 for $80,000 is now worth $3M, you still only own 1 housing unit's worth of wealth. And that housing cost is an input into everything you need to buy because all the workers required for those things have to be paid high enough to pay those exorbitant rents.
Let me repeat that: high housing costs are an input into everything that you buy.
So what needs to happen? We need to stop treating housing as a speculative asset. It's simply stealing from the next generation. Worse, it's diverting investment capital from productive output because land has become the asset with the best tax treatment, highest returns and most government protections. So what does this look like?
1. Some form of land value tax. The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable;
2. Punitively tax land hoarding including second homes. We could give discounted rates to primary residences of state residents. Nobody else should get a discount. This would mean repealing Prop 13 and that's never going to happen. As an example of this, I'll bring up Prop 19. In CA you can inherit a preferential property tax rate. Prop 19 proposed to limit this to only one property could inherit this preferential rate and it barely passed (51% IIRC). Do we think that 49% of California voters have multiple properties that have property tax rates set 40+ years ago? Of course they don't. It's an example of how people vote against their own interests;
3. Part of what sold Prop 13 originally was the idea of pushing seniors out of their homes with property taxes. Well, that gave Disneyland a tax rate that was set in the 1960s. California should do what Texas does: you can defer your property taxes until you die if you're a senior but there's no capped property tax rates like incumbent SF residents have and no inherited preferential property tax rates;
4. Wind back the preferential collateralization of property for mortgage debt over time. Residential property lending now dominates bank lending and earnings. It's significantly harder to get finance for any form of productive output;
5. Wind back over time preferential tax treatment for home ownership.
Do I think any of this will happen? No.
Oh, one of the worst things to do is transaction taxes, often called stamp duty. This is where you pay a percentage of the value on purchase. This really hurts mobility. I guess it's fine if it's only on the luxury end of the market (CA's is at $5M+?) but it's not a good idea regardless.
The other part of this is to provide social housing like Vienna. The government should be a significant supplier of affordable quality housing.
We need to stop treating housing as a speculative asset.
Something I've been yelling from the rooftops.
Housing can either be affordable, or it can be an investment that's bought, rented, and sold for the sole purpose of profit. It's not possible for it to be both.
People expect their house to appreciate faster than inflation, but all that does is rob the next generation of home ownership.
Ditch or reform/restrict the 30-year fixed-rate mortgage. Remove barriers to building more housing. Other stuff, but you can do a web search, I'm sure.
We need to stop treating housing as a speculative asset.
This kind of assumes the only reason a house appreciates in value is because people are "treating it as an asset" rather than "the house I bought 30 years ago in the middle of nowhere is now smack dab in the middle of a very desirable area." At that point it's simple supply and demand, not some homeowner being greedy.
The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable
This makes the fatal assumption that just because a house is worth dramatically more than what you paid for it many years ago that your income must have risen just as dramatically. "Oh well, too bad, sell your house and deal with it." Maybe people kind of like living where they've put down roots and don't want to be punished for something outside of their control? Any proposal that boils down to "pay more or fuck off" is not going to go over very well.
If the tax is calculated based on residency at the time it was earned or granted rather than when it vested or was sold then it doesn’t matter if they leave.
I agree the proposed wealth tax is a bad idea, but raising property taxes is probably not viable. They are incredibly unfavorable to voters. No one who owns a home wants to pay rent, that's why you buy in the first place.
Personally, this is why I am fine with higher income or sales taxes.
Sales Taxes are the worst ones. Burden on seller, burden on buyer, regressive. Income is more fair but easy to mask-out for the wealthy. Property is meh, Wealth tax is the best one. Assuming all were well designed.
Some items taxable, some are not. Keep track. Some have different rates depending on who's buying, keep track. Buyers in different locations pay different rates, keep track. The rules change frequently, keep track. Collect money for the govt, keep track. Remit quarterly or face penalty.
There complexity and overhead on sales taxes; more than on an income, retained earnings or wealth taxes.
Also, sales taxes take more percent of wealth away from the lower wealth bracket than from the upper wealth bracket.
Sales tax and the gasoline tax are use taxes. They are about as fair (democratic) as you’re gonna get because it’s based upon use most the other taxes whether they’re high or low, you can’t escape from particularly if you are the average person in the middle, and once again, if you benefit from capital gains, that is a huge life-changing benefit, which most working people don’t have. Vote yes. on proposition 40 if you are in California the less than .001 and even the 1% will easily survive.
They just want continually delivered services from the city funded by taking out increasing amounts of debt or selling off new land in a ponzi scheme to fund existing obligations.
The numbers on wealth distribution are shocking, to say the least. I think wealth taxes without loopholes are a really good idea in the current circumstances, infact I believe it may not go far enough. And I think there has to be a global concerted effort to tax wealth.
The working class are starting to choke and drown in financial stress, and this will only get worse. Capital naturally accretes and we've never had this level of capital concentration in human history.
Not even the poor. Really everyone working. I would much rather sleep all day and live off of a pile of money than to show up somewhere and do something for money. That's the tax -- 35% of your waking hours are now at the service of someone else. And yet, they charge income tax on that. Stay home and live off a stash of money in your mattress, 0% tax, 0 obligations. Wake up and commute to work, 35% of your week gone, 35% of your "income" gone.
I am not even that mad that I personally have to pay taxes. I enjoy funding government programs! I think I owe society something! But it sure doesn't make sense that already being rich makes you immune to giving back to the society that made you that way.
Which is why the majority of people in California who work for a living shouldn’t be carrying any water for billionaires or hundred millionaires, you could even extend that down to someone who’s worth 10 million, until you get to that level, you don’t realize how many people over that level have it very easy.
In comparison to the majority of the population, you know the other 99%. That’s right, you heard it right. 99% of the population does not have $10 million free and clear without debt. In other words, if you are still paying off your house you are not in that upper bracket.
the rich are an astounding amount of wealthy such that they dont show up and still make a good poor wage in the first couple hours/days of a year by their assets increasing in value
you are poor, even if you are doing plenty well for yourself
No one who owns a home wants to pay rent, that's why you buy in the first place.
If this is actually a common attitude, people are... ridiculous. Real property is a limited resource, and allowing people to own property comes with strings attached. This is a pretty normal thing in very many places.
But I do agree that raising property taxes in CA in particular is a politically toxic topic.
The land value tax can’t be dodged by leaving nor can it be passed on to renters.
In what sense can't it be passed to renters? Esp if all landlords in the market were faced with a new land tax that they had not previously planned for, why would it not be passed on?
Rent is a function of supply and demand, not a landlord's costs, otherwise we would expect changes in e.g. mortgage interest costs to be passed on to, but in practice we don't see this effect. We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
LVT would push up the supply of rental properties by ensuring that property owners who don't rent out their properties or who don't make efficient use of land lose money.
Thats an incentive to rent out the property or sell up to somebody who will.
It would apply harsh market discipline on landlords - a demographic that has usually been rather coddled.
A property loses ~30% of its value when rented out and maintenance cost and insurance cost goes up significantly. Plenty of landlords rather have their property be empty and just collect on the equity gains over the years without putting in any effort.
property owners who don't rent out their properties
The existence of property tax (which on a single house in some areas of the state is upwards of $15,000 a year already) already makes it absolutely ruinous to just sit on an extra house you don't need and not rent it out.
or who don't make efficient use of land
A little more convincing. Though I suspect most empty land in places where anyone would be willing to live in California, is empty because our insane zoning laws don't allow what would otherwise make sense there (I don't care that it's like what most areas have -- it's insane to have laws that would make it illegal to build a place like San Francisco, Brooklyn, or Boston).
The funny thing about those zoning laws though is that they're held up by a rare case of bipartisanship:
- The MAGA Boomer set who doesn't want any more development near them because "it'll bring traffic" or noise or crime
- And most of the "progressives" who don't want any more development anywhere because "we hate greedy developers" and "Not enough of this proposed development is low-income housing for the government to dole out in lotteries to a few lucky families."
otherwise we would expect changes in e.g. mortgage interest costs to be passed on
These aren't a universal cost. When rates change, some landlords' costs go up. But some don't. That lets the latter set the marginal price.
If everyone's costs go up the same amount, it's collusion without communication. In an inelastic market like San Francisco's, you'd expect prices to rise.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
Taxes may not affect the amount of land that physically exists, but they absolutely can and do affect the amount of land available for rent as opposed to other income-generating use cases.
On top of that, a tax that applies equivalently to all of the land available to the rental market in a given area will simply push prices upwards across the board, which is likely to just be absorbed by renters given the usually low price elasticity of demand for housing.
These are assertions, not arguments. Respond to points in the post you replied to. Be sure you understand them first; your assertions do not hold in the case of LVT.
On top of that, a tax that applies equivalently to all of the land available to the rental market in a given area will simply push prices upwards across the board
Most research asserts that a land value tax decreases the selling price of land.
In a fully functioning spherical chicken market, once balancing in
If I buy land for $100k today, I can assume I'm going to make say $6k a year from renting it to someone and $2k a year from it increasing in value, giving me a 8% roi
If I instead had to pay just $4k a year in LVT, the price would reduce to $50k to keep that 8% roi. I'll still be making money for doing nothing.
Now if that LVT was returned to the population at large, it's quite possible the population has more money to spend on land, so I could increase the rental price from $6k a year, but then the LVT would increase, because the idea is it reduces unimproved land value to zero -- nobody should make money from occupying land, they should make money through improving it.
In reality though any LVT implemented would be full of loopholes which would introduce absurd incentives. Just like taxing income, and worse taxing earned income more than non-earned income.
All property owners can increase rental prices now anyway. They can only increase them to the maximum someone will pay for it. That's why average rental prices tends to track average income. If you have 5 homes and 6 people, each able to pay 2100, 2200... 2600, then the worst home will rent for 2200, and the one who can only afford 2100 will live in a box.
Why would a land value tax shift the allocation of land between uses? The amount of the tax doesn't depend on what the land's being used for. If renting is the highest-value use without the tax, it will still be the highest-value use with the tax.
Most mortgages are fixed interest. So it makes since that today's rate change doesn't impact a renter cost in the near future. Probably not until the next time the property is sold.
If I own £100K worth of land, and the government announces a 1% annual land tax, it's likely the value of my land will fall by about ~25-33% overnight.
If you think that's morally unobjectionable, fine, but I'd love to know what happens when all the landowners who own rural land that doesn't have a profitable development path attached to it can't pay their tax bills. Have the state seize it all?
Or do they just claim it's of negligible value and avoid the tax?
You would sell the development for as much as you can get, regardless of tax. The people buying from you aren't going to pay you more just because the government raised your taxes.
A land tax would effect every single landlord though. Every single landlord would put up rent.
The market will bare it because people have no choice. The choice is homelessness or paying the higher rent.
It's principally the same when mortgage rates rise. Landlords with mortgages put up rent. Only it would be worse, since not all landlords have mortgages.
Although the rules were later somewhat changed. Perhaps after pressure due to terminally ill farmers committing suicide (before the tax came into effect so that they could pass on their inheritance).
Is there really a market dynamic in rent pricing anymore? I thought that algorithmic collusion had eliminated the need for landlords to compete on price.
I thought that algorithmic collusion had eliminated the need for landlords to compete on price.
Well, that and non-enforcement of antitrust which is a big part of many of our current economic problems.
Massive corporate landlords like Greystar and Morgan Properties own so much of the market they can do a lot of pricing damage even without colluding with others (but of course they do that too).
We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages.
Why would they as long as they find a renter? The market always charges the marginal cost.
Landlord costs affect supply in the long term, so you will see changes, just not necessarily immediately over a one year period, but definitely over a 5-10 year period.
We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
If costs are uniform for each landlord (they have to pay for), it limits the amount of money they can invest in new capacity, and you will see the effects over a decade. If one landlord has cost advantage over another, then they will of course probably just take the extra money as extra profit.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
They provide friction with what can be done with the land, because the cost of owning the land has to be paid. If it is just a land tax, however, you can game it by building as much as possible on it so the landowners who can't build as much as you can subsidize your usage (long term, you either have to build as much as you can on your land, or sell the land to someone who can).
A transaction can occur if the price is >= the seller's cost, and <= the value to the buyer. If it's at the minimum, the seller must pass on the tax or not trade, at the maximum (down to the max minus the tax) , the seller can't pass on (all of) the tax and still trade. We observe that landlords make profit, so we are not at the minimum. Are we at the maximum?
I think there are cases where we are in between for significant periods of time. Consider a positive shock to wages. Can landlords put up prices overnight? I don't think so, unless the landlords all co-ordinate to do so, prices will be sticky as there are always some properties in the market, so it's difficult to be the first to increase rent. Unlike a purchase, a landlord who waits for a buyer at the right price is forgoing income during the void. So the market price can be a Schelling Point.
A tax increase, however, happens at the same time to all landlords. All of them would prefer to pass it on, and they know that so they can assume all other landlords will try to pass it on. If the rent is currently below the maximum possible, they will succeed.
How long it takes prices to adjust I don't know. It is an empirical question, but I don't know what data would answer it. But it seems like it took decades for landlords to capture the two-income surplus after it became common for women to have a career.
I do acknowledge that rent is a function of supply and demand in the big picture, at least. I don't think the whole foundation of economics is wrong.
Demand for apartments will be constant.
Supply of apartments will be constant.
But I think what's going on here is that we are way off the equilibrium point. The supply of good places to rent is far outpaced by demand for them, at most price points, and especially so where all the value is (on the coast). So, this means if you're a landlord and you know you'll owe another $1200 tax to Sacramento this year, you should be very confident that if you raise rent by $100 a month, even if an individual tenant would rather move than pay it, someone who can afford $100 more exists and will almost certainly fill that vacancy promptly. It may represent a slight step down in what their buying power would buy. Like, they may have rented a $3000 apartment before, and they'll now rent what used to be a $2900 apartment from you for $3000.
Do you really believe that landlords will subsidize tenants for a long time?
This literally happens all the time in California.
You buy a house in CA. You move somewhere else. You hold on to the house because your property taxes are fixed and housing prices grow like crazy here. Maybe your kids will want it. Maybe you'll want to move back..
You can't charge enough rent to cover the mortgage and taxes os you end up taking a loss monthly.
That cost will, of course, be passed on to renters unless the rental prices cannot be raised at all.
If they can't be raised, and the costs end up being ruinous to the landlords, they will find other solutions like mass arson. That isn't hyperbole; this was a serious problem in the 1970s:
https://en.wikipedia.org/wiki/1970s_South_Bronx_building_fir...
That was obviously not acceptable... but it was predictable.
All legal proposals should be viewed like a chess move. Presume others will respond, and make sure you're ok with that response. In a sense that's also the point of the original article too, a law was passed without adequqtely thinking through what would happen.
I actually think there's a lot of positives in land value taxes. However, I was objecting to the phrase "The land value tax can’t be dodged by leaving nor can it be passed on to renters" because that is missing key issues.
Land's assessed value is based on what you could do with it. If can be rented at a profit, that's something you can do with it, and its potential matters. If it can't, then that is no longer a potential value of it.
That doesn't make lvt a bad idea, it's just that I think there's not enough acknowledgement of the trade-offs and limitations.
Burning down an apartment building doesn't change what could be done with the lot; an appropriate valuation method for LVT would not give a different valuation for the land depending on what is built on it.
Burning down an apartment building doesn't change what could be done with the lot; an appropriate valuation method for LVT would not give a different valuation for the land depending on what is built on it.
True, but an LVT is a cost. Changes in cost can change what is financially viable to do with a property, regardless of what is currently done with the lot, and thus can impact the land value.
Actually no, land value tax is not a marginal cost so does not change the profit maximizing use of land.
The idea of cost-plus pricing is folk economics.
Tax incidence is very well understood in economics and has to do with relative supply and demand elasticity (supply of land is perfectly inelastic) and marginal costs which land value tax does not touch.
It's accurate to say LVT changes the price of land. But it doesn't change the profit maximizing productive use of land.
Other taxes that scale with production (sales tax, income tax, property tax) do change profit maximizing productive use.
It is quite disingenuous to attribute the South Bronx fires as a result of landlords unable to raise rental prices. I mean that is technically true, but your comment makes it sound like it was a result of a particular legal proposal. It was not. It was a period of urban decay in NYC and many cities in the United States. It was the continuation of white flight into suburbs that started in earlier decades. It was a large demographic change with complex causes.
If they can't be raised, and the costs end up being ruinous to the landlords, they will find other solutions like mass arson
Landlords who have their entitlements to land rents or other natural resource rents they've captured ripped away from them would almost assuredly endorse the use of violence.
Land redistribution (of which this is a form) from the landed rentiers to the landless has historically resulted in brutal violence in order to protect their privileged claim on non-human created wealth.
LVT is incoherent, it pretty much only benefits people who are cash rich and land poor. Which is why it gets so much oxygen from tech elites with lots of cash and an inability to buy a house somewhere like mill valley, or wherever.
Essentially taken to the logical conclusion, there will be people competing for more cash to pay their increasing taxes on the same land, it doesn't fundamentally solve the problem. It's such a joke.
"utilized better" in that context just means that the owner of the land can support the taxes on it, it doesn't mean suddenly we are going to put skyscrapers in el cerrito.
No, you won't have a skyscrapers in some random village in the middle of nowhere. But maybe the land owner, seeing how high is the LVT tax is, decides to build a 5-stories apartment building with 50 units, instead of 5 single family homes. And that's a win.
I do understand how it works, are you saying that the zoning will magically be fixed when the taxes go up or the land becomes more exlusive? because I can tell you which one has precedent and which one is wishful thinking.
Rents are already as high as renters can bear. If a tax is introduced, you'd expect landlord competition to drive down the landlord margins, not increase rents.
The supply of land is inelastic. Property developers can't get more land by building more houses on it (and as a corollary, the eventual owner also do not get charged more in taxes).
I don't think this is why it won't get passed on. In theory the lowest income could leave the state and higher income renters would come in.
But in reality a land value tax incentivizes higher density housing. A single house and an apartment complex pay the exact same amount of tax, while the apartment building can split it up over many occupants. Land value taxes are a very natural hands off way of encouraging the right use of land, empty lots and car parks become unaffordable in highly desirable areas while apartments become relatively very cheap.
In theory the land value tax could be set so the overall taxation is the same as before, but but the distribution is such that the people with massive blocks of land in highly desirable areas foot most of the bill. This would over time make housing cheaper over time as more housing is built to reduce the tax burden.
a land value tax incentivizes higher density housing. A single house and an apartment complex pay the exact same amount of tax, while the apartment building can split it up over many occupants.
That would only be true if the LVT replaced the existing property tax structure, which is not what TFA is calling for.
This is the problem with governments who think they can synthesize value. They think all businesses can too.
If these communists succeed, they will use the very fact that a landlord cannot synthesize money to prove the landlord passed the cost to the tenant and seize the land.
the rent is already priced to the maximum of purchasing power of the local renters ability.
if landlords were able to raise rent, they would have done that already as its pure profit for them. The fact that they can't, means they will have to eat any marginal tax imposed on them
The author makes the comment about the land value tax not being able to be passed on to renters in the context of comparing it to a property tax.
If I’m understanding the argument you’re making here correctly, wouldn’t what you’re saying be equally true for a property tax?
I’m not saying you’re wrong, but I don’t think the author would agree with your point since I don’t see how your argument could be true for a land tax, but not for a property tax.
Landlords are competing with each other, and renters can take their next best alternative. If everything gets strictly more expensive, the next best alternative is not necessarily any cheaper...
The author probably has a very superficial understanding of economics. It's economics 101, like VAT, the cost will be passed to BOTH the renter and the landlord. The portion of each is dependent on market dynamics and hard to calculate.
In the instance of perfect elasticity of the demand or perfect inelasticity of the supply, the price will remain the same and the entire tax burden is on producers. An example of perfect inelastic supply curve is unimproved land (the supply of improved land is elastic because more or less could be created by investment in improvements) or crude oil. Thus, the whole tax burden is on landowners and owners of the oil.
Which economic system are you critiquing? I would tend to agree, since I think wealth taxes amount to a breaking of the 8th and 10th commandments. But I also think some would argue that the consumerism (envy) that often drives capitalism is a form of covetousness. I think the counter argument is that capitalism does not require consumerism, and that consumerism (envy) can appear in any economic system.
not good believer in christ would ever participate, when jesus made it clear you are supposed to freely give away everything you own to the poorest among us
It's covetous to expect someone else to give you a part of something they worked for and you contributed nothing to. One of the basic 10 commandments is not to covet your neighbour's property; envy is a sin.
Exactly $0 of high speed rail infrastructure was funded by sales taxes. State dollars came from prop 1a and cap and trade funds. About 12B over a decade and a half for heavy engineering, land acquisition etc. if that money was not spent it would have a negligible impact on your taxes.
California spends an insane amount on combating homelessness with nothing to show for it. This is a difficult problem to solve for sure; I'm not an expert in this field and would be speaking out of turn were I to suggest preferable alternatives. Suffice it to say that billions of dollars are being flushed down the toilet doing whatever is being done right now.
Land, as apposed to the property on it, is raw nature. If we view raw nature as a common inheritance of mankind, then paying a tax on land is how the exclusionary use of it, balances with the common interest in it.
Economist Henry George in the 1800's, pointed out that taxing land, but not the property on it, incentivizes efficient use of land, because holding land for its passive (parasitic) return even when underused, becomes unprofitable when the land is taxed in proportion to the value it can enable.
And in turn, only taxing land, not property, incentivizes increased development, as higher property investment amortizes land tax against higher returns.
Greater investment in housing being just one way land tax, without property tax, incentives greater productive use.
So many things align for higher growth in ways that more evenly benefit everyone. But our relationship with land is over-complicated, and that is both the reason for change, but the reason change is so hard.
Small attempts have failed, but then, for the rich who can hold land and reap growth in value that outpaces the taxes they pay on it, that remains another inefficient/negative-externality, that pays off for them.
If it's also a necessity for life, then honestly, yes?
Also, even when not a necessity, taxes are often just more efficient than the alternative.
Think about taxi licenses before Uber. The government thought there were too many taxis. They made a limited supply of medallions therefore. The government gave them away to existing taxi drivers for free. Eventually they reached $1,000,000.
Eventually there were too few taxis. Existing owners complained about trying to expand the supply because maybe they just took out a loan to buy one. People were even renting out medallions. Something the government handed out for free.
The whole mess could have been avoided if the government just taxed taxis until the quantity matched what they wanted.
In a way, you'd end up in a position similar to just handing out the medallions for free. The differences are the government is getting the money and the rate can be more easily changed.
This is a pretty close metaphor for land value tax. All LVT really does is instead of paying the prior owner or a bank for land, you pay the government in installments.
Not if there are either substitutes or financial incentive to make more. Capitalism is pretty great, it just doesn't work for certain natural resources that have a very finite supply.
We’re all on this world for a little while and then we die and leave behind the detritus of our lives.
For some people that’s a house full of crap that their kids need to clean out after the funeral and for others that’s a dilapidated apartment building that’s soon to be condemned and will require asbestos abatement and demolition.
If you exclude others from a rectangle of land, you are imposing that exclusion on others and the others are due consideration. The rest of the property stack is good -- improvements require investment, investment requires returns, so binding the returns to the investment is important and creates incentives for good stewardship and skin-in-the-game decision making etc -- it's "just" the foundation that is problematic.
Georgists want to tackle this with a Land Value Tax, I tend to think it would be difficult to make this robust against highly motivated attack and the better approach is long-term leases with similar duration to building depreciation schedules. In either case, the idea is that capital appreciation of the dirt (which is really capital appreciation of the right to exclude others from the dirt) goes to public coffers, improvement value goes to the people who made the improvements. That's fair.
Of course, there's also the question of how to get there from here, and one way to do it without guillotines would be to tie the extraordinary tax treatment of property to conversion into a 99 year lease (and then, after 99 years, new issuance could target the ~30 year range). "Sure, you can have your 1031 capital gains tax exemption and pay no tax on the money you obtained by holding on to the right to exclude others from an increasingly popular rectangle of land, but only if you sign up to eventually be part of the solution rather than part of the problem."
The hard part is that we've structured life such that you are on a fixed income at the end of your life in no position really to deal with inflation. At least when you are still working, in theory at least your wages will go up with inflation. This is really why prop 13 happened to pass at all: the idea of being displaced at the end of your life out of the home you already paid off due to market forces you aren't even a participant in is actually widely unpopular even if it makes better economic sense.
the idea of being displaced at the end of your life out of the home
I would argue that this is unpopular not only amongst retirees but everyone. And it would have tons of negative side effects.
Why would I fix up my house to look nice, if I’ll be displaced? Why would I invest in my child’s local school system, if we could be displaced? Why would I do any community outreach or support, or get involved in local politics? How can banks underwrite loans if the affordability can fluctuate wildly? Look at the life of people who live in mobile homes and trailer parks - they essentially rent the land, and it’s oppressive because they can’t afford to move (actually moving or repurposing land is hard) but their cost to stay is unpredictable.
The only people this is appealing for are people who fancy themselves analytically minded economists with no interest in the practical humanity of the people living there and renters hoping to finally do the displacing for their own affordability.
The only people this is appealing for are people who fancy themselves analytically minded economists with no interest in the practical humanity
Most states in the US do not have Prop-13-like laws and get by just fine. For the few states that do, they are less restrictive taxation-wise than California's.
Prop 13 has completely distorted the housing market; it is, perhaps unintuitively, a co-cause of CA's housing unaffordability issues. (Prop 13 discourages new development, and is an enabler of housing NIMBYism.)
We of course shouldn't just abolish Prop 13 overnight, or lots of people will get displaced, also overnight. But we should absolutely reform it and phase it out over time, while building more housing, as fast as we can (something that will be a little bit easier to do as all the NIMBYs realize that if they keep shooting down housing projects, their property taxes are gonna go up a ton).
Prop 13 is a bit of a nothingburger anyhow when you consider median homeownership period in CA is only like 2 years longer than national average, rather than the myth that seems to be perpetuated of every home being a 40+ year hold paying a couple dollars in property taxes. And when that home is sold the tax assessment of course goes right back to market rate, and boy that is substantial when you have what would be a 450k home outside of Boston go for 2.1m with a 1% tax. 21 thousand a year off a single 50ft wide lot is no slouch in terms of tax revenue.
And when that home is sold the tax assessment of course goes right back to market rate, and boy that is substantial when you have what would be a 450k home outside of Boston go for 2.1m with a 1% tax. 21 thousand a year off a single 50ft wide lot is no slouch in terms of tax revenue.
The problem is all the tax revenue being lost at the municipality level for decades. National tenure average is ~12 years. Los Angeles is 20 years, SF is 16.5 and SJC is in between. It clearly has a meaningful effect, it's just harder to buy into the market and keep the home over a long period of time.
San Francisco receives over $3,000 per capita in property tax revenue alone. Dallas receives about $1,200 per capita. NYC is less than $1,000, though I gather NYC has their own property tax issues.
And California has an income tax, whereas Texas doesn't.
Prop 13 has it's problems, but I don't think they're as significant as the rhetoric claims. It makes for a great excuse, though. Politicians can blame Prop 13 for why they can't spend as much on services as people demand, and now it's become the common wisdom--but for Prop 13 California could afford to spend much more than it does, and the housing affordability crisis would end, too. It's just wishful thinking.
I don’t think the housing affordability crisis ends and I don’t think that’s the right way to model it. SF has one of, if not the highest, $/sq ft in the US. And prop 13 is suppressing it - estimates indicate that property taxes revenues would double meaning that 2.5k/person would become 5k.
And remember that that 2.5k/person is only for residential properties. commercial properties still fall under prop 13 and that’s about 50-60 of the other tax. So a full repeal would make it closer to 10k/person instead of the current 5k.
I agree the story on rents and home prices would be unclear because ultimately the people might move and just rent out their homes with property taxes baling into the new rental price.
It's not reset of you inherit, or a bunch of other bullshit exemptions.
We live in a gerontacracy. Every advantage and tax break and handout is given to the elderly and the ladder has fully been pulled up for the new generations.
Most states also rely on sales taxes and various fees, and assign limited property taxes. A Georgist land value tax would have much greater effects than the current tax regimes.
You shouldn't strawman the other side. Us "people who fancy" actually understand that there are real negative side effects. But the money has to come from somewhere.
If not from land taxes, where? Would you like to double sales tax? Or increase income taxes? Every solution costs something, what does yours cost?
The key bit is that California is relatively unique here. There are a few other states that have Prop-13-like laws, but California's is the most restrictive and incumbent-homeowner-friendly. All those other states (and the ones with nothing similar) seem to get along just fine.
Of course, the solution to increased demand (driving increases in property market value) is to build more housing. Without Prop 13, a big chunk of the NIMBYs who are currently against more housing would likely change their tune if they had to choose between no new housing or much higher property taxes.
I think it would be reasonable and productive to phase out Prop 13 over time, rather than immediately getting rid of it. We could structure it so a property doesn't lose Prop 13 protection until the next time it's sold (and then it never has that protection again). We could completely remove the inheritance loophole (which was tightened up in 2020 but still exists). We could even set a date, say, 10 or 15 years in the future, when re-assessments at market value will start for everyone, regardless of whether or not they've sold. We could also phase in higher allowed assessment percentage increases over time (right now it's capped at 2% per year, but we could, say, add 0.5% to that figure every year for some number of years).
Hell, we could even leave Prop 13 in place as it is today, and just bump up the assessment increase cap to 5% or 10% or something like that. (Texas, for reference, has their own 10% yearly cap on assessment increases.)
There are so many ways to solve this, but all of them are politically unpopular. (Hell, we couldn't even reform Prop 13 as it applies to commercial properties.) As a homeowner in California, I get it, but I still support Prop 13 reform and eventual Prop 13 abolishment.
Most of the other states have not seen the rise in population growth and real estate values seen in CA. There are still places where homes are like 250k or less. There is also way more value drop off outside the metros in most other states with high cost cities such as MA or NY. You could be 30 mins drive from boston in a great 400k home. Try and find that 30 mins out from SF or LA. There just isn't really that fall off in california that you might expect from real estate markets elsewhere. It is like the rising tide has lifted all boats.
To be fair 250K homes and under homes are increasingly uncommon and increasingly undesirable. Rural areas with almost zero industry are averaging out at 600-750K. Maybe a bit of a downward trend, but the average salary in the area is like 50K. so it doesn't matter.
While there is certainly some (very) expensive real estate outside of Boston, to a much greater degree than San Francisco, you can actually get a house within a drive for an evening event that's pretty reasonable to a much greater degree than the Bay Area.
Without Prop 13, a big chunk of the NIMBYs who are currently against more housing would likely change their tune if they had to choose between no new housing or much higher property taxe
I mean, the way you make housing units more affordable is to make more of them, but for existing homeowners of SFH, building condo buildings in their neighborhood will increase their property value because the competition for the remaining lots increase. Given we build close to zero family friendly multi family in this country (ie, appartments buildings have zero family oriented amnenities), there isn’t much in there for nimbys. It’s the right thing to do but you can’t except nimbys to join in on a purely monetary basis.
appartments buildings have zero family oriented amnenities
This isn't always true. I've seen apartment buildings that have a playground and little astroturf field and some small goals. The kids also are using the pool pretty heavily in every apartment I've lived with one. Some have other facilities like basketball or tennis as well that kids could take up (or use the smooth surface for skating or something).
Empirically, according to Doucet, a land value tax would only raise average tax rates if you're living on a parking lot, or vacant lot. Aging homeowners would mostly see a slight decline in their property taxes ( California excluded ).
A land tax means that you don't own property but rent it.
A few comments:
1) we already have property taxes so I don't understand the objection; a land value tax is just a property tax with a different way of assessing value.
2) I don't think this idea of "not owning property, only renting it" is actually that crazy if you take a long term view over it. Land is a finite, shared resource. We already acknowledge that you don't have absolute rights over land that you own in the same way you do over, say, a toaster. We place all kinds of restrictions on what you can do with it, we tax its ownership, we have eminent domain laws, etc.
The idea of treating land as a pure asset has had a lot of negative social effects and ultimately will lead to a kind of neo-feudalism where the megarich own everything and the underclasses are perpetual renters.
The idea of treating land as a pure asset has had a lot of negative social effects and ultimately will lead to a kind of neo-feudalism where the megarich own everything and the underclasses are perpetual renters.
The idea that land is not a pure asset leads to regular feudalism.
The idea that land is not a pure asset leads to regular feudalism.
Yup. And despite the claims made that it's a solution for the common folk, the people who "own" and can make decisions about the land will be the megarich, so it will be feudalism, with rent due on the land you own.
No, some resources aren't shared (for example, human capital: things that I know how to do aren't shared, since nobody can 'borrow' my knowledge) or are effectively infinite (for instance, you can travel arbitrarily far into outer space and not run out of space).
This is a solved problem in other jurisdictions. Effectively you can just allow seniors to defer their property taxes at low interest rates and it becomes a liability on the house when it is transferred on death.
This is how the government countered the people demanding the end of debtor’s prison. And it’s not “transferred on death” it’s whenever the house is sold whether the owner is alive or not. Property tax is just rent paid to the government and the taxman always gets their dues one way or the other.
If we view raw nature as a common inheritance of mankind, then paying a tax on land is how the exclusionary use of it
This will have some of the unfortunate effect of collectivism. We don't want the govt to tax you into poverty.
A simpler overall approach (I've left out the nuances) would be to have an equal amount of land per person completely tax free. Individuals can then rent out their land for others to use as needed. Forests/rivers/conservation lands etc. can be seen as truly a common inheritance of mankind and should generally have the least of commercial activity.
p.s - a govt will never agree to such an arrangement because it will not favor them.
Raise X in land tax and then you spend it evenly amongst the population. Anyone using less than their fair share gets a bonus, anyone uses more has to pay.
If you just allow using X value, but tax free, then those who use less don’t get rewarded.
Effectively one non transferable share, one per citizen, with proceeds as a dividend.
p.s - a govt will never agree to such an arrangement because it will not favor them.
IDK, governments tend to align with what results in the most economic activity being created / moved into their country ("growth"). If you were able to convince that overall economic growth would be multiple times higher over a few decades with the system, it might just become appealing.
A problem I see with implementation in the US, though, is that local municipalities are who tax land and property value, so entire rural counties and cities would have their funding stunted. And asking the government to buy into that while subsidizing low-growth areas for a long time (decades / forever, if a rural area never develops) is a really hard sell.
A simpler overall approach (I've left out the nuances) would be to have an equal amount of land per person completely tax free
I like the thought, but the challenge in most places is that the poor are already paying massive "negative tax" in the form of various social subsidies.
So if you add tax exemptions on top of it, it becomes increasingly impractical to raise enough taxes.
And no, it can't be done simply by taxing the rich more. That should be done too, in my view! But the math is simply such that we need a pretty broad tax base to support our spending.
Yeah, because the value of your land just went up and you didn't do anything to make that happen. Only right that excess value goes back to society and reduces the tax burden of the working class.
Why is it assumed true that individuals do not contribute to the increasing appeal of their neighborhood?
What if I voted for pro-theme park politicians? Or what if I volunteered my time to clean up the community parks and shared space? What if I helped improve the reputation of my child’s school by volunteering and donating to the music department?
My taxes fund the maintenance of public infrastructure and services, and my actions support the civic good. If I vote to be cheap or generous with taxes, or choose to be lazy or ambitious in community support, that all contributes to the desirability of the land around me.
Why is it assumed true that individuals do not contribute to the increasing appeal of their neighborhood?
Two things are true:
1. I should have been more precise in my language. "You didn't do anything to make that happen" is a useful generality and not a prescription of every single individual in the community. In this case, we're talking about fairness - which I don't actually care much about myself, but is a point that people most often can emotionally identify with. But, to continue, if you're carrying all that water on behalf of your land value, then good for you! You likely have an existing stake in the community, other than the land that you own (maybe the businesses or houses or other property built on that land or you own a local services business). That is great! The fairness comes from owning the finite resource of land, and not something others can provide (housing, businesses, etc.). I hope you do continue to contribute to your local community and increase its appeal!
2. Your fixation on this point reveals a very fundamental misunderstanding of the goal of an LVT (surely partially my fault). It has to do with efficient taxation. Dollar equal, it's better that your taxes come from the value of the fixed resources of your community rather than things that can be increased. Because then you don't have a depressing effect on productivity and the things, other than land, that make your community nice. It's better that you keep more money from the things you _do_ for your community instead of the monopolies you hold in your community.
I disagree with the fundamental premise on both parts.
"You didn't do anything to make that happen" is a useful generality and not a prescription of every single individual in the community.
In fact, everyone does contribute, positively or negatively, to their community. Either through involvement or absenteeism, or somewhere in between.
Your fixation on this point reveals a very fundamental misunderstanding of the goal of an LVT
The goal is obvious and not a misunderstanding. The goal is a bad goal, precisely because it punishes positive involvement in the community. To improve the community means to increase your own cost of staying.
Imagine someone wants to avoid displacement due to their taxes increasing beyond their ability to pay. I don’t know why they would want to stay in their economically “inefficient” house, but perhaps it’s because home is where the heart is and they have sentimental attachment to their home.
If they want to keep your housing costs down, the best thing to do is poison the ground (metaphorically or literally) because it decreases the “productivity” of the land. Box stores in America famously pay low property taxes because building a box store actually decreases property values - they’re expensive to demolish and limited in utility, while being an eye sore that makes the neighborhood higher traffic and less undesirable. Mississippi as a state is cheap because the voters used the government to destroy public services - it’s in someone’s best interest to do this in a Georgism world if they don’t want to be regularly displaced.
Quite the contrary, it rewards positive involvement in the community and it punishes anti social involvement in the community (leaving your lot empty, letting your neighbors create a vibrant community you do not contribute to, and then selling at a large profit anyway). The reward is the taxes you're not paying on the positive productivity you're bringing to your community (which is how we're currently punishing those who make their communities nicer).
If they want to keep your housing costs down, the best thing to do is poison the ground (metaphorically or literally) because it decreases the “productivity” of the land
Yes, if you collapse multi-dimensional problems into a single dimension you can find many logical oddities. If I wanted an easier time finding a doctors appointment, I should murder every non healthcare professional in my local area until all of their calendars are totally clear. Wanting cheaper healthcare is evil! You're really saying things for the sake of saying them and I'm not going to engage further or explain to you when you're saying irrelevant things.
it’s in someone’s best interest to do this in a Georgism world if they don’t want to be regularly displaced.
Under the majority of proposed LVT policies (and the ones I support) the vast majority of American housing would see a decrease in net property taxes paid since the majority of American's Building / Land value ratio is orders of magnitude higher than the average parking lot, land speculator, etc.
That article is ridiculous “More expensive tomorrow, more affordable today”. It reads like a predatory credit card offer and is full of what if’s.
High property taxes pushing down the sales price of a house does not help the buyer or seller. The buyer is going to pay the same, just more in taxes vs the loan, and the seller is going to get less because high taxes have reduced the value of their home.
If you're a professional landowner and investor, and the taxes on one parcel of land in your portfolio went up because someone built Disneyland near it, this is fine. You might want to sell that parcel out of your portfolio now; or you might want to do something like build a hotel on it catering to Disneyland-visitors, which will earn you enough in profits to more than make up for the higher land tax.
If you're an ordinary person who owns the home you live in, and they build Disneyland next to it, most of the ways that the value of the land your home is on increases are useless or actively harmful to you. It's actively bad for you if you have to sell your family home and move somewhere else because you can no longer afford the taxes on it. You're probably not a professional real estate developer who knows how to effectively use the land as an investment, after all, you just wanted to live somewhere stable.
In fact, the increase of value of your land and the consequent tax increase under Georgist land value schemes, would be so bad for you, that you might decide to protestthe construction of that Disneyland to begin with. This is typically called "NIMBYism", and it happens all the time even under current property-tax schemes because the negative externalities of many different types of construction are bad for the quality of life of existing homeowners.
How is this different from just having higher taxes on capital gains? (Obviously higher capital gains taxes would also impact other assets, but I mean in the context of land. Seems like both result in the same effect if you're able to defer LVT until sale.)
Liquidity is a value of its own. 10% equity in a $1M non-fungible residentially-zoned lot is much less valuable than $100K in cash, ready to wire at a moment's notice.
If you don't want to pay the taxes, thanks to Disneyland you can now sell your land for a nice fat gain, buy cheaper land elsewhere, and pocket the difference. And whoever bought your land will likely use it for the social good (maybe build a hotel or something).
I would imagine that if Disneyland were built next door, that might be in the cards regardless of the tax situation...
It's just a reality of life that not every homeowner can possibly be entitled to fully control what gets done with the land around them, and that's going to cause some friction.
It's a difficult job to navigate who gets to decide what, while still enabling necessary development. LVT is just one of the more elegant ways to do this.
I'm not a big LVT fan - pushing for maximally productive use of land is going to result in displacing people, displacing small businesses, displacing artistic/cultural/environmental spaces, etc.
I would much rather see an overall assets tax that scales with the value of the assets. That would incentivize more smaller businesses, long-term thinking, and wealth distribution. It would hit big corporations in the same way a LVT would, forcing them to be more and more productive with their assets the more they have, without pricing out smaller entities.
I wouldn't say it's coordinated. This is an old article, published in June. A lot of people came to the land economics blog from the ACX article that ran today, someone likely saw this one and then posted it to HN.
Economist Henry George in the 1800's, pointed out that taxing land, but not the property on it, incentivizes efficient use of land, because holding land for its passive (parasitic) return even when underused, becomes unprofitable when the land is taxed in proportion to the value it can enable.
That sounds like a terrible idea to me. Efficiency isn't everything. Small stripes owned by many people or by many smaller companies it's less efficient than one hedgefond owning everything and yet it has disadvantages.
A forest is much less efficient than a mall and yet, the forest might still be more important.
There's also no way for a government to effectively determine the potential value of land. Asking them to do it means inviting disaster and corruption.
> A forest is much less efficient than a mall and yet, the forest might still be more important.
This is a good example of a very common problem: data isn't objective, it needs to be interpreted. Metrics will give you information, but they aren't the full story. That's why Goodhart's Law is so prolific. You can't just look at data and act on it without context. It depends what your actual goals are. And a huge part of that is that we have to consider how much we value things, especially things that haven't already been assigned monetary value. Sure, we can assign monetary value to things like a forest (economists do this), but it would also be wildly inappropriate to just accept those estimates as cold hard facts void of interpretation too. What's the saying? Reality has a surprising amount of resolution.
In a weird twist of irony our efforts to be lazy end up costing us a lot of work. But that's also because there's two types of lazy: short term and overall work. We used to say we want to hire programmers that are lazy because they'll find the most efficient way to do something. But now we don't revere that kind of lazy, we like the kind of lazy that procrastinates. Do the quick cheap thing now, telling ourselves that we'll make it better in the future, knowing that's a lie. That pattern isn't unique to programming, it's just marshmallows.
The main problem with this view is that land value is laggard to the economy. You will end up taxing people more than what the land is actually worth during downturns, instigating a vicious feedback loop to cause further problems. The logical path is to tax money where there is money - income.
The first time I heard about a Land Value Tax it sounded great. You can then go read where it's been tried and find that it's extremely hard to implement.
As just one example, if I place becomes popular then suddenly the taxes rise and people have to move out. Lots of people hate that idea and so vote it away. And then LVT no longer works.
The effectiveness of other taxes aside, the argument that billionaires will leave if taxed at a higher rate isn't compelling.
Billionaires are not struggling to meet their expenses. If you raise their taxes, they aren't suddenly unable to afford things. They don't need to change their behavior just to get by. A carbon tax forces average people to drive less, but doesn't affect billionaires at all.
Billionaires live where they want to because they can afford to. They're not going to let themselves be chased from jurisdiction to jurisdiction because of numbers that have zero impact on their daily lives. That's what happens to poor people. If California raises taxes on billionaires, very few will actually leave. They're where they want to be and they can afford to stay there. What's the point of having a really big number in your bank account if you have to move to the middle of nowhere in Alabama to keep it from falling just a little?
----------
Edit: Yes, some billionaires have changed their tax residency, but not necessarily their physical location. They likely still own properties in California and can likely be found on them rather a lot. This is evasion, in spirit if not law. Taxing land is just one way to make them pay. Others should be pursued as well. The argument that we shouldn't tax billionaires because billionaires are good at not paying taxes is complete hogwash.
It may not be logical, but money effectively turns into a scoreboard at a certain point. The ultra-wealthy care whether they show up to the yacht club in a 100m or 150m yacht.
That individuals won’t optimize their wealth beyond $100m, $1b, or really any number just doesn’t square with observable behavior.
Starting a business self-selects for people that desire money (over other benefits).
The purpose of a business is money (otherwise you start a hobby or charity or something non-businessey).
Being very successful at business is a selection bias for people that are highly competitive at chasing money.
There's a bunch of traits in very wealthy self-made people due to the filter they have run through.
Tax too much, and we kill the golden geese of the economy. Examples abound around the world of crappy economies that can't afford good socialist stuff because they've demotivated the rain makers.
the argument that billionaires will leave if taxed at a higher rate isn't compelling
I agree with this. California’s climate and culture will keep many a billionaire within tax nexus reach of the state. Of course, this isn’t a strategy every locale can pursue, but I don’t see a reason for California not to exploit its advantages.
The article claims that 6 individually named billionaires already left (presumably recently), and another is likely to leave if he loses his court challenge.
This is a strange argument coming from the side of the argument that usually talks about billionaires being greedy and doing anything to make the numbers go up even though they can't feel the difference.
They can certainly afford it but they obviously like their money to stay theirs and like getting more of it, not less.
The greatest feat that Mao achieved was to take the land that had been tightly gripped by generations upon generations of owners and to shake up the distribution of it so that the land could produce again. People naturally want to work the land, but you end up with suboptimal inertia because owners just end up letting it sit fallow if it doesn't immediately return. It's how you turn a billion serfs into a billion entrepreneurs.
We're already way past the point where a creative cocktail of 10 different progressive taxation schemes could feasibly fix the root of the problem, and you feel this especially if you were born after the year 2000. You're more likely to see results if you pick up a red scarf than if you pass a higher wealth tax, sales tax, land tax, consumption tax, estate tax...
Famine along the yellow river and yangtze river has been happening for thousands of years across all dynasties, its specifically what land distribution was meant to fix, and since 1960s there hasn't been a famine since. My parents and grandparents lived through it and left cities to work in countryside fields during the cultural revolution. You tell me how the famine fits in and I'll let you know if you're accurate or not.
I think not. Your framing thus far is so wildly inaccurate that I believe this is a propaganda account, and hesitate to engage further. But in case any not familiar with the history read this in passing, I will leave a reference to an actually reputable source:
"Mao’s violent collectivization and forced labour campaigns during China’s Great Leap Forward (1958–1962) led to as many as 45 million deaths in what is widely regarded as the worst famine in human history." [1]
The famine is unrelated to the land distribution but also the farm land distribution didn't last. They changed course and put the land into collectives and it is still in collectives today so the famine cannot be blamed on collectives.
My understanding is the famine was essentially the middle managers of these collectives over stating yields and being too afraid to admit their lies. To maintain the lie, they shipped off food while the farmers starved.
They changed course and put the land into collectives and it is still in collectives today so the famine cannot be blamed on collectives.
Painting it as if Mao era collectives are the same as the state quotas that exist today is highly misleading. The HRS was 1979:
"The household responsibility system replaced collective farming." [1]
Broadly speaking, the collectives can and should be blamed for the famine, just as in the Ukraine. Getting into the weeds on the specific mechanisms is fine, but using it to undermine the broader lesson is apologetics.
those who advocate for land value tax are usually advocating for single/minimal types of taxes (and, in fact, against sales and income taxes) rather than a cocktail of them. "Single Tax" predominantly refers to a single land value tax. https://en.wikipedia.org/wiki/Single_tax
My point is that a single land value tax would have the same effect as piecemeal improvements to current tax portfolio - none of it would fix the inertia already priced and baked into the system.
A revolution is not a dinner party, or writing an essay, or painting a picture, or doing embroidery; it cannot be so refined, so leisurely and gentle, so temperate, kind, courteous, restrained and magnanimous."
To put it bluntly, it is necessary to create terror for a while in every rural area."
Let's not glamourize the Mao's land reforms. It required the killing of 1-2 million people. Even then, the collectivization was a massive failure - not only did the peasantry not get to enjoy the benefits of land reform, a further 15 million people would die from the resulting famine.
The deep irony is that Taiwan was actually able to do the same reform but with much better outcomes, with much less loss of life or political violence.
Taiwan did not have anywhere near the land distribution occur under CKS/CCK, nor the same veracity of landlord clique ownership. And, you're further wrong in that a big part of white terror was specifically due to 外省人 owners of factories and farms, from land stolen from the aborigines. The white terror wasn't by any means less violent and senseless than cultural revolution.
I don’t have experience elsewhere but in Santa Clara county, the county assessor calculates a very much incorrect split between land value and value of the improvements (buildings) when they assess the property tax. Sometimes they just divide the total value by two and call it value of the land; in other cases the value seems to match reality more, and the value of improvements match the actual cash value (but not replacement cost) from insurance companies.
How would a land value tax accurately compute the land value?
Not all assessors do this accurately, especially in California, but there are many that do. This article includes a section on land valuation which summarizes and links out to various other articles about various approaches
In its ideal form, this tax would capture and redistribute the annual rental value of land; that is, the recurring value of the land excluding the value of any buildings or other improvements on top of it.
but you see the same basic patterns everywhere. Land in the city center is worth much, much more than outlying areas.
The calculation of the "unimproved value" always perplexed me.. it seems like you're not taxed for the things you build on your land, but instead for the things other people built around your land. After all, why would property in a city be valuable if not for all the high rises, subways, and office buildings?
It, in effect, turns out not really to be a land value tax at all. It turns out to be a tax on the most valuable thing that _could_ be built there because that's what gives land it's value.
So you're completely correct, the value of the land changes with what's around it because it opens up new options for what someone might build there.
this is the idea - if theres a lot of value around you, you should build to make sure you are meeting the bar of whats around you in terms of economic activity.
if you build even more and get more out of the land than whats around you, you essentially get a lower tax rate until your neighbors catch up.
if you lag behind, you pay a premium in taxes to not develop
But I think the purpose of a wealth tax is precisely to get rid of greedy billionaires.
So if they vote with their feet and leave, then that's an even better outcome. Now they can't manipulate the government anymore. They can go manipulate and continue extracting wealth from some other place.
Yeah because they got billions by extracting it like mosquitos. It came mostly from your billions I assume. Without that it would have been all yours. Clearly you have zero concept of how an economy works.
You know the extraction is more like 10000-to-1 than 1-to-1.
But in essence I do believe that I (and thousands of others) could have had at least $100k more net worth if they hadn't monopolized all user-acquisition channels and if they hadn't helped bring about the many laws and regulations which made this possible.
I have no ill feelings towards them but I just don't want them in my state competing against me for limited resources using money which they acquired through an unjust scheme which I was coercively made a part of but which I never agreed to and have been protesting for almost a decade (on deaf ears).
It's not personal or even saying anything negative about their character or abilities. From my perspective it's just pure self-preservation. They either need to contribute more tax to make up for the injustice or they leave.
When they sell their assets, it makes those assets more affordable for the rest of us. So any forced sale is good for society. I don't see any issues with it. We were/are forced to prop up their stocks through government contracts, grants and regulatory monopolies... So they should contribute something on their end too.
And I don't care about the "jobs they create" - They created jobs for my competitors to get easy money in cushy jobs. I want those jobs gone too! I don't want FAANG employees bidding up house prices in my area.
I only want to compete against people who are playing by the same rules as me! I don't want to compete against people who can rewrite the rulebook as we go, to suit them.
"None of this is really about billionaires; California reaches for exotic taxes because its normal one has been broken since 1978."
The author then goes on to talk about CA's property taxes ... but LAND HAS NOTHING WHATSOEVER TO DO WITH THE BILLIONAIRE'S FORTUNES!!! Zuckerberg did make his money trading property, he made it through companies.
Nothing about California's property tax decisions have anything to do with 99.9% of Zuck's (and others') wealth not being taxed!
Nothing about California's property tax decisions have anything to do with 99.9% of Zuck's (and others') wealth not being taxed!
That may be true, but you appear to have missed the part of the sentence you quoted that came after the semicolon:
California reaches for exotic taxes because its normal one has been broken since 1978.
Property taxes make up a large portion of many states' tax income. 1978's Proposition 13 made it so that California is -more or less- unable to tax the actual value of any property in the state. Wealthy people who've held on to property for decades get to borrow against the "market value" of that property, but the value of the property used to calculate the tax owed to the state only increases at a maximum of something like 2% per year. This means that you'll see long-term landlords (and holding companies) getting the financial benefits of a -say- multi-million dollar property, but the state only gets the tax of -say- a multi-deca-thousand dollar property.
Because of Proposition 13, property tax increases in California will affect an extremely tiny slice of landowners, [0] so it must turn to other mechanisms when it needs more tax revenue.
In regards to private "wealth creation", it turns out that money is fungible and you absolutely can built a bunch of wealth off of a mortgage if the "market" value of that property has increased by a huge amount, but the costs of holding that property haven't increased much at all.
[0] This doesn't contradict what I've said, I've just left out some details. A quick summary:
Ignoring a few exceptions, when a property changes ownership its property tax is adjusted to be based on the current "market" rate. When nontrivial improvements are made to a property, the property tax is adjusted to account for the "market" value of only those improvements. [1] Some "clever" people have been known to get around the "property changes hands" trigger by making the property be owned by a company and distributing private shares in that company. Want out? Get rid of all of your shares. Want in? Get shares from someone who already has them, or maybe convince those who are in to make more for you. The property is still owned by the company, so its tax is not adjusted.
[1] It's important to note that repairs are not improvements. It's also important to note that the government can choose to ignore all of these rate-reset rules whenever it wants, as it did when all those extremely wealthy people in LA got their houses burned down in that big wildfire that hit LA.
So what? The goal is to fund the government. You may want to stick it to Zuck and other billionaires (and I admit, there's appeal to that), but if fixing our broken property tax system will fund the government (without causing mass displacement as people's property taxes go up), then we should do that. It's a fix to a structural problem, and a fix that will be durable and be reliable in the future.
Taxing billionaires is not a durable fix to budget deficits. The article very clearly explains why this is the case.
I was talking to a friend about the billionaire's tax and this issue came up. Here's how I see it: either individually wealthy people stay here, and we take their money to build state capacity to even out the distortions created by their wealth, or, they leave, and the distortions fix themselves.
The easiest one to point to is property prices. Wealthy people buy land, and drive up the price of land and rent for everyone else. If a lot of people suddenly make a lot of money in San Francisco, in general, for me and most of the people I know, there's no "rising tide" that lifts our boats. Our income remains the same, but our rent goes up, and maybe our lives don't make sense anymore, and we have to move.
But if there's a wealth tax, and it encourages rich people to leave the state? Awesome. Go drive up rents in Texas or Montana or somewhere else. Or pay the tax, and then the state can use that money to build affordable housing.
Before you say anything: I lived through the 90s, and you can't trick me with "WOW YOU THINK THE GOVERNMENT CAN DO THINGS? WHAT ABOUT THE DMV???" Go somewhere else.
Perhaps I'm uniquely able to read and understand simple instructions, or maybe I've never asked the DMV to do anything especially complicated, but I've never had the DMV fail to do what I came there to have it do for me. The worst I've gotten from a DMV was having to wait for literally an entire day when I made the mistake of going to the San Francisco DMV to get something done, rather than doing the smart thing and going to an office in one of the nearby towns. It's... very stupid that there's a single DMV office for a city of -last I checked- nearly a million people.
I don't think that makes sense. The wealth tax, as written affects a pretty small percentage of "rich people". Most "rich people" will not pay a wealth tax.
So sure, let's say for the sake of your argument that everyone who would be subject to the wealth tax moves away. That won't move the needle when it comes to housing affordability in California.
So, ok, change the wealth tax so it applies to a lot more people. Ok, so maybe more people leave. Do you really think driving people with money out of your state will actually be good for you and the state? That's just not how economics works.
Do you really think driving people with money out of your state will actually be good for you and the state?
If your state is selling 500sqft condos for $3,000 a month, then yes, it probably would increase the average quality-of-life for that state's residents.
The problem is the wealthy people can still buy and own the land without being residents. These billionaires "moved" to Austin or Florida or wherever, but they still own the same multi-million dollar mansions in the bay area or LA or wherever. They just spend less time in them.
California is full of people who do not understand how investment works and want it gone. This is progress missing from progressive. It is the social missing from socialist. Ists and ivs with nothing, merely a pack of stupid ideas. The residual is reality: no-teeth, drug-induced stupor sleeping in street squalor and their rent-seeking enablers cozying up to the tax authorities.
Not sure if anyone could get such a policy change made given that California politics is now just "Whatever the California Democratic Party Wants" and they are very rigid in the ideas they accept.
But I think the proposal being discussed is 1000% more consistent with the principles of a free, non-communist society than the crazy "wealth tax," which sets the precedent that if the government thinks you have "too much" stuff, they can just declare that to be so, and come and take it. Given that the people in charge of drawing the line between "so rich that we need to take your stuff" and "not that rich" will be the same people who have blown up the state budget, I don't see why anyone would trust them.
(No, I'm not Zuck's sock puppet account -- I expect it won't be my turn for "wealth" confiscation for at least 5 years, worst case.)
wealth taxes are from the old roman republic. the wealthy showed off their worth to each other by how much they could pay in taxes.
its not particularly crazy and is far older than communism or socialism which have the much more straightforward setup of seizing the means of production rather than taxing it.
however, it didnt stop the ultrawealthy from seizing power for themselves
I don't live in California but the article mentioned Proposition 13 which capped property tax rates and the reassessment is only when the property changes ownership?
Is that right?
That seems unfair to people who recently moved compared to the people that stay in their house for decades.
Reading more it looks like California created alternative types of property taxes like Mello-Roos.
In my state we used to have property tax values reassessed every 8 years, then they changed it to every 4 years. But my bill goes up every year. I started off paying about $2000 25 years ago and now it is about $5000 but my property value has also increased about 3X
It seems like if you just taxed an ordinary house at a percentage and you taxed a billionaire's huge house at the same percentage that you would get more money from the billionaire without needing to create special laws and special taxes.
Yup, Prop 13 is a mess and is a big part of why housing in CA is broken. But it's politically toxic to even mention substantial reform, let alone abolishing it or even just phasing it out over time.
Well Mamdani's pied-a-tierre tax was specifically a real estate tax, levied on the real estate of people who don't have residency in the city. It's a marginal tax in the grand scheme of things, but unlike the billionaire wealth tax, it actually works, because the real estate can't move. And the owners can't just threaten to leave because they've already left, that's why the tax hits them.
Prop 13 should only cover primary residences. No vacation homes, no investment homes, no apartment complexes, no Airbnbs, no commercial properties, no offices. This single change would fix the majority of the state's tax shortfall. Going on about billionaires and not fixing this obvious loophole should tell you that people in charge aren't actually interested in solving the problem, just using populism to get votes.
Most land I bet is leveraged (hence the high price!) and taxing it will put pressure on home owners and investors. It is great for the truely rich who have a $50m mansion because it is chump change and will pay $375k which is approx zero but for someone with a typical house $1m it is $7500 which is less money for food and other household expenses and they may be paying a big mortgage already and not rich in the true sense.
Taxation ain't simple. There are always second order effects.
I am not against land tax but using it as a kneejerk levy could have unintended consequences.
Instead taper onto a reasonable land tax. Just raise taxes if you need more money in a fair and progressive way.
Of all the places you can avoid flight from to avoid tax California must be the easiest.
Since so much of land value is in downtowns, in a theoretical shift to land value tax, most of the increased land value revenue would come from vacant and underdeveloped parcels downtown. The median tax burden on single or multi family homes would actually be reduced. An example is this model of Spokane: https://landeconomics.org/reports/spokane-report#:~:text=sin...
And a lot of the time, it’s those truly rich people who own those vacant/underdeveloped parcels in downtowns.
I think the author may be right about multiple points but I think it doesn't matter? This is one of those, don't let the perfect be the enemy of the good situations. A state-level, one-time wealth tax _is_ something that billionaires can run away from. And this law seeking to apply to people who lived in the state _before its passing_ seems structurally sketchy. This article has some fair concerns.
But we have a one-time billionaire's tax proposal on the upcoming ballot, and we don't have an LVT proposal on the ballot. Saying that the Billionaire's tax will be less effective than promoters say maybe true -- but we're definitely going to get exactly $0 from a statewide LVT for 2026. If the Center for Land Economics gets an LVT on the ballot in a future year, I would strongly consider voting for it -- but that's not on its own a reason to not do the Billionaire Tax this year.
What _would_ be a convincing piece of info, and which no one knows, is what the long-term impacts of a one-time wealth tax are. E.g. Zuckerberg is moving his residence to FL but Meta isn't going to stop employing Californians. And if the state is _credible_ in saying it's a one-time tax, will the billionaires who fled come back after it's done?
From what I can tell the residency change for a billionaire is about how often you fly to your various homes. Zuckerberg I think hasn't gotten rid of his Palo Alto or Lake Tahoe property, he just added a FL house and will have a cap on how many days per year he's in CA right? This isn't like a normal person with 1 house relocating.
“ Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Travis Kalanick, and Steven Spielberg, worth roughly $540 billion combined — had already moved their tax residency out of state before the measure”
Imagine being worth billions USD and rather than being a part of the solution to support the state that helped build your wealth, you spend your money to just get around paying your small share.
It is trivial for the wealthy to buy another house elsewhere and “move” their primary residence.
California already has a property tax, about half of which is based on the land value, and the other half on the structure on the land. So this is not some brilliant idea, just a renaming of what we already have.
If the author is suggesting to repeal Prop 13, that is also not a new idea, and has been discussed for decades. Good luck.
Property tax increases are hamstrung by Prop 13 and until that’s repealed, will continue to be.
And while the wealthy always threaten to leave when faced with higher taxes, the fact is that they never seem to actually do so.
The site is based around georgism whose fundamental premise is that taxing land is the universal solution (much like for republicans cutting taxes is their solution to everything: economy going great? We should cut taxes. Economy going poorly? Cut taxes. Deficit too high? Cut taxes.) I don’t put much stock in analysis by single-solution thinkers.
Even the conservative states who supposedly stand for the individual can’t get anything like proposition 13 passed through their state legislature and it’s been over 48 years.
This is the reason I would leave if I was a billionaire. Living in California I never felt like my tax dollars got me anything more than they got me in other states and if the city/country/state got even more I knew it would go to some sort of tomfoolery like a high speed rail that doesn’t actually get built or a $1m bathroom.
If you are a billionaire or 100 millionaire, you probably got rich in California, Washington, or Oregon, or probably in the northeast of America in the last 50-60 years, if prop 40 passes, it will have the same effect as prop 13, a positive effect long-term that is, if you manage your finances, most of the states in the Union you are out of luck. why is that?
The billionaire tax is an experiment, they did put the bar pretty high to measure how many families will relocate (that's super easy to track); once that's measured, it's easy to build a model to adjust this threshold to whatever is advantageous for the state and keep things in balance this way, where the outflow is carefully measured and weighted against the tax threshold. The "hard part" was just getting this to pass the vote; then they can adjust this threshold anytime as voters have already approved it. What isn't measured is that billionaires create jobs "around them"; and, implicitly, jobs will be created somewhere else; unfortunately this model will not measure that.
I’m not convinced billionaires “create jobs” in any meaningful numbers.
Sure, the companies that made them wealthy do, but the billionaires themselves? Doubt.
So if the only consequence of this is that the billionaires flee to Texas, with its regressive taxes, and take the wealth inequality and corruption that goes with them… I’m not seeing that as a bad thing.
The article contains significant inaccuracies. Individuals in the lower and middle economic strata need not advocate for the interests of billionaires or those with assets exceeding $100 million; these individuals have already benefited disproportionately.
Over the past 50 to 60 years, wealth concentration in many Western nations—coupled with the relocation of jobs to East Asia—has primarily favored the upper class rather than the middle class. Similarly on a different battlefield, Brexit has not served the majority of the United Kingdom’s working class population the average citizen has experienced a decline in wealth. In Great Britain, most residents did not benefit from North Sea oil revenues, which were largely directed toward affluent groups—a contrast to Norway’s more unselfish. forward thinking approach of establishing a sovereign wealth fund which benefit it all to the consternation of the wealthy well connected conservative class within Norway.
Remarkably, adherence to sound financial principles—living within one’s means, settling obligations, and saving—can enhance long-term economic stability across all income levels and even at the governmental level.
Much like Proposition 13, voting in favor of Proposition 40 is a straightforward choice. Historically and currently, western political leaders have failed to act in the best interest of the majority usually, they have to be dragged along kicking, and scratching.
It shall be interesting will the middle and lower end carry water for the wealthy again and vote against their interests to save the lucky 214 billionaires in California, that’s right you heard it right, 214 out of 40 million people…
The billionaires won’t be going anywhere. There’s a reason why the West Coast, California, and Oregon are what they are, when compared to the rest of the United States outside the Northeast, climate, higher education, better business opportunities, better political climate for the population, particularly if you look a little different or have a different religion in comparison to a large part of the United States, particularly after 1945.
I ctrl+f search for "gentrification" and nothing pops up. I close the Substack blog and proceed with my day.
why is that?
Because TFA ignored the problem.
“I think people shouldn’t be displaced from their neighborhoods because of lack of affordability”
I didn’t mention gentrification in the above sentence. Does that mean I’m ignoring the problem?
I think the point of the article is correct; the issue with CA is everyone wants to live there, including rich people. If we try and tax them then they'll leave just long enough to not pay state income tax, if we tax property values then the state actually gets the tax and doesn't miss out on job creation or future revenue.
Red states have implemented low income tax with heavy property taxes (think Texas) with great results. and although I'm sure California would just manage to mess it up it's a great idea.
I would not frame Texas as having great results. If anything places should get as little like Texas as they possibly can. I mean they send you to jail for an abortion or a gram of weed. It's living under Shari-yall law.
The tax system in Texas is a better system. Sure, Texas has lots of problems. That doesn't mean there is nothing to learn from Texas.
I live in Texas. I don't like the restrictive laws. Texas could learn a lot for California, just not in the areas of taxation
The lack of a progressive income tax structure gives texas few levers to ameliorate budget issues without cutting services or raising property taxes. It doesn't help the current governor seems to be pushing city budgets to the brink by also cutting off the property tax lever.
https://www.texastribune.org/2026/08/17/texas-city-budgets-c...
Out of curiosity, why couldn't property taxes be progressive? What stops Texas from having different tax rates based on the value of the property?
It even seems like it avoids a lot the pit falls the uber-wealthy use to avoid most progressive income taxes. Its easy to disguise income as something else. Property, though, is right out in the open. The state can easily audit and value property and send the bill. No matter how fancy the accounting, that bill will eventually reach the person "consuming" that property.
Nothing I'm aware of stops that.
In practice, at least from what I've read, in TX, the largest/wealthiest companies get the biggest/best tax breaks (eg Tesla), and end up paying proportionally less, so it's somewhat regressive.
Better, or better for you in particular?
Made me laugh while drinking; messy, but worth it for the smiles I'll have every time I remember it! Outstanding job, internet stranger.
Related slang options: "Y'all-Qaeda", "Yeehawdis", "Talibangelical".
It’s pretty easy not to murder babies.
Appropriate username.
Solid counter argument.
ROFL what? I'd bet the author a lot of money that costs WILL roll downhill, the source matters not.
I think the idea is that if the market demand is such that it allows them to raise rents, they'd already have done it, whether or not expenses justify it.
If they can't raise rents to cover expenses plus "enough profit to make this PITA worth it" then things (slowly over time) grind to a halt.
It won't grind to a halt. The owner will sell, because they can't make the business work.
At what price will they sell? At whatever price a buyer who thinks will make it work. And by "work" there are many definitions, from continuing operation at current rents, to building more units on the land so that it generates enough income to pay the tax.
Land value taxes shift tax burden away from productive use of land and on to unproductive uses of land. The people who pay more are land speculators and those with empty lots, and the people who pay less are those productively using the land, which is 99% of homeowners and businesses.
So what happens then? High enough property taxes could in theory result in a situation like Detroit where the land value drops so low that properties are abandoned, with no buyers. But that seems unlikely in California?
At less of an extreme, there are still buyers, but they offer less money so they can still make a profit. So, the property tax basically comes out of land values. The current owners lose money on the property. It's the opposite of the windfall profits that California property owners have gotten from rising land values, taken out of whoever owns the land now.
For the next owner, their mortgage expense is lower, their property tax is higher, and maybe rents and profit margins stay about the same.
Notice that if the demand is there, falling land values doesn't result in lower rents. If your complaint is that the rent is too damn high, higher property taxes won't fix it. Only more housing does that.
I'm a bit skeptical that it would really work out that way. In California, we can have the odd situation where the current owner pays low property taxes, the new owner will pay higher property taxes, and yet property prices get bid up, and whoever buys it has to pay both more property tax and a higher mortgage. But they can still afford it, because there are a lot of rich people out there.
If the assessed land value is actually correct, then someone can make that land work profitably, by definition. That might mean bulldozing a single-family home and building a 4-unit building, for example, but it's doable.
If the assessed land value is incorrect, then that would need to be fixed.
Did tariffs raise prices? Or did prices stay the same because "if the market demand is such that it allows them to raise [prices], they'd already have done it"?
Looks like this is complicated and the short answer is "it depends":
https://chatgpt.com/share/6ab5ca51-3e0c-83e8-a232-892d3e4ef9...
I'm curious what costs you think will roll downhill and why
Yeah, that's unlikely. There are certain classes of renters it can't be passed on to during their rental term, but I'm guessing it can and likely would in general.
People can also sell their land/homes and move. It's less liquid than other assets, but less doesn't mean people won't sell/leave.
In Massachusetts it’s legal to pass on real property tax increases during the term of a residential lease, provided the lease contains specific clauses. (Most leases do, as a result.) And most commercial leases are triple-net, meaning the tenant is also on the hook for increases.
I would be surprised if most land consumption taxes (whether structured as property or land) would not get directly passed through to the beneficial consumers of that land quite quickly, or for their privilege to consume that land to be terminated/non-renewed at the expiration.
In California some percentage of certain developments need to be rental controlled, so those are exempt from increases for those lower income folks, but I'm sure the difference would be spread out among everyone who isn't rent controlled.
One of the benefits of a land value tax is that it has zero dead weight loss: because there's a fixed supply of land, the tax won't cause less of it to be around, and you don't lose out on the beneficial transactions that property tax can prevent.
There are several key benefits and I like the theoretical soundness.
My primary concern is that there are generally no market comparables for undeveloped land in developed areas.
If I believe it’s over-stated, I can appeal my property tax assessment by using comparables for nearby developed property. There is no equivalent market-based process for land values alone.
This is a reasonable and common concern, and one I shared until I looked into it in fine detail. Turns out it's far easier to estimate the value of land that things sit on than the entire property value, and most of the country actually operates on continually updated estimates of total property value rather than just land.
There's several anchoring sales nearby, you can regress out from all sales, etc. etc. And it's smoothly varying for nearby parcels, with very little change!
A much better explanation than what I can write can be found in the "Estimating" section here https://landeconomics.org/reports/california-billionaire-wea...
I will read that link later tonight (thanks!), but this still seems like a system where a particular property owner could be “targeted” (politically or economically) and suffer without reasonable legal recourse.
It's actually much harder to target a particular owner, because it's based only on land area, and the value of land in a general area! Property taxes are much much more susceptible to targeting as individual properties are much more variable and there's far more judgement about individual buildings and the potential value of a building.
Economists for generations have agreed a land value tax is the least prone to this problem. You might want to take it up with Adam Smith.
I hope we agree that we need more taxes, it doesn't matter if they are taxes on billionaires, taxes on property, taxes on sales, taxes on crypto, or taxes on the poor. Without taxes we can't have a civilized society.
No thanks, I pay too much in taxes as it is. California has a spending problem, not a revenue problem.
Spending problem? What spending problem?
https://www.smartcitiesdive.com/news/california-high-speed-r...
Taxes aren’t 0 right now, nor particularly close for anyone being taxed. Your statement supports taxes as a concept at all, but what’s the specific argument that they must be more than they are today?
The number of different taxes is constantly increasing, obfuscating the total tax burden, and making democratic accountability almost impossible. Additionally, tax collections are already at a historical high, while government deficits world-wide are also at record levels, with services on the decline, and no realistic prospect of balancing budgets. This is true for most western countries.
Given the current situation, I do not agree that "we need more taxes", but would welcome your clarifying exactly what you mean.
For a long time I agreed with you, but seeing how the tax money is spent I cannot agree any longer. In most cases government is no longer even spending the money itself, instead it is giving the money to NGOs.
I would much rather see people keep more of their dollars and use them to 'vote' for the products and services that benefit them most, via their purchases.
Congragulations you have just rediscovered conservatism.
…and how to never have any large infrastructure projects like highways or just services that run at a loss while being essential like the EPA
It would be interesting to run the counter-factual on the EPA. Lawsuits around pollution were already increasing significantly prior to the EPA even company vs. company.
Would the resources have been better spent on a more efficient legal system, then leverage that?
*Disclaimer: This definition not valid in American politics, consult your doctor before self-labeling.
How much of California's budget is "giving the money to NGOs"?
I’ve long thought if you doubled tax revenue or halved it the public services rendered would be the same. Tax revenue is not the problem.
this is the sadest assertion i've ever seen. if sucking the life out of people is the only way people can remain civilized then we are truely lost.
How else are we going to support public infrastructure and society?
More efficiency in spending? We have newer tools and equipment, technology, automation etc. Do more with less, that is called productivity.
You don’t understand the natural order of things: productivity for you(the worker constantly told to do more), not for me(governments of all sizes, middle management & execs, dumb owners).
Progressive taxation and more efficient spending.
(And in CA, fixing Prop 13, and knocking out more hurdles to housing development in desirable areas.)
I think we should start with changing taxes on corporations/companies, specifically being able to indefinitely write off expenses against income regardless of size/etc...
Most companies take profit eventually, but if it's possible for a company to decide to never take profit and grow/acquire perpetually without paying any taxes on gross income, that's a problem.
That'd be like individuals being able to deduct living expenses and having uncapped pre-tax 401k contributions.
The ratio of the economy that gets collected as taxes has only gone up over time. Do you have an idea for how much should be collected as some ideal ratio? At what point do the effects of taxation become counterproductive?
Well, the general economic consensus is that for income taxes, the revenue-maximizing peak of the Laffer curve is around 65-70% [1]. Revenue maximization isn't necessarily the right primary goal, though.
[1] https://en.wikipedia.org/wiki/Laffer_curve#Income_tax_rate_a...
Same back at you. Clearly you think they’re too high. So what is the correct ratio?
The straightforward answer is there is no correct ratio. The best tax regime is the one that allows for sufficient funding of necessary and desired services and long-term economic investment while also balancing wealth creation with wealth inequality. That number isn’t fixed and it’s clear that it shouldn’t be evenly borne by the population as a whole.
I made no such claim. I simply asked someone who said that we can all agree taxes must go up to what level they were referring to and how they chose the number. If there is no fixed ratio such as you say, then their claim is clearly false.
Sorry, but this is bullshit. You’re not fooling anyone. If you think the GP needs to provide an ideal tax ratio, so do you. You don’t get to opt out and pretend you’re above it all.
haha. did you say taxes on the poor? I'd like to see you implement that.
Assuming we do need more taxes, the manner of taxation absolutely does matter.
[flagged]
But neglects to consider why it won a majority of votes. Why did it? And how does Prop 13 relate to the more recent Prop 19, which substantially weakened it?
The idiom is "film at 11."
And it will never be repealed.
Old voters like the house they brought 20 years ago for 100k being worth 1.5 million today. They also like not paying taxes on that 1.4m in wealth accumulation.
I mean, I do too. Mine just happens to have been bought before the last inflationary cycle.
I think not wanting to pay some yearly tax on that $1.4 million because the government pretends that the same as having $1.4M cash in the bank, or making $1.4M in a year, is fine.
Not wanting to pay the property taxes associated with a $1.5M home is the problem.
Which is why we also have things like a deferred property tax program! The way to "solve" the problems Prop 13 addresses would be to expand programs like that, but homeowners—disproportionately active middle- and upper-middle-class voters—want to have their cake and eat it too.
It wildly distorts the entire real estate market. Cool your home is worth 1.5 million. Your kids will never ever afford a home.
Without prop 13 that house would probably only be worth 600k. What difference does it make if it functions as a home.
Too late to fix it now.
Is it not that the gains are unrealized? If they sold the house they would pay capital gains tax?
Property taxes are unrelated to income tax
I'm not a finance person but I think capital gains kicks in if you sell early. Otherwise, just regular taxes?
opposite, income taxes take place first. after a waiting period, its just capital gains. capital gains taxes are typically lower than income taxes so this encourage long term holding
They aren't going to sell it, they'll pass it to their children and the cost basis will reset. Their children will then sell it and pay zero tax.
what reasonable persons wants to pay taxes? Just because you like to pay extra doesn't me we should.
But let's be clear: Prop 13 is bad and is holding down property taxes on both commercial and residential land.
Whats wild is the commercial side didn’t get closed. I understand the argument for individuals or households (I don’t love it - I’m on the wrong side of it, but at least it’s somewhat defensible), but if you’re running a business and your income isn’t keeping up with inflation, that’s called failing.
If the SEIU healthcare workers union is going to amend the state constitution, they should chip away at Proposition 13 instead of amending the constitution to make a bad tax that encourages capital flight.
It drives me crazy that California voters will wave through every single regressive sales tax hike that is placed in front of them, yet they will crawl through broken glass to vote against a property tax hike on corporations.
Please don't post snarky dismissals like this on HN. The guidelines make it clear we're trying for something better here. https://news.ycombinator.com/newsguidelines.html
Wealth taxes are a symptom of a broken tax system. If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
It's only too late if you're timid and wimpy.
And care about the rule of law. You cannot pass retroactive laws, you cannot pass laws that target individual people. If you pass a general law (which could very well have reasonable objections), people have to have a chance to leave.
"I'm passing this law that is effective the exact millisecond I sign it, tough shit if you don't like it" is tyranny and despotism. But based on your comment I think you know that.
A wealth tax is not a retroactive law, nor something that targets an individual person. It's a "general law" in your parlance. Think about it.
I don't think so. By what legal authority is that required?
No, it's not, and don't be ridiculous. When they passed laws against date-rape, would you have judged it "tyranny and despotism" unless the law was delayed to give the date-rapers time to finish up the date-rapes they'd planned?
There's no justice in giving the wealthy the maximum opportunity to pick and choose the laws that apply to them.
The richest people in the world sure are lucky to have good people like you out here fighting to protect their rights
What hyperbolic nonsense, just because something doesn't affect me doesn't mean it can't be bad policy. Wealth taxes are a fool's errand and serve only to damage and slow the economy.
a lack of wealth tax is slowing the economy today.
ultrawealthy people just cant spend as much or give useful market signals the way the masses can
its hyperbolic to say laws that are active when passed are tyranny and despotism
ah yes, all the tech billionaires of this era, had they been given the heads up that there success would have led to a level of concentration of wealth and power previously unknown to humanity, and that the populace would likely call for some changes to tax law to address the largely unforeseeable structural economic effects of this level of change they brought, would certainly have opted out, leaving the US, and moving to another less tyrannical part of the world, where, by the unique magnitude of their genius, they would have brought all their great works to the glory of other nations and not to America with its overly entitled peasants and social media sharecroppers; clearly the rule of law in Europe and China would have allowed them to fully manifest their unparalleled vision of technological greatness without any concern of a rug-pull by authorities challenging their well-deserved hegemony
They did give people that chance.. That's kind of what the entire article is about. They literally did leave.
the FTB is anything but timid and wimpy
if the voters and legislature have the “bravery” to pass the wealth tax law, it will be aggressively enforced by the FTB
the second-order effects, whatever they may be, would be clearly visible within a couple years.
Or if people can easily move. Or if you want the next generation of startups to operate in your state.
This fundamentally misunderstands how this paper wealth actually works.
This is to once again mistake net worth for money. Net worth is not real. It is not a good measure of the money someone may be able to realise. They do not have hundreds of billions. There is nothing to tax until they sell some shares.
Good way to find out it this is the case: take it away. Not real, right? Why would they mind?
There is no way to take anything like that. Net worth is quite similar with me saying you are worth 1 billion dollars, but you have zero money in the bank. What do you take, super-rich billionaire person?
You take control of the shares and distribute the proceeds and make it impossible to leverage them for loans, credit etc.
Is it Zuck's networth or salary that makes it possible for him to own his ranch in Hawaii?
The net worth is simply the sum of assets minus the sum of liabilities. Take away the assets and you take away the net worth. I can't think of an asset category that you can't transfer if you are willing to sacrifice its value (which presumably doesn't matter, because it's not real anyways)
In the rare cases where contract law makes the transfer impossible legally the government could trivially step in to make it possible
Why not? Net worth is the estimated sell value of a list of assets. It is entirely possible to take those assets, or charge a tax based on that estimated sell value. Why would it even be a little difficult, let alone impossible?
And certainly ceejayoz was being a bit glib by suggesting we take all of it, but it would not be remotely insurmountable to tax billionaire wealth.
which thing of mine are you saying is worth a billion dollars? the lawnmower? take that then?
whats the complication? if its not worth anything whos gonna worry, especially if the government then compensates you in dollars
Because that would involve seizing assets? The parent meant it's not "real" in the simple-minded sense that people think it is: the average person imagines Elon Musk and other billionaires have a checking account that keeps increasing by tens of thousands of dollars per second because that's the only frame of reference they have. The reality is the wealth is mostly tied up in assets that ain't exactly liquid. Yes yes, they apparently have access to this supposed infinite money glitch where banks will endlessly loan them money without requiring interest payments (which would require liquidating assets for payment and therefore triggering a taxable event, the very thing people think never happens for billionaires). But the fact of the matter is the wealth isn't money in a bank, and therefore not "real" in the sense the parent was referring to. But it is at the same time something they would miss if it was just "taken away", much the same way you'd miss the numbers in your 401k if voters decided you had a few too many millions saved up for retirement.
Oh, are those real now?
the government seizes dollars in the form of taxes, which are still assets, no?
these other assets like musk's stocks are still quite divisible, and theyre as liquid as the government wants them to be. just because musk hasnt written the liquidity into his government sponsored contracts doesnt mean the government cant say yes, 10% of your private spaceX stock is liquid and belongs to donald trump now
its real and thus it is taxable
I dont know why it's so complicated to just say "Money is Money when it's Liquid, tax it then". Any loans on wealth should be taxed..nationwide.
But even in California's case this doesn't feel like anything anybody would object to. Given how much California Billionaires liquidate using loans on their wealth, I bet, they could do a middle class tax cut too to offset it a little bit too.
I am little baffled as to why the politicos haven't latched on to this whole-heartedly. You can still proudly say you're taxing Billionaire wealth. Because you are! Just more sensibly.
You will find that the centi-billionaires will find a different way to turn their illiquid wealth into personal power and value in a way that avoids that tax.
Simply let them pay the tax with shares. Problem solved!
Well one thing is, they'd sell shares to pay the taxes. Then dilute their own ownership of the thing (Tesla, Amazon) and it would serve as another form of wealth distribution.
Charitably speaking: I suspect the commenter above you was indicating that the government should have a stock portfolio you can transfer stocks to to pay taxes in a non-taxable event type scenerio.
If you're taxing wealth (and not income) then switching stocks into cash doesn't change the wealth. Then use the cash to pay the taxes which reduces the wealth.
which is also part of the idea of wealth taxes? to diffuse wealth?
Yes.
It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes. If "net worth is not real" neither is equity in real estate.
It's like saying cash isn't real until you spend it. Which is true in one sense but not what they mean.
The only reason it works with real estate is because they can put a lien on the house and block the sale of it. They don't have any useful mechanism to stop the sale of a share of stock, but since the government is involved in the transfer (due to the registering of the new house deed) of a house, they can stop that one.
Why can't govt block the sale of stocks? It's not like you would be selling non digitalized assets, govts often freeze and reverse stock sales/trades when they find it to be illegal already.
It's harder for private companies sure, but who will stand in the way of govts if they said we will sanction your if you buy X or Y company?
This entire argument doesn't really hold IMHO
The SEC exists. As do many other mechanisms by which the government regulates direct and brokered securities trades and sales. You can make the case that some of those controls are poorly/ineffectively implemented, but you can’t claim that it’s not something the government routinely regulates, intervenes in, and sometimes prohibits outright.
Society has deemed it "ok" for a real estate transaction to take days or weeks to process and mountains of paperwork, probably because it is done so rarely in an average person's life. But stock trades are expected to be done quickly in minutes or even milliseconds with high frequency trading. It just isn't feasible to inject government paperwork in the middle of a transaction. Wall Street would revolt if they even tried.
Nah. Look up the SEC’s reporting requirements, specifically form 4. The paperwork requirement already exists.
https://www.sec.gov/files/forms-3-4-5.pdf
Here are Musk’s. https://www.secform4.com/insider-trading/1494730.htm
its perfectly feasible.
high frequency traders dont have a right to a business model.
if they want faster trades, they can take full liability for what they own
The main reason real estate taxes work so well is that tax evasion is very difficult.
Because the building is standing right where it is, in the open, lit by the sun every day. If you don't pay your tax, the government can just take it.
This compensates for the several philosophical and moral problems with it, and I've seen several economists declare it the best form of taxation there is.
Exactly... that's why sales tax and VAT don't exist anywhere -- because there's no way to stop the purchase of goods or services.
This type of low-hanging sarcastic rebuttal doesn't belong here
If I sell my house, there's a reasonable expected range of money I can expect for it.
If a majority stock holder in a company sells all of their stock, the price first the first share sold is likely going to be completely different (and substantially less!) than the last share sold.
"It's difficult to accurately value" isn't an argument against taxing net worth. It's like the old (likely apocryphal) Winston Churchill joke, "We already established what type of woman you are, now we are just haggling over price". Just take whatever the proposal is, cut in half, quarter, or whatever fraction you want and you no longer have an argument against it.
Personally my favorite idea for this stuff that I have heard thrown around is to allow people to self value everything. However, that self valuation then becomes a price tag. Let a billionaire's accountants put their own evaluation on their equity in a business. But that becomes a binding offer and some other billionaire could come along and buy them out at that valuation. That creates pricing pressure in both directions, the person is prevented from underpricing their assets due to the threat of another buyer coming in and a person is prevented from overpricing because it increases their taxes. And suddenly all the problems regarding how the government appraises these things disappears.
Forcing people to write a call option on their property without an offsetting risk premium only sounds like a good idea if you neither understand the implications nor the math. Asset values would collapse because risk would go to the moon.
And that ignores that it trivially enables large-scale exploitation and looting by construction.
Once again, this is simply haggling over price. Name the premium you think is justified and add that into the law.
The market determines the risk, not the asset owner. The owner has no special knowledge of what the risk actually is separate from the market pricing it. You explicitly want them to accurately price it outside of a market, which is effectively impossible, ignoring that the price is highly fluid and dynamic.
If the owner is required to invent a fake risk premium then it virtually guarantees that the risk will be mis-priced. Forced rampant mis-pricing is an exploitable arbitrage opportunity of epic proportions. Every quant worth a damn will make a fortune looting this. No serious policy can ignore this defect. It has the additional political downside that no one can ever own anything anymore in a meaningful way, which won’t be popular.
No one takes this idea seriously because anyone with a modicum of finance math background can see that the math doesn’t math. Political ideology doesn’t even figure into it.
I don't get it. What if the person doesn't want to sell at all? Self-value at +inf and pay 1% of that?
Society has already decided that we can compel people to sell their private property for fair compensation via eminent domain. Plus getting the assets in the hands of people who value them more certainly creates utility and presumably increases the tax base via further development.
This type of forced sale happens all the time with public companies. For example, only like 60% of Twitter shareholders approved the sale to Musk, but the other 40% were forced to go along with it regardless of their preference. If Musk can do that to other people, why should some hypothetically richer person not be able to do it to Musk?
And to repeat myself for a third time, we don't need to haggle over price. If we only want this to apply to billionaires, assets worth $50 million, or whatever, that's fine. If one of the people impacted truly doesn't want to sell, let them set the price as high as makes them feel safe. I'm not going to lose any sleep over taxing the emotional desires of billionaires.
People absolutely make that argument about property taxes. That's where deferrals or abatements for e.g. elderly or low-income homeowners, or caps on property tax increases come from. Someone may own a home that property taxes price them out of, forcing them to leave their community because they can't actually conjure money from a higher priced home.
I think a lot of tax authorities also don't really aggressively reassess that regularly without a sale, so it also kind of ends up baked in that if you didn't pay that much for the property, it's only theoretically worth that much.
Predatory property taxes were a part of how so many black American farmers lost their land: https://archive.is/exkhR
Their fault for not developing it to it's highest and best use so they could afford to pay the taxes /s
This is all conceding the argument already. Many of us would happily accept these sorts of limitations on a wealth tax if it means there is a wealth tax.
I don't like property taxes either, and at minimum would rather they were called something else, and preferably replaced with per-service charges where possible.
But either way they exist to pay for things, and not to just degrade the value of your property simply because you worked to own it.
Property taxes are use taxes, not wealth taxes. Apples and oranges.
I feel like there's think tanks thinking up talking points that sound reasonable to convince internet communities against taxing the wealthy.
It's interesting to see the level of discourse change across time as these same points are brought up again and again.
It seems there are many many more people heavily invested in preventing land tax all of a sudden and are very informed whereas when that guy made a land tax visualizer a few months ago... crickets.
https://news.ycombinator.com/item?id=45425770
One of the first comments. Now there are dozens of people who are suddenly well versed in "georgeism"?
Absolutely ridiculous statement, it's not an accurate measure but it's definitely a good measure of money.
If you have 100B to your name even if it's post IPO stock in a possibly ponzi company that's your current wealth and you can easily convert a staggering portion of it into material realized wealth depending on several factors.
If I use cash to buy 1B dollars in Microsoft shares today, am I not worth a Billion dollars...?
The value may not be exactly convertible agreed so let's just force everyone to book all gains every year, and force sell a net percent of your share.
Not 100B$ of share, but 2% of 100 Million units of stock that you own. Why does this not work?
If I take 2% of your shares why can't it work the same way? I can then pick and sell it over the next year or two however I see fit, in case of govt they can slowly sell back this share to not affect the prices too much.
I am baffled by the fact that we have a tractible quantity and people call it hard to use to measure money.
Paintings, Jewels, etc. are what's truly the hard part of the wealth equation not the stocks, which is over 99% of what a wealthy billionaire owns.
I am not even considering pro or against taxes on billions people make but it's ridiculous to say stocks aren't money? Then what is money really... Currency is also traded, it's value can also go up or down....
even still, the government can propose a value, and if the owner thinks its worth less than that, the government can immediately confiscate the asset and pay that price as compensation.
if the owner thinks its worth more than what the government proposes, they can pay tax on the higher amount.
its still not that hard
I’d be willing to take some of the “not real” money.
I hate this argument.
Would you rather have 1M dollars in cash or 10B in stock that you can't sell?
Depends -- can I use the 10B as collateral?
You are ignoring the most common approach, borrow against the asset. In that case the sufficient assets turn into essentially unlimited untaxed cashflow. Especially with how the market has been lately, the gains erase any burden of the loan. Sounds like a broken tax system to me.
So why isn't the suggestion to tax the loan instead of the asset (that is 10x more volatile than say property)?
That may be a perfectly viable solution. Seems like an easier path to me, at least. But the point is that these assets are a lot more fungible than you imply.
And as such, when you get into the higher ranges, net worth is quite a good indicator.
What evidence do you have that people borrow against assets as some tax avoidance strategy? What are the details of this brilliant, often repeated plan? In particular, where do you get interest rates that are low enough to make it worth it to avoid capital gains even with an asset that's grown 100x over its cost basis (and are you accounting for reinvestment of income like dividends that can't indefinitely defer taxes, creating regular tax lots with higher basis that you could sell first)? e.g. are they getting better interest than SOFR somewhere?
The framing was slightly glib, and you're correct that current rates impacts the equation, but there has been real damage caused by how extremely attractive this strategy has been over the past decade. We sitting on an unprecedented peace time deficit due to a failure to properly tax an economy that has been massively prosperous during this same period. This strategy is small part of it, but it is a real part.
It wasn't extremely attractive if you actually think it through. e.g. if rates are lower and you're willing to carry investments with leverage (that's the idea, right? Your investments will grow faster than interest?), why aren't you already leveraged up to your risk tolerance? I don't think there's actually a world where this plan works. It seems like this is a reddit meme for people who have never actually considered a securities loan.
Loans must be paid back. Loans are cash flow neutral (cash flow negative with interest) over the maturity. That's why loans are not counted as income.
In theory, maybe, but in practice that is not what happened over the past decade(s). Instead our retirement funds are paying it back.
When the market grows it makes the collateral worth more, which lets the borrower keep refinancing the debt instead of selling assets and realizing taxable gains. As long as the assets appreciate faster than the debt grows, the borrowing can effectively roll forward for decades. Eventually the estate pays the debt out of the assets themselves, but this is not necessarily out of taxable income earned during the person's lifetime. The US markets has seen exceptional genuine growth, but the trillions of 401(k), IRA, etc money flowing in to them over the last 40 years is no small consideration.
And even so, you could say it all settles out in the end, but that ignores the fact that there have constant constant efforts (and successes) in eroding away the e̶s̶t̶a̶t̶e̶ ̶t̶a̶x̶ "death tax" during this same period.
However, the bank is happy to extend the loan infinitely for people with enough assets. It's questionable that whether such loans are cash flow neutral.
Try this - go to a bank and say “I’d like to borrow money using my 401k/Roth IRA as collateral. If I fall behind in payments you can liquidate the entire thing, including penalties, and make yourself whole.”
You’d think they’d jump over each other to lend money against such a stable, secure asset right?
Except they’ll say “sorry, this isn’t allowed. IRS treats borrowing against an untaxed retirement account as an early withdrawal, even if the asset itself stays untouched.”
Turns out the government fully understands the concepts of stocks, gains, unrealized net worth and more, and has laws on the books to make sure you are being taxed appropriately for them.
Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth. Because it’s “paper money”. It doesn’t exist. There’s nothing to tax. Just cannot be done, or it’ll bend the laws of spacetime.
Incredibly terrible example because you are allowed to borrow money against a 401k, up to $50000 with no penalties as long as you pay yourself back at whatever schedule you have determined for yourself
Is Larry page borrowing “up to $50000”?
No but he’s also not borrowing against his 401k? You and I can also go and borrow against stocks held in regular accounts? https://us.etrade.com/bank/line-of-credit
Does Larry Page’s brokerage account pay no taxes on dividends like a 401(k)?
Your 401k/Roth IRA (subtracting early withdrawal penalty) amortized over the loan period literally do count when considering qualifying income for a conventional mortgage. This is not a taxable event. You do not actually have to make distributions. It's just standard procedure that it counts when determining whether you can pay the loan.
You misunderstood. The discussion was not about income qualifications for a loan but about collateral.
Quite the opposite: Socialist politicans and their media lapdogs have dishonestly convinced you that wealthy people are escaping taxes en-masse by taking out loans and that this can only be stopped by eye watering wealth taxes. They frequently use a motte and bailey confusing unrealized gains (which certainly exist in huge amounts but are also significantly fiction) with tax escape via loans collateralized by securities.
But it's not true: were there meaningful tax escape that way it could be addressed by establishing rules with conditions where taking a loan against securities can be treated as realizing gains (and adjusting cost basis accordingly). Doing so would be minimally disruptive and distorting and have relatively little legal complication (at least compared to wealth taxes!).
But the reality is that the claimed tax escape isn't happening (at least not at any significant scale) particularly in the current interest rate environment, so a reasonable policy change to address it would be a no-op.
... and to grow and maintain their political standing they specifically need to push a NON-SOLUTION because they can't campaign on something that was simply done and solved, and to retain your (highly monetizable) attention they need to rile you up against an Enemy, and certainly never address the state's addiction to wasteful spending and buying votes with tax dollars as one half of the revenue vs expenses equation.
wealth taxes solve the problem that the ultra-wealthy will find a way to make their income untaxable, and focusing on these loans is a red herring. its how theyre doing it now, but not how theyll do it an hour after you add this tax. That the ultra-wealthy propose this as the solution means theyve already planned the next work around.
they dislike wealth taxes, which are an old roman concept predating socialism, because the wealth tax covers all the work arounds they can think of.
it is a proper solution to the overall problem which is extreme wealth concentration.
the obvious alternative is nationalization of all assets worth more than 100M.
DOGE has pretty conclusively proved that the government has been incredibly efficient with spending and doesnt have an addiction to wasteful spending. instead the problem is wasteful monopolization and wealth concentration. society writ large has an addiction to giving a small cadre too much power and control, and they arent the government
Nah, just make them pay taxes when it's valued as collateral and it's over a certain amount. Anyone saying you can't do that is lying to you.
Another thing with taxing unrealized gains is that no one in the government is willing to return any money if the unrealized losses happened. Somehow it's all hunky-dory when someone loses 1M in stock value, but as soon as someone's stock went up 1M they all want to tax it right away.
That’s just a decision we made about what is taxable.
Purely an accounting artifact. We can pass a wealth tax tomorrow and it’ll suddenly be taxable.
Net worth is real money, and is usually a very accurate measure of what people can realize. There are a few outliers who own so much that they’d move the market if they sold it all. Selling 2% to cover taxes? Not going to move the market very much.
The actual mistake is pretending like they can't leverage those shares to access fiat, for example securities-backed loans. The proceeds aren't taxable income, the bank gets its interest, and the latter is typically substantially cheaper than realizing the shares and paying capital gains tax. Meanwhile, they keep the assets, which on average continue appreciating.
The obvious correct solution is to tax securities-backed loans the same as selling the securities.
Security backed loans for what though? Personal spending? Building a factory to great jobs?
Income for what though? Personal spending? Building a factory to great jobs?
Capital gains for what though? Personal spending? Building a factory to great jobs?
Property for what though? Personal spending? Building a factory to great jobs?
Inheritance for what though? Personal spending? Building a factory to great jobs?
What a strange question.
no more obvious than taxing against the whole value of the asset rather than just the loan.
Which currently require interest payments of ~6-8% APR. Meaning that you need to be able to invest that money that is being borrowed back into the economy to hopefully get a return more than that. And if your investment fails you will have to realize a different investment. The interest being paid doesn't get hoarded either and is used to make other investments, pay employees, build products, etc.
The idea that a bunch of people are just hoarding their money and not reinvesting it back into the system is flawed. Taxes actually have the opposite effect to contributing to the system. Taxes are like if someone was to come and start hoarding money under their mattress for himself and not contribute back to society.
Yeah, it's all illiquid illusory non-wealth when they have to pay taxes, but when they want to buy a newspaper or social network they suddenly have 40 billion in hand.
Forced liquidation hurts more than the sticker price, but with billionaire taxes, that's a feature, not a bug. They make the most sense as a check on concentrated power rather than a revenue driver.
You wont mind if we tax it then will you?
You do, of course.
p.s. liquidity != wealth. try not to confuse them.
If you have $2bn worth of the same listed stock and go sell half of those, now you have a net worth of $1400m because your gargantuan order drained the order depth, tanked the stock value and triggered a panicked selloff at the stock market which further drove down that stock's price.
You can't take net worth away because it's just an estimate of what someone is worth. It may eventually be possible to turned into dollars and cents without losing too much in the process, but almost universally it can't immediately be exchanged in such a fashion.
Even more so when we're talking shares in a company that is not yet public, e.g. a founder's shares. At that point the valuation is complete speculation, based on what the company may be worth in some hypothetical future IPO. There's no actual price discovery since there's no public trading of such shares.
you confused liquidity and wealth.
illiquid wealth != unreal wealth.
as I said, if it were unreal you wouldn't mind losing it.
if it is illiquid, you clearly do.
economic illiteracy is not the best foundation for arguing against taxing the wealthy. by pretending the wealth "doesnt really exist" and "isnt there" to tax it highlights the underlying greed motivating the argument.
if you dont agree, perhaps elucidate on a more legitimate reason you might have had for confusing unreal with illiquid?
The lack of reality is mostly from how much net wealth is a guessestimate. The actual realizable wealth is largely unknowable. There isn't enough price information to give a certain answer.
But sure, how do you propose to pay taxes with assets that can't be liquidated and may not even be possible to valuate?
Even if you somehow pay taxes in assets that can't be liquidated, now the government has the same problem instead. What is the government gonna do, pay its employees in unlisted stocks, yachts and famous paintings? How will it even know how much taxes it's gathered?
If the tax isn't isn't just satisfying some sense of petty envy, and the tax is intended to cover some budget deficit, I don't see how this would help.
Net worth is usually not fully realizable unless it is in the form of cash. The larger the net worth, the smaller the realizable fraction usually is. In some cases, including some highly visible billionaires, the realizable fraction is likely tiny.
id say it usually is.
most people have very little illiquid wealth, and its generally in the form of a house.
billionaires are a tiny propertion of people, and their situation is as atypical as it comes. theres no reason to make super special accomodations for them, when theyre responsible for making their own dumb situation where they have too many assets to make them liquid on a hurry
There is a lot of literature on this. In the US, 2/3 of wealth is non-liquid so any attempt to price it is fiction. Of the 1/3 that is liquid, most is not realizable. Tax policy is effectively restricted to the liquid, realizable fraction, which is such a small percentage of the total that even modest-sounding percentages are a large percentage of what is practically taxable. Governments know this.
An overlooked issue in popular discourse is that notional asset values are tightly coupled to who owns them — it isn’t transferable. Concepts like “dead equity” have been in the finance literature for a very long time. Elon Musk’s equity only has the value it does because he owns it. He couldn’t convert it into cash even if he wanted to.
Well then why are people able to borrow against it and then also deduct taxes on the interest on that borrowed amount?
Also I pay property taxes. Somehow the worth of the property goes up every year and gets gets taxed accordingly. Then why can’t wealth get the same treatment?
This is a very strange claim when we have property taxes. Shares are property so they can be taxed just like houses and land.
They play a clever little game where they borrow against those shares to live on. Since there’s no realized gain, there’s no income (and the interest is deductible against any incidental gains that might happen along the line). Then when they die, the sale of shares to pay off the loan is a non-taxable event and the estate value is reduced so the heirs won’t pay as much (or any) estate tax.
that net worth is still power, which is even more valuable than money.
if you are claiming the high net worth, almost certainly you have raised significant actual money on things you own. a wealth tax means that if you dont actually think your business is worth a billion, you cant raise money as if it was.
thays a net good thing.
if peter theil is lying about being rich and he only has a couple hundred thousand bucks to his name, the publiv overall deserves to know, and it should cost him quite a lot to raise or borrow money.
these people are commiting fraud and should be forced into texas prisons without AC because theyre lying to banks about the value of their assets, and the bankers too beed to go to those same prisons because theyre defrauding their depositors.
this is only a good thing for routing how whos lying about their worth
That's tautological. I mean, it's true under current federal tax law. It's obviously not true under new California law, which is what the article is about.
Clearly the government can tax non-cash assets, and they do all the time. People act like "wealth taxes" are some moral horror or logical impossibility, while tossing their mortgage statement into a big file and pretending to ignore the property tax line on the escrow account.
Are there practical problems like "wealth has feet"? Sure. Taxation is hard and all systems can be gamed. But let's not pretend that there's a greater principle at work here.
Just wait until you find out what $20b in necessarily liquidations does to Meta's stock price and your S&P500 ETF.
Larry Page owns about 5% of Alphabet, which is worth $4T, so he has $200B give or take. Which part of that do you think reflects a "broken tax system"? Companies should get kneecapped if their market cap gets too high? Founders shouldn't be allowed to keep even a single digit percent of the company?
The broken part is that there is third world-level poverty on the streets outside Google’s offices, working class people cannot afford to live in the Bay Area, and a fifth of California lives in poverty.
This has basically nothing to do with with market cap of Google or Larry Page's percentage ownership of it; and the state government taxing it more will not make this situation any better.
This is almost completely traceable to Californians' failure to allow sufficiently dense housing to be built on their doorsteps. The only thing Larry did was bring prosperity to the region.
(I'm in agreement with the thesis of the article)
More taxes should solve that.
Read somewhere that SF spends roughly 50k$-80k$ per homeless person per year.
Taxing more doesn't solve a massively inefficient system at it's core. Just like US education, we spend more than any country on earth, why is it still bad?
Answering that question with a "if only we had more money" is a really poor argument. The CA tax fundamentals are bad, pooring more cash onto the fire will not fix that.
If money isn't solving the problem, you're just not using enough.
You can't solve a shortage with demand subsidies. You need to expand supply. SF has too little housing relative to its population, and has perennially tried throwing money at the nonprofit industrial complex which has (obviously) perennially failed to solve the problem because it doesn't generate new housing units, it just bids up and reshuffles the existing ones (and steals a lot of money in the process).
OK, use money to expand supply. Using more money can make more supply.
Technically, cratering every fortune 500 does solve inequality so at it's purest their argument is right.
I think it's more socialist/communist motivation to seize production I don't think they care about the rich as much as control.
Sure. A lot of that money doesn't even make it to intended recipients because of corporate welfare and inefficiencies in government.
https://youtu.be/YKAD7l1a9hc
In addition, there should probably be changes to laws/regulations to address companies that exploit the poorest.
https://youtu.be/U9Rls-_7LdQ
And, many people who are poor have persistent mental/physical disabilities, so part of that spending is because many of these people have it the hardest.
With that said, we could likely fix all of these things and significantly unequal wealth distribution would still result in a lot of poverty.
I think it's hitting 96k per homeless person a year now. But yes, it's the tax system's fault.
96k$?! Those are rookie numbers. I propose a mclaren for every homeless person. We will weath tax all stocks in the fortune 500 to pay for it, crash the stocks and solve inequality.
I agree that that's the major problem; the poverty is inexcusable. But that's not caused by the $300B (or whatever) of equity. It's caused because the homeowners of the Bay Area decided that once they got a house, nobody else should, and that they should get to exclude others from the opportunities they had.
This same thing was observed during the Gold Rush in California in the 1800s; extreme wealth also resulted in extreme poverty. And there's a great way to solve this: tax the land and redistribute it equally to everyone. Land can't be moved, it's something that belongs to all of us, and you can't make more of it.
You sort of can make more land -- by building tall buildings. Unfortunately the Bay Area has mostly outlawed that, too. And we can't blame that just on homeowners. SF "tenant advocates" are just as violently allergic to developers building new structures as homeowners are. But the worst offenders are definitely Peninsula and South Bay homeowners.
That distinction between tall buildings and shorter buildings on the same plot of land is exactly why the land should be taxed.
Economic land is any capital that has a fixed amount, that you can't make more of. When the local governments in the Bay Area started capping the amount of buildable square feet, they greatly accelerated inequality by converting regular living space and working space into economic land, just like the real land it sits upon.
This is why economic inequality skyrocketed so much. Rentierism resulted in so much being stolen from anybody who doesn't own the land, and blocks out so many people from even having access to the economic system.
Tenant advocates recognize that eviction is an existential threat to their way of life and so understandably they are fighting for their short term future. I disagree with their efforts in the long term, but I understand why they'd do what they're doing.
In contrast when you have enormously wealthy people like Marc Andreessen fighting against higher density zoning there is no such excuse and it's pure greed. Nothing could actually be an existential disruption to the wealthy in the same way. There is no reason to listen to the rich like Andreessen at all.
The equitable thing would be to focus on redeveloping wealthy homeowner areas and limit redevelopment in areas occupied by poor renters, but somehow that option never seems to be on the table. Only the reverse.
I tend to keep quiet on the following critiques, because it can be counterproductive to larger goals to speak the truth sometimes, but something in this comment got to me and I need to share my truth. You're too kind on the "tenant" advocacy groups here. They are nearly 100% funded by wealth foundations that have exactly the same motivations as Marc Andreesen, and the people carrying out the wishes of the wealthy foundations are merely woke-washing really bad behavior. These "tenant" groups fight the types of change that would redevelop wealthy areas, precisely because of their funding sources, and they do it just as hard if not harder than stopping housing going up in other areas.
If anything, these "tenant" groups only advocate for the interests of a small subset of tenants, those who have their forever home, and do so at the expense of tenants in general. It's "pure greed" too, at the expense of others in their same general social, economic, and political class!
I say this as someone who continues to advocate alongside tenant groups on policy for better protections, for rent registries, etc. And as someone who spent many years giving small donations to local tenant advocacy groups. At least Andreesen is transparent in his greed, and not hiding it. I regret all those years of donations to the groups that hurt people, but when it comes to the few good things they do I'll be there with them still. Marc Andreesen and the wealthy funders of "tenant" groups are not harmed at all by better tenant protection policy, but boy are they harmed if real power were handed back to tenants in the form of having enough housing, and therefore ultimate power over the landlords.
Well I'm speaking from first hand experience knowing working people who live in such situations. Their existence is so precarious that a change in housing situation is indeed existential. So even if there are some disingenuous tenancy orgs out there, it doesn't change the reality that this is a real problem.
Certainly not the case in my jurisdiction of Vancouver, where such political groups (eg. COPE) have explicitly advocated for apartment development in the wealthiest areas of the city. Maybe this is the case somewhere but a big [citation needed] here. If there are somewhere tenant advocacy orgs that aren't in favour of turning low density detached homes into apartments for workers that's certainly not one I recognize.
Yes this is the point of my last comment. The solution is to increase the amount of people who have their forever home. The most equitable way to do that is to "destroy" the forever homes of the very rich for whom that is really no big disruptive deal, not to destroy the forever homes of the poor for whom it would be incredibly existentially disruptive. It is not "greedy" for people to want to keep their toehold on their long term home. To be clear the stakes here are not simply moving somewhere else but being priced out of the city entirely.
that has ZERO to do with the tax system... You can't be serious? Have you looked at the data at all? have you seen how much money is spent "combatting" homelessness in San Francisco?
just not his problem. not a single motherfucker on this website lives their life as if wealth disparities are a genuine problem anyways. you are motivated by resentment
None of that is Google's fault.
Landlords could have collectively agreed to keep rents at $1K/month and not lobby against building more housing complexes, but they decided to be greedy instead.
Yes. No one person should have assets worth as much as the GDP of Qatar.
Sure, yeah, but which of the two numbers I was multiplying together is, in your mind, too big, and should be made smaller, and by what mechanism?
What if they provided value of 10x of the GDP of Qatar?
Why does it matter how much the shares of his company are worth? They just represent ownership of a company. It's not like their existence is somehow holding back wealth from the market or from other people. And if he wants to sell the shares to make some cash, then he's going to have to pay taxes on that, which is good for everyone else. And he wouldn't do that unless he planned to spend or invest the cash receives, which is also good for everyone else. I fail to see the harm.
I think one could argue that taxation should be higher, and harder to dodge, and I would agree with that.
But once you start saying that some people shouldn't have more than others to some degree, that's a very slippery slope. Where do you draw the line? Why is it okay for middle class Americans to buy nicer clothes and move into bigger apartments when people are out there starving? If it's not okay for someone to have the net worth of Qatar, why would it be okay for someone to live in an apartment that's worth more than a poor township in South Africa?
At some point we have to accept that inequality exists, and that although almost everyone could do something to minimize it, there's an ethical and practical line that needs to also respect individuality to a large degree, if we want people to feel incentivized to do things, to feel ownership, to maintain autonomy. And where to draw that line is tough to say exactly, but it probably shouldn't be a line, it should probably be smooth, or at least smooth-ish. So I feel like we're just coming back around to progressive taxation. Which we already have.
Why?
Yes perhaps there should be wealth caps. Did Larry Page really do 5% of all that labor that made google as big as it is? And should a single company get so big and have so much power? Yes, I get that they took risks and invested early, and we shouldn't take away that type of incentive, but perhaps it should have caps, or an S curve tax schedule.
Google doesn't have much power. It can't arrest you or pass laws or vote. It just happens to produce a lot of profits for its shareholders (who are, overwhelmingly, average people with 401Ks) and a lot of profits means a big market cap.
If we need revenue to fund useful government programs, great, let's tax Larry. But I don't understand what problem is solved by expropriation qua expropriation.
Figured I wouldn't get much traction with that comment on a message board run by Silicon Valley hyper-capitalists lol
that is to say theyre being kneecapped.
it does have monopoly power and anticompetitive power all over the place though.
google bans are quite intrusive, but google could pretty easily with their graph knowledge apply secondary or tertiary sanctions, at which point you would not be able to do much of anything, same as if the US government sanctioned you
Yes. They should be broken up because competition is good for consumers and society. If we had functional anti-trust enforcement Google would not have a near-monopoly on search ads where they own both the ad inventory and the marketplace where you have to buy those placements.
Then you'd have two (or three, or four) companies that Larry owns 5% each of that are collectively worth $4T.
The part where he has access to essentially unlimited untaxed cashflow by borrowing against that asset. Especially with how the market has been lately, the gains erase any burden of the loan. Something has be done about this, at least. Otherwise broken sounds about right.
Larry has sold tons of Alphabet stock and paid lots of capital gains taxes. This is easily available public information. The whole buy-borrow-die thing is sort of a stupid myth. Actual centibillionaires diversify because the risk of having a huge concentrated position is much greater than the liability of having to pay some capital gains taxes.
Well, why does something have to be done about this, exactly? Who is getting hurt here? It's not like borrowing is increasing his net worth. Just like anyone else, he has to pay back what he borrows, he immediately owes an equal debt. And that requires actual income, which gets taxed.
In theory, maybe, but in practice that is not what happened over the past decade(s). Instead our retirement funds are paying it back.
When the market grows it makes the collateral worth more, which lets the holder keep refinancing the debt instead of selling assets and realizing taxable gains. As long as the assets appreciate faster than the debt grows, the borrowing can effectively roll forward for decades. Eventually the estate pays the debt out of the assets themselves, but this is not necessarily out of taxable income earned during the person's lifetime. The US markets has seen exceptional genuine growth, but the trillions of 401(k), IRA, etc money flowing in to them over the last 40 years is no small consideration.
The something here is what's required to have a functional tax system. Without addressing this situation I do see an argument that we have one. How important that is to one is another question.
the people getting hurt is anyone who would have bought something but was outbit by larry page's free money glitch.
he doesnt necessarily have to pay it back either. he could just take out another loan against his same now higher valued assets to pay off the old loan
whats its mean to be kneecapped?
like, if a company's market cap gets too big, the law should stop applying to them? they should be allowed to start their own militaries and enforce martial law a la east india company?
how does a founder keep a single digit of their company after theyve been dead for a thousand years?
These arent nearly as absolute as you are making them to be.
a founder can keep their percent by paying their taxes with other money they have, or by decreasing the worth of their company. theyre a founder, they have control. Maybe founders wont be so keen to enshittify their products if theres a downside to continued growth forever. considering google dropped "dont be evil" in exchange for making larry page's 1% grow for the sake of growing, how's society at large benefiting from continuing to subsidize it?
There's also the fact that alphabet should have been broken up into about a dozen companies over a decade ago
Larry would still be rich as heck, but probably... less rich..
If you taxed him half of that wealth he'd still have single digit percentage of the company.
The broken tax system is that I get taxed about 50% on my marginal income dollar --- the system doesn't wait for me to spend it first --- but when his stock portfolio appreciates by a dollar, he's not taxed! Not until he sells in order to spend. Why are we taxing labor so much more than capital?
And no, I don't think that inventing pagerank really entitles two people to $200B. Although in their case I don't think they've done as much harm with it as some other billionaires.
If the $100B+ was created through ownership of a company and is unrealized wealth, how would you have taxed it if not through a wealth tax? Nobody is getting to $100B by way of income.
Absolutely not. 100% you can take it.
I would care more about the broken tax system if the politicians didn't waste our tax money. Stop the fraud and the corruption and the incompetence and then let's talk about increasing taxes.
$24 B unaccounted for and lost that was supposed to be for homelessness. $12 B already spent on high speed rail and they want $120 B more. $50 B in EDD unemployment fraud during the pandemic.
This is just in California in the last year or two.
How much more fraud and corruption and incompetence is there that we just don't know about?
There is no way I will agree to any increase in taxes just to see it wasted and going to corruption and political buddies on every side of the aisle.
Zero taxes is the only right answer. Any talk of taxation means that you have already given in to being exploited, because it's a slippery slope. Let's be realistic - corruption will never end. The only way to reduce it is to starve the beast.
We're in a situation where it's already "too late". We can't go back 100 years. How do you propose we fix it, assuming time machines won't get invented soon?
"Let someone"? I guess the right to pursue one's happiness is not all that self-evident after all. One should first ask permission, and, if we are in a good mood, we might "let them" pursue their happiness.
yes... this is called the law...
Lots of peoples "pursuit of happiness" is hindered by the law because we've deemed it not good for society.
They can move to Afghanistan. I'm not sure the wealth leaving the state, or the country, is such a bad thing.
Meanwhile, when you're in an "already too late" situation, it's already too late. You still have to deal with it.
Two things:
1. If wealth was only motivated by taxes and was going to leave, it would've left already. Fact is, billionaires don't want to live in Tennessee;
2. Nobody is doing the right thing to tackle any of this, including California.
The article mentions California has land and that's the key point. Unfortunately, California homeowners have been coopted into voting against their own interests to raise property values. If the house you bought in SF in 1975 for $80,000 is now worth $3M, you still only own 1 housing unit's worth of wealth. And that housing cost is an input into everything you need to buy because all the workers required for those things have to be paid high enough to pay those exorbitant rents.
Let me repeat that: high housing costs are an input into everything that you buy.
So what needs to happen? We need to stop treating housing as a speculative asset. It's simply stealing from the next generation. Worse, it's diverting investment capital from productive output because land has become the asset with the best tax treatment, highest returns and most government protections. So what does this look like?
1. Some form of land value tax. The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable;
2. Punitively tax land hoarding including second homes. We could give discounted rates to primary residences of state residents. Nobody else should get a discount. This would mean repealing Prop 13 and that's never going to happen. As an example of this, I'll bring up Prop 19. In CA you can inherit a preferential property tax rate. Prop 19 proposed to limit this to only one property could inherit this preferential rate and it barely passed (51% IIRC). Do we think that 49% of California voters have multiple properties that have property tax rates set 40+ years ago? Of course they don't. It's an example of how people vote against their own interests;
3. Part of what sold Prop 13 originally was the idea of pushing seniors out of their homes with property taxes. Well, that gave Disneyland a tax rate that was set in the 1960s. California should do what Texas does: you can defer your property taxes until you die if you're a senior but there's no capped property tax rates like incumbent SF residents have and no inherited preferential property tax rates;
4. Wind back the preferential collateralization of property for mortgage debt over time. Residential property lending now dominates bank lending and earnings. It's significantly harder to get finance for any form of productive output;
5. Wind back over time preferential tax treatment for home ownership.
Do I think any of this will happen? No.
Oh, one of the worst things to do is transaction taxes, often called stamp duty. This is where you pay a percentage of the value on purchase. This really hurts mobility. I guess it's fine if it's only on the luxury end of the market (CA's is at $5M+?) but it's not a good idea regardless.
The other part of this is to provide social housing like Vienna. The government should be a significant supplier of affordable quality housing.
Something I've been yelling from the rooftops.
Housing can either be affordable, or it can be an investment that's bought, rented, and sold for the sole purpose of profit. It's not possible for it to be both.
People expect their house to appreciate faster than inflation, but all that does is rob the next generation of home ownership.
Many, many years ago multiple generations would live in one home that may have even been built by a generation that is long dead.
What are the proposals for accomplishing this?
Ditch or reform/restrict the 30-year fixed-rate mortgage. Remove barriers to building more housing. Other stuff, but you can do a web search, I'm sure.
This kind of assumes the only reason a house appreciates in value is because people are "treating it as an asset" rather than "the house I bought 30 years ago in the middle of nowhere is now smack dab in the middle of a very desirable area." At that point it's simple supply and demand, not some homeowner being greedy.
This makes the fatal assumption that just because a house is worth dramatically more than what you paid for it many years ago that your income must have risen just as dramatically. "Oh well, too bad, sell your house and deal with it." Maybe people kind of like living where they've put down roots and don't want to be punished for something outside of their control? Any proposal that boils down to "pay more or fuck off" is not going to go over very well.
What you mean is voting against what you think their interests should be.
This phrase is incredibly condescending and undemocratic.
If the tax is calculated based on residency at the time it was earned or granted rather than when it vested or was sold then it doesn’t matter if they leave.
I agree the proposed wealth tax is a bad idea, but raising property taxes is probably not viable. They are incredibly unfavorable to voters. No one who owns a home wants to pay rent, that's why you buy in the first place.
Personally, this is why I am fine with higher income or sales taxes.
Sales Taxes are the worst ones. Burden on seller, burden on buyer, regressive. Income is more fair but easy to mask-out for the wealthy. Property is meh, Wealth tax is the best one. Assuming all were well designed.
why is it a burden when they are already collecting sales tax? They just change one number but nothing else changes.
Some items taxable, some are not. Keep track. Some have different rates depending on who's buying, keep track. Buyers in different locations pay different rates, keep track. The rules change frequently, keep track. Collect money for the govt, keep track. Remit quarterly or face penalty.
There complexity and overhead on sales taxes; more than on an income, retained earnings or wealth taxes.
Also, sales taxes take more percent of wealth away from the lower wealth bracket than from the upper wealth bracket.
If you kill demand, you kill economy.
And I’m very surprised nobody mentioned cooperative tax in this post. Taxing cooperative profits is the simplest and fairest solution.
Property is literally a wealth tax on an asset that can’t move away
Sales tax and the gasoline tax are use taxes. They are about as fair (democratic) as you’re gonna get because it’s based upon use most the other taxes whether they’re high or low, you can’t escape from particularly if you are the average person in the middle, and once again, if you benefit from capital gains, that is a huge life-changing benefit, which most working people don’t have. Vote yes. on proposition 40 if you are in California the less than .001 and even the 1% will easily survive.
They just want continually delivered services from the city funded by taking out increasing amounts of debt or selling off new land in a ponzi scheme to fund existing obligations.
"Personally, this is why I am fine with higher income or sales taxes."
Indeed, the working poor need to pay more in taxes.
The numbers on wealth distribution are shocking, to say the least. I think wealth taxes without loopholes are a really good idea in the current circumstances, infact I believe it may not go far enough. And I think there has to be a global concerted effort to tax wealth.
The working class are starting to choke and drown in financial stress, and this will only get worse. Capital naturally accretes and we've never had this level of capital concentration in human history.
Not even the poor. Really everyone working. I would much rather sleep all day and live off of a pile of money than to show up somewhere and do something for money. That's the tax -- 35% of your waking hours are now at the service of someone else. And yet, they charge income tax on that. Stay home and live off a stash of money in your mattress, 0% tax, 0 obligations. Wake up and commute to work, 35% of your week gone, 35% of your "income" gone.
I am not even that mad that I personally have to pay taxes. I enjoy funding government programs! I think I owe society something! But it sure doesn't make sense that already being rich makes you immune to giving back to the society that made you that way.
To me the most egregious is inheritance not being taxed like income. You can get $10m in a year and pay less tax than a working person.
Even worse, step up basis! That capital gain may never be taxed
Which is why the majority of people in California who work for a living shouldn’t be carrying any water for billionaires or hundred millionaires, you could even extend that down to someone who’s worth 10 million, until you get to that level, you don’t realize how many people over that level have it very easy.
In comparison to the majority of the population, you know the other 99%. That’s right, you heard it right. 99% of the population does not have $10 million free and clear without debt. In other words, if you are still paying off your house you are not in that upper bracket.
everyone working is the poor.
the rich are an astounding amount of wealthy such that they dont show up and still make a good poor wage in the first couple hours/days of a year by their assets increasing in value
you are poor, even if you are doing plenty well for yourself
If this is actually a common attitude, people are... ridiculous. Real property is a limited resource, and allowing people to own property comes with strings attached. This is a pretty normal thing in very many places.
But I do agree that raising property taxes in CA in particular is a politically toxic topic.
And higher taxes on capital gains & dividends.
It's the single taxers again, with a new argument.
I'm not a single taxer.
The article is. It's an argument for the main tax being on real property.[1]
[1] https://en.wikipedia.org/wiki/Single_tax
In what sense can't it be passed to renters? Esp if all landlords in the market were faced with a new land tax that they had not previously planned for, why would it not be passed on?
Rent is a function of supply and demand, not a landlord's costs, otherwise we would expect changes in e.g. mortgage interest costs to be passed on to, but in practice we don't see this effect. We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
Landlord costs impact supply.
If mortgage expenses go down and property tax expenses go up, it's basically a wash.
But for that to happen, land values need to go down. Landlords need to bid less.
Of housing, but not of land.
LVT would push up the supply of rental properties by ensuring that property owners who don't rent out their properties or who don't make efficient use of land lose money.
Thats an incentive to rent out the property or sell up to somebody who will.
It would apply harsh market discipline on landlords - a demographic that has usually been rather coddled.
A property loses ~30% of its value when rented out and maintenance cost and insurance cost goes up significantly. Plenty of landlords rather have their property be empty and just collect on the equity gains over the years without putting in any effort.
The existence of property tax (which on a single house in some areas of the state is upwards of $15,000 a year already) already makes it absolutely ruinous to just sit on an extra house you don't need and not rent it out.
A little more convincing. Though I suspect most empty land in places where anyone would be willing to live in California, is empty because our insane zoning laws don't allow what would otherwise make sense there (I don't care that it's like what most areas have -- it's insane to have laws that would make it illegal to build a place like San Francisco, Brooklyn, or Boston).
The funny thing about those zoning laws though is that they're held up by a rare case of bipartisanship:
- The MAGA Boomer set who doesn't want any more development near them because "it'll bring traffic" or noise or crime
- And most of the "progressives" who don't want any more development anywhere because "we hate greedy developers" and "Not enough of this proposed development is low-income housing for the government to dole out in lotteries to a few lucky families."
These aren't a universal cost. When rates change, some landlords' costs go up. But some don't. That lets the latter set the marginal price.
If everyone's costs go up the same amount, it's collusion without communication. In an inelastic market like San Francisco's, you'd expect prices to rise.
Taxes may not affect the amount of land that physically exists, but they absolutely can and do affect the amount of land available for rent as opposed to other income-generating use cases.
On top of that, a tax that applies equivalently to all of the land available to the rental market in a given area will simply push prices upwards across the board, which is likely to just be absorbed by renters given the usually low price elasticity of demand for housing.
These are assertions, not arguments. Respond to points in the post you replied to. Be sure you understand them first; your assertions do not hold in the case of LVT.
These are assertions, not arguments. Respond to points in the post you replied to. Be sure you understand them first.
Most research asserts that a land value tax decreases the selling price of land.
Presumably by exactly the value of the tax (over the lifetime of the purchase).
In a fully functioning spherical chicken market, once balancing in
If I buy land for $100k today, I can assume I'm going to make say $6k a year from renting it to someone and $2k a year from it increasing in value, giving me a 8% roi
If I instead had to pay just $4k a year in LVT, the price would reduce to $50k to keep that 8% roi. I'll still be making money for doing nothing.
Now if that LVT was returned to the population at large, it's quite possible the population has more money to spend on land, so I could increase the rental price from $6k a year, but then the LVT would increase, because the idea is it reduces unimproved land value to zero -- nobody should make money from occupying land, they should make money through improving it.
In reality though any LVT implemented would be full of loopholes which would introduce absurd incentives. Just like taxing income, and worse taxing earned income more than non-earned income.
But who's selling the land? If everybody has to pay the tax then all of the property owners can increase rental prices by the same amount.
All property owners can increase rental prices now anyway. They can only increase them to the maximum someone will pay for it. That's why average rental prices tends to track average income. If you have 5 homes and 6 people, each able to pay 2100, 2200... 2600, then the worst home will rent for 2200, and the one who can only afford 2100 will live in a box.
Why would a land value tax shift the allocation of land between uses? The amount of the tax doesn't depend on what the land's being used for. If renting is the highest-value use without the tax, it will still be the highest-value use with the tax.
Whether the landowner rents it to someone who will improve it to generate income, or they improve it themselves, doesn't matter.
Most mortgages are fixed interest. So it makes since that today's rate change doesn't impact a renter cost in the near future. Probably not until the next time the property is sold.
This absolutely happens in the UK where variable interest rates affect more people.
The price of everything is pretty much a ratchet. They never go down again absent some kind of competitive pressure.
If I own £100K worth of land, and the government announces a 1% annual land tax, it's likely the value of my land will fall by about ~25-33% overnight.
If you think that's morally unobjectionable, fine, but I'd love to know what happens when all the landowners who own rural land that doesn't have a profitable development path attached to it can't pay their tax bills. Have the state seize it all?
Or do they just claim it's of negligible value and avoid the tax?
You would sell the development for as much as you can get, regardless of tax. The people buying from you aren't going to pay you more just because the government raised your taxes.
A land tax would effect every single landlord though. Every single landlord would put up rent.
The market will bare it because people have no choice. The choice is homelessness or paying the higher rent.
It's principally the same when mortgage rates rise. Landlords with mortgages put up rent. Only it would be worse, since not all landlords have mortgages.
Property is already taxed based on its assessed value in California.
If it doesn't have a profitable development path attached, the price(and therefore "value") will go down, as will the tax burden.
Labour in the UK introduced a 20% inheritance tax on >£2M rural property.
https://www.theguardian.com/uk-news/2024/nov/01/farmers-shoc...
Although the rules were later somewhat changed. Perhaps after pressure due to terminally ill farmers committing suicide (before the tax came into effect so that they could pass on their inheritance).
Is there really a market dynamic in rent pricing anymore? I thought that algorithmic collusion had eliminated the need for landlords to compete on price.
Well, that and non-enforcement of antitrust which is a big part of many of our current economic problems.
Massive corporate landlords like Greystar and Morgan Properties own so much of the market they can do a lot of pricing damage even without colluding with others (but of course they do that too).
Why would they as long as they find a renter? The market always charges the marginal cost.
They will charge the maximum amount possible, no matter what their costs.
And the maximum amount possible is based on the cost of bringing more housing supply to the market aka the marginal cost.
Which comprises
1) Cost of land per year (which won't change as you'd be paying $10k a year tax rather than $10k a year in interest on the loan taken to buy the land)
2) Cost of building per year (which won't change)
Landlord costs affect supply in the long term, so you will see changes, just not necessarily immediately over a one year period, but definitely over a 5-10 year period.
If costs are uniform for each landlord (they have to pay for), it limits the amount of money they can invest in new capacity, and you will see the effects over a decade. If one landlord has cost advantage over another, then they will of course probably just take the extra money as extra profit.
They provide friction with what can be done with the land, because the cost of owning the land has to be paid. If it is just a land tax, however, you can game it by building as much as possible on it so the landowners who can't build as much as you can subsidize your usage (long term, you either have to build as much as you can on your land, or sell the land to someone who can).
A transaction can occur if the price is >= the seller's cost, and <= the value to the buyer. If it's at the minimum, the seller must pass on the tax or not trade, at the maximum (down to the max minus the tax) , the seller can't pass on (all of) the tax and still trade. We observe that landlords make profit, so we are not at the minimum. Are we at the maximum?
I think there are cases where we are in between for significant periods of time. Consider a positive shock to wages. Can landlords put up prices overnight? I don't think so, unless the landlords all co-ordinate to do so, prices will be sticky as there are always some properties in the market, so it's difficult to be the first to increase rent. Unlike a purchase, a landlord who waits for a buyer at the right price is forgoing income during the void. So the market price can be a Schelling Point.
A tax increase, however, happens at the same time to all landlords. All of them would prefer to pass it on, and they know that so they can assume all other landlords will try to pass it on. If the rent is currently below the maximum possible, they will succeed.
How long it takes prices to adjust I don't know. It is an empirical question, but I don't know what data would answer it. But it seems like it took decades for landlords to capture the two-income surplus after it became common for women to have a career.
This is a prime example of short term thinking, often espoused by politicians.
Landlord costs drives supply at a given price point so your initial premise is flawed.
I do acknowledge that rent is a function of supply and demand in the big picture, at least. I don't think the whole foundation of economics is wrong.
Demand for apartments will be constant. Supply of apartments will be constant.
But I think what's going on here is that we are way off the equilibrium point. The supply of good places to rent is far outpaced by demand for them, at most price points, and especially so where all the value is (on the coast). So, this means if you're a landlord and you know you'll owe another $1200 tax to Sacramento this year, you should be very confident that if you raise rent by $100 a month, even if an individual tenant would rather move than pay it, someone who can afford $100 more exists and will almost certainly fill that vacancy promptly. It may represent a slight step down in what their buying power would buy. Like, they may have rented a $3000 apartment before, and they'll now rent what used to be a $2900 apartment from you for $3000.
Profitability of renting effects supply. Reducing the profitability of renting reduces supply which, as you noted, increases price.
Do you really believe that landlords will subsidize tenants for a long time?
More to the point, if landlords are losing money, why would anyone build rental housing? Instead, why wouldn't they take housing off the market?
This literally happens all the time in California.
You buy a house in CA. You move somewhere else. You hold on to the house because your property taxes are fixed and housing prices grow like crazy here. Maybe your kids will want it. Maybe you'll want to move back..
You can't charge enough rent to cover the mortgage and taxes os you end up taking a loss monthly.
That cost will, of course, be passed on to renters unless the rental prices cannot be raised at all.
If they can't be raised, and the costs end up being ruinous to the landlords, they will find other solutions like mass arson. That isn't hyperbole; this was a serious problem in the 1970s: https://en.wikipedia.org/wiki/1970s_South_Bronx_building_fir...
That was obviously not acceptable... but it was predictable.
All legal proposals should be viewed like a chess move. Presume others will respond, and make sure you're ok with that response. In a sense that's also the point of the original article too, a law was passed without adequqtely thinking through what would happen.
Feel free to quote in the article what supports your summary given the article doesn't actually talk about that
In fact it mentions insurance fraud as the cause...
Additionally it certainly wasn't increasing cost but reduced income which is a very different issue
Yeah. Arson-induced insurance fraud. Hope this helps.
If landlords can already raise the price of rent, why haven’t they?
That’s one of the ideas of LVT actually: building apartments in land doesn’t increase tax burden, burning the apartments doesn’t lower it
I actually think there's a lot of positives in land value taxes. However, I was objecting to the phrase "The land value tax can’t be dodged by leaving nor can it be passed on to renters" because that is missing key issues.
Land's assessed value is based on what you could do with it. If can be rented at a profit, that's something you can do with it, and its potential matters. If it can't, then that is no longer a potential value of it.
That doesn't make lvt a bad idea, it's just that I think there's not enough acknowledgement of the trade-offs and limitations.
Burning down an apartment building doesn't change what could be done with the lot; an appropriate valuation method for LVT would not give a different valuation for the land depending on what is built on it.
True, but an LVT is a cost. Changes in cost can change what is financially viable to do with a property, regardless of what is currently done with the lot, and thus can impact the land value.
Actually no, land value tax is not a marginal cost so does not change the profit maximizing use of land.
The idea of cost-plus pricing is folk economics.
Tax incidence is very well understood in economics and has to do with relative supply and demand elasticity (supply of land is perfectly inelastic) and marginal costs which land value tax does not touch.
It's accurate to say LVT changes the price of land. But it doesn't change the profit maximizing productive use of land.
Other taxes that scale with production (sales tax, income tax, property tax) do change profit maximizing productive use.
Arson would be irrelevant for land taxes.
It is quite disingenuous to attribute the South Bronx fires as a result of landlords unable to raise rental prices. I mean that is technically true, but your comment makes it sound like it was a result of a particular legal proposal. It was not. It was a period of urban decay in NYC and many cities in the United States. It was the continuation of white flight into suburbs that started in earlier decades. It was a large demographic change with complex causes.
Or the more likely option is they will no longer do investment properties as the return it too low vs the risk.
Landlords who have their entitlements to land rents or other natural resource rents they've captured ripped away from them would almost assuredly endorse the use of violence.
Land redistribution (of which this is a form) from the landed rentiers to the landless has historically resulted in brutal violence in order to protect their privileged claim on non-human created wealth.
Why shouldn't people's property be protected?
LVT is incoherent, it pretty much only benefits people who are cash rich and land poor. Which is why it gets so much oxygen from tech elites with lots of cash and an inability to buy a house somewhere like mill valley, or wherever.
Essentially taken to the logical conclusion, there will be people competing for more cash to pay their increasing taxes on the same land, it doesn't fundamentally solve the problem. It's such a joke.
The idea is that valuable land will be utilized better.
"utilized better" in that context just means that the owner of the land can support the taxes on it, it doesn't mean suddenly we are going to put skyscrapers in el cerrito.
It would most definitely lead to densification in SF and its surroundings.
No, you won't have a skyscrapers in some random village in the middle of nowhere. But maybe the land owner, seeing how high is the LVT tax is, decides to build a 5-stories apartment building with 50 units, instead of 5 single family homes. And that's a win.
It completely solves the problem. I recommend you read “progress and poverty” to get a better understanding of it.
You don’t seem to understand how it works or what it does.
I do understand how it works, are you saying that the zoning will magically be fixed when the taxes go up or the land becomes more exlusive? because I can tell you which one has precedent and which one is wishful thinking.
Rents are already as high as renters can bear. If a tax is introduced, you'd expect landlord competition to drive down the landlord margins, not increase rents.
And if margins are decreased, then... (what happens to new supply?)
The supply of land is inelastic. Property developers can't get more land by building more houses on it (and as a corollary, the eventual owner also do not get charged more in taxes).
They can make higher density buildings that generate more income and house more people on the same amount of land.
youd think that, but you can fit another 10 people into that studio apartment
I don't think this is why it won't get passed on. In theory the lowest income could leave the state and higher income renters would come in.
But in reality a land value tax incentivizes higher density housing. A single house and an apartment complex pay the exact same amount of tax, while the apartment building can split it up over many occupants. Land value taxes are a very natural hands off way of encouraging the right use of land, empty lots and car parks become unaffordable in highly desirable areas while apartments become relatively very cheap.
In theory the land value tax could be set so the overall taxation is the same as before, but but the distribution is such that the people with massive blocks of land in highly desirable areas foot most of the bill. This would over time make housing cheaper over time as more housing is built to reduce the tax burden.
Why would a land tax make the state more attractive to higher income renters than where they currently live?
That would only be true if the LVT replaced the existing property tax structure, which is not what TFA is calling for.
This is the problem with governments who think they can synthesize value. They think all businesses can too.
If these communists succeed, they will use the very fact that a landlord cannot synthesize money to prove the landlord passed the cost to the tenant and seize the land.
My understanding is that LVT would be lower than current property taxes, so it should be viewed as a tax cut for landlords not an increase.
the rent is already priced to the maximum of purchasing power of the local renters ability.
if landlords were able to raise rent, they would have done that already as its pure profit for them. The fact that they can't, means they will have to eat any marginal tax imposed on them
The author makes the comment about the land value tax not being able to be passed on to renters in the context of comparing it to a property tax.
If I’m understanding the argument you’re making here correctly, wouldn’t what you’re saying be equally true for a property tax?
I’m not saying you’re wrong, but I don’t think the author would agree with your point since I don’t see how your argument could be true for a land tax, but not for a property tax.
Landlords are competing with each other, and renters can take their next best alternative. If everything gets strictly more expensive, the next best alternative is not necessarily any cheaper...
Sounds like the debate from 2 years ago whether the importer or exporter pays for tarrifs
The author probably has a very superficial understanding of economics. It's economics 101, like VAT, the cost will be passed to BOTH the renter and the landlord. The portion of each is dependent on market dynamics and hard to calculate.
https://en.wikipedia.org/wiki/Tax_incidence
It's literally econ 101 that says landowners will bear the burden of a land value tax.
Supply of land is perfectly inelastic and land value tax is not a marginal cost of production so does not change MR=MC.
"I'm livin' to keep warm, you livin' to pay rent [...] Bitch, I made my moves with shackled feet"
- some Kendrick guy
Narrator: Kendrick’s feet were never shackled.
https://www.pangram.com/history/afa0fd9b-eeae-49d0-932a-24b8...
This is mostly slop. Don’t waste your time.
just make it federal, bump it to 20%, permanent, each year over shares they own... then they will still pay 20% less than the other 90% of USA
Coveting is a terrible basis for an economic system.
Which economic system are you critiquing? I would tend to agree, since I think wealth taxes amount to a breaking of the 8th and 10th commandments. But I also think some would argue that the consumerism (envy) that often drives capitalism is a form of covetousness. I think the counter argument is that capitalism does not require consumerism, and that consumerism (envy) can appear in any economic system.
capitalism itself is covetousness and greed.
not good believer in christ would ever participate, when jesus made it clear you are supposed to freely give away everything you own to the poorest among us
It's covetous to expect someone else to give you a part of something they worked for and you contributed nothing to. One of the basic 10 commandments is not to covet your neighbour's property; envy is a sin.
You prefer a regressive one?
Don't argue something the GP didn't say.
There are plenty of other taxation schemes that are progressive and more durable and effective than a wealth tax.
The main reason we're here is because talking about reforming Prop 13 is political suicide, even if that's the best way to fix CA's budget.
Yes, agreed. It's expected, that what the peasant's do, envy the rich and have lots of children.
So they're dealing with the problem the rest of the country has been dealing with since everyone started wanting to move to California?
It is possible to just ... stop spending ...
If you have specific suggestions for what spending to cut, by all means...
High speed rail.
Exactly $0 of high speed rail infrastructure was funded by sales taxes. State dollars came from prop 1a and cap and trade funds. About 12B over a decade and a half for heavy engineering, land acquisition etc. if that money was not spent it would have a negligible impact on your taxes.
California spends an insane amount on combating homelessness with nothing to show for it. This is a difficult problem to solve for sure; I'm not an expert in this field and would be speaking out of turn were I to suggest preferable alternatives. Suffice it to say that billions of dollars are being flushed down the toilet doing whatever is being done right now.
Land, as apposed to the property on it, is raw nature. If we view raw nature as a common inheritance of mankind, then paying a tax on land is how the exclusionary use of it, balances with the common interest in it.
Economist Henry George in the 1800's, pointed out that taxing land, but not the property on it, incentivizes efficient use of land, because holding land for its passive (parasitic) return even when underused, becomes unprofitable when the land is taxed in proportion to the value it can enable.
And in turn, only taxing land, not property, incentivizes increased development, as higher property investment amortizes land tax against higher returns.
Greater investment in housing being just one way land tax, without property tax, incentives greater productive use.
So many things align for higher growth in ways that more evenly benefit everyone. But our relationship with land is over-complicated, and that is both the reason for change, but the reason change is so hard.
Small attempts have failed, but then, for the rich who can hold land and reap growth in value that outpaces the taxes they pay on it, that remains another inefficient/negative-externality, that pays off for them.
Using up land is an externality, and thus should be taxed accordingly.
I don't understand your use of externality here. How is it imposing costs on others?
They can't use the same land anymore.
That’s true of everything in limited supply.
And what's being litigated here is how people deal with limited supply when "just make more money" isn't a real option.
So owning anything that’s in limited supply produces “externalities” that should be taxed?
If it's also a necessity for life, then honestly, yes?
Also, even when not a necessity, taxes are often just more efficient than the alternative.
Think about taxi licenses before Uber. The government thought there were too many taxis. They made a limited supply of medallions therefore. The government gave them away to existing taxi drivers for free. Eventually they reached $1,000,000.
Eventually there were too few taxis. Existing owners complained about trying to expand the supply because maybe they just took out a loan to buy one. People were even renting out medallions. Something the government handed out for free.
The whole mess could have been avoided if the government just taxed taxis until the quantity matched what they wanted.
In a way, you'd end up in a position similar to just handing out the medallions for free. The differences are the government is getting the money and the rate can be more easily changed.
This is a pretty close metaphor for land value tax. All LVT really does is instead of paying the prior owner or a bank for land, you pay the government in installments.
Not if there are either substitutes or financial incentive to make more. Capitalism is pretty great, it just doesn't work for certain natural resources that have a very finite supply.
We’re all on this world for a little while and then we die and leave behind the detritus of our lives.
For some people that’s a house full of crap that their kids need to clean out after the funeral and for others that’s a dilapidated apartment building that’s soon to be condemned and will require asbestos abatement and demolition.
If you exclude others from a rectangle of land, you are imposing that exclusion on others and the others are due consideration. The rest of the property stack is good -- improvements require investment, investment requires returns, so binding the returns to the investment is important and creates incentives for good stewardship and skin-in-the-game decision making etc -- it's "just" the foundation that is problematic.
Georgists want to tackle this with a Land Value Tax, I tend to think it would be difficult to make this robust against highly motivated attack and the better approach is long-term leases with similar duration to building depreciation schedules. In either case, the idea is that capital appreciation of the dirt (which is really capital appreciation of the right to exclude others from the dirt) goes to public coffers, improvement value goes to the people who made the improvements. That's fair.
Of course, there's also the question of how to get there from here, and one way to do it without guillotines would be to tie the extraordinary tax treatment of property to conversion into a 99 year lease (and then, after 99 years, new issuance could target the ~30 year range). "Sure, you can have your 1031 capital gains tax exemption and pay no tax on the money you obtained by holding on to the right to exclude others from an increasingly popular rectangle of land, but only if you sign up to eventually be part of the solution rather than part of the problem."
The hard part is that we've structured life such that you are on a fixed income at the end of your life in no position really to deal with inflation. At least when you are still working, in theory at least your wages will go up with inflation. This is really why prop 13 happened to pass at all: the idea of being displaced at the end of your life out of the home you already paid off due to market forces you aren't even a participant in is actually widely unpopular even if it makes better economic sense.
I would argue that this is unpopular not only amongst retirees but everyone. And it would have tons of negative side effects.
Why would I fix up my house to look nice, if I’ll be displaced? Why would I invest in my child’s local school system, if we could be displaced? Why would I do any community outreach or support, or get involved in local politics? How can banks underwrite loans if the affordability can fluctuate wildly? Look at the life of people who live in mobile homes and trailer parks - they essentially rent the land, and it’s oppressive because they can’t afford to move (actually moving or repurposing land is hard) but their cost to stay is unpredictable.
The only people this is appealing for are people who fancy themselves analytically minded economists with no interest in the practical humanity of the people living there and renters hoping to finally do the displacing for their own affordability.
Most states in the US do not have Prop-13-like laws and get by just fine. For the few states that do, they are less restrictive taxation-wise than California's.
Prop 13 has completely distorted the housing market; it is, perhaps unintuitively, a co-cause of CA's housing unaffordability issues. (Prop 13 discourages new development, and is an enabler of housing NIMBYism.)
We of course shouldn't just abolish Prop 13 overnight, or lots of people will get displaced, also overnight. But we should absolutely reform it and phase it out over time, while building more housing, as fast as we can (something that will be a little bit easier to do as all the NIMBYs realize that if they keep shooting down housing projects, their property taxes are gonna go up a ton).
Prop 13 is a bit of a nothingburger anyhow when you consider median homeownership period in CA is only like 2 years longer than national average, rather than the myth that seems to be perpetuated of every home being a 40+ year hold paying a couple dollars in property taxes. And when that home is sold the tax assessment of course goes right back to market rate, and boy that is substantial when you have what would be a 450k home outside of Boston go for 2.1m with a 1% tax. 21 thousand a year off a single 50ft wide lot is no slouch in terms of tax revenue.
The problem is all the tax revenue being lost at the municipality level for decades. National tenure average is ~12 years. Los Angeles is 20 years, SF is 16.5 and SJC is in between. It clearly has a meaningful effect, it's just harder to buy into the market and keep the home over a long period of time.
San Francisco receives over $3,000 per capita in property tax revenue alone. Dallas receives about $1,200 per capita. NYC is less than $1,000, though I gather NYC has their own property tax issues.
And California has an income tax, whereas Texas doesn't.
Prop 13 has it's problems, but I don't think they're as significant as the rhetoric claims. It makes for a great excuse, though. Politicians can blame Prop 13 for why they can't spend as much on services as people demand, and now it's become the common wisdom--but for Prop 13 California could afford to spend much more than it does, and the housing affordability crisis would end, too. It's just wishful thinking.
I don’t think the housing affordability crisis ends and I don’t think that’s the right way to model it. SF has one of, if not the highest, $/sq ft in the US. And prop 13 is suppressing it - estimates indicate that property taxes revenues would double meaning that 2.5k/person would become 5k.
And remember that that 2.5k/person is only for residential properties. commercial properties still fall under prop 13 and that’s about 50-60 of the other tax. So a full repeal would make it closer to 10k/person instead of the current 5k.
I agree the story on rents and home prices would be unclear because ultimately the people might move and just rent out their homes with property taxes baling into the new rental price.
It's not reset of you inherit, or a bunch of other bullshit exemptions.
We live in a gerontacracy. Every advantage and tax break and handout is given to the elderly and the ladder has fully been pulled up for the new generations.
They patched that with a recentish assembly bill, but they really need to patch the LLC loophole too.
Most states also rely on sales taxes and various fees, and assign limited property taxes. A Georgist land value tax would have much greater effects than the current tax regimes.
Many states have senior property tax reduction programs. It doesn't go as far as prop 13, but had similar goals.
You shouldn't strawman the other side. Us "people who fancy" actually understand that there are real negative side effects. But the money has to come from somewhere.
If not from land taxes, where? Would you like to double sales tax? Or increase income taxes? Every solution costs something, what does yours cost?
Existential nihilism is always possible to have regardless of how taxes are setup.
The key bit is that California is relatively unique here. There are a few other states that have Prop-13-like laws, but California's is the most restrictive and incumbent-homeowner-friendly. All those other states (and the ones with nothing similar) seem to get along just fine.
Of course, the solution to increased demand (driving increases in property market value) is to build more housing. Without Prop 13, a big chunk of the NIMBYs who are currently against more housing would likely change their tune if they had to choose between no new housing or much higher property taxes.
I think it would be reasonable and productive to phase out Prop 13 over time, rather than immediately getting rid of it. We could structure it so a property doesn't lose Prop 13 protection until the next time it's sold (and then it never has that protection again). We could completely remove the inheritance loophole (which was tightened up in 2020 but still exists). We could even set a date, say, 10 or 15 years in the future, when re-assessments at market value will start for everyone, regardless of whether or not they've sold. We could also phase in higher allowed assessment percentage increases over time (right now it's capped at 2% per year, but we could, say, add 0.5% to that figure every year for some number of years).
Hell, we could even leave Prop 13 in place as it is today, and just bump up the assessment increase cap to 5% or 10% or something like that. (Texas, for reference, has their own 10% yearly cap on assessment increases.)
There are so many ways to solve this, but all of them are politically unpopular. (Hell, we couldn't even reform Prop 13 as it applies to commercial properties.) As a homeowner in California, I get it, but I still support Prop 13 reform and eventual Prop 13 abolishment.
Most of the other states have not seen the rise in population growth and real estate values seen in CA. There are still places where homes are like 250k or less. There is also way more value drop off outside the metros in most other states with high cost cities such as MA or NY. You could be 30 mins drive from boston in a great 400k home. Try and find that 30 mins out from SF or LA. There just isn't really that fall off in california that you might expect from real estate markets elsewhere. It is like the rising tide has lifted all boats.
To be fair 250K homes and under homes are increasingly uncommon and increasingly undesirable. Rural areas with almost zero industry are averaging out at 600-750K. Maybe a bit of a downward trend, but the average salary in the area is like 50K. so it doesn't matter.
Where exactly? Not true for the midwest. E.g. (1,2,3)
1. https://www.zillow.com/homedetails/933-Atmore-Ct-Indianapoli...
2. https://www.zillow.com/homedetails/10916-S-Wabash-Ave-Chicag...
3. https://www.zillow.com/homedetails/3920-15th-Ave-S-Minneapol...
Here's what you might find 20 miles outside boston, this one is 350k:
https://www.zillow.com/homedetails/55-Emory-St-Brockton-MA-0...
While there is certainly some (very) expensive real estate outside of Boston, to a much greater degree than San Francisco, you can actually get a house within a drive for an evening event that's pretty reasonable to a much greater degree than the Bay Area.
"Rural areas with almost zero industry are averaging out at 600-750K."
Source? This is completely inconsistent with my experience.
"There are still places where homes are like 250k or less."
By land mass that's the majority of the country. Population concentration is the real issue.
I mean, the way you make housing units more affordable is to make more of them, but for existing homeowners of SFH, building condo buildings in their neighborhood will increase their property value because the competition for the remaining lots increase. Given we build close to zero family friendly multi family in this country (ie, appartments buildings have zero family oriented amnenities), there isn’t much in there for nimbys. It’s the right thing to do but you can’t except nimbys to join in on a purely monetary basis.
This isn't always true. I've seen apartment buildings that have a playground and little astroturf field and some small goals. The kids also are using the pool pretty heavily in every apartment I've lived with one. Some have other facilities like basketball or tennis as well that kids could take up (or use the smooth surface for skating or something).
I think the marketing of prop 13 was old people getting kicked out of their houses.
But I think the majority of the tax avoidance goes to not-old-people, like immortal corporations that can own the land forever.
EDIT: random link - it seems like residential owners don't benefit anywhere NEAR as much as commercial, rental and industrial entitites.
https://youngamericans.berkeley.edu/wp-content/uploads/2023/...
The linked study in OP shows that the single biggest beneficiary of Prop 13 on a category basis was vacant land.
Retirees are not on fixed income and haven't been for decades. Social Security gets adjusted for inflation. 401ks grow. https://www.slowboring.com/p/seniors-arent-living-on-fixed-i...
Empirically, according to Doucet, a land value tax would only raise average tax rates if you're living on a parking lot, or vacant lot. Aging homeowners would mostly see a slight decline in their property taxes ( California excluded ).
A land tax means that you don't own property but rent it.
This is bringing us back to the dark ages in terms of land rights.
If you can own land, what happens when all the land is owned but newly born people need some?
Old people die.
Drive through New Mexico, there’s a lot of land.
A few comments:
1) we already have property taxes so I don't understand the objection; a land value tax is just a property tax with a different way of assessing value.
2) I don't think this idea of "not owning property, only renting it" is actually that crazy if you take a long term view over it. Land is a finite, shared resource. We already acknowledge that you don't have absolute rights over land that you own in the same way you do over, say, a toaster. We place all kinds of restrictions on what you can do with it, we tax its ownership, we have eminent domain laws, etc.
The idea of treating land as a pure asset has had a lot of negative social effects and ultimately will lead to a kind of neo-feudalism where the megarich own everything and the underclasses are perpetual renters.
Everything is a finite shared resource.
That's the point of ownership.
The idea that land is not a pure asset leads to regular feudalism.
Yup. And despite the claims made that it's a solution for the common folk, the people who "own" and can make decisions about the land will be the megarich, so it will be feudalism, with rent due on the land you own.
No, some resources aren't shared (for example, human capital: things that I know how to do aren't shared, since nobody can 'borrow' my knowledge) or are effectively infinite (for instance, you can travel arbitrarily far into outer space and not run out of space).
What do you think an income tax is? Its the shared resource from human capital. It doesn't have to be homogenous or even equal to be shared.
every tax can be expaned to a infinite series of rent.
how is this any different from the statement "a property tax means that you don't own the property but rent it"
We never left the dark ages in this respect. The government grants you title to deed and then you must pay your share to the lord (gov).
Washington has a much lower property tax rate for a primary residence owned by a person over 65 years old.
Total Boomer Luxury Communism
61 years old. Also your household disposable income must be below a certain threshold that is based off county median household income.
This is a solved problem in other jurisdictions. Effectively you can just allow seniors to defer their property taxes at low interest rates and it becomes a liability on the house when it is transferred on death.
This is how the government countered the people demanding the end of debtor’s prison. And it’s not “transferred on death” it’s whenever the house is sold whether the owner is alive or not. Property tax is just rent paid to the government and the taxman always gets their dues one way or the other.
This will have some of the unfortunate effect of collectivism. We don't want the govt to tax you into poverty.
A simpler overall approach (I've left out the nuances) would be to have an equal amount of land per person completely tax free. Individuals can then rent out their land for others to use as needed. Forests/rivers/conservation lands etc. can be seen as truly a common inheritance of mankind and should generally have the least of commercial activity.
p.s - a govt will never agree to such an arrangement because it will not favor them.
I'm curious as to how you think we should divide up who gets what plots, can you explain how that works?
Raise X in land tax and then you spend it evenly amongst the population. Anyone using less than their fair share gets a bonus, anyone uses more has to pay.
If you just allow using X value, but tax free, then those who use less don’t get rewarded.
Effectively one non transferable share, one per citizen, with proceeds as a dividend.
IDK, governments tend to align with what results in the most economic activity being created / moved into their country ("growth"). If you were able to convince that overall economic growth would be multiple times higher over a few decades with the system, it might just become appealing.
A problem I see with implementation in the US, though, is that local municipalities are who tax land and property value, so entire rural counties and cities would have their funding stunted. And asking the government to buy into that while subsidizing low-growth areas for a long time (decades / forever, if a rural area never develops) is a really hard sell.
Weird framing. In any case, this would lead to less taxes for most folks, at least compared to property taxes.
I like the thought, but the challenge in most places is that the poor are already paying massive "negative tax" in the form of various social subsidies.
So if you add tax exemptions on top of it, it becomes increasingly impractical to raise enough taxes.
And no, it can't be done simply by taxing the rich more. That should be done too, in my view! But the math is simply such that we need a pretty broad tax base to support our spending.
Georgists think that my taxes should go up if someone builds Disneyland near my land.
Yeah, because the value of your land just went up and you didn't do anything to make that happen. Only right that excess value goes back to society and reduces the tax burden of the working class.
Why is it assumed true that individuals do not contribute to the increasing appeal of their neighborhood?
What if I voted for pro-theme park politicians? Or what if I volunteered my time to clean up the community parks and shared space? What if I helped improve the reputation of my child’s school by volunteering and donating to the music department?
My taxes fund the maintenance of public infrastructure and services, and my actions support the civic good. If I vote to be cheap or generous with taxes, or choose to be lazy or ambitious in community support, that all contributes to the desirability of the land around me.
Two things are true: 1. I should have been more precise in my language. "You didn't do anything to make that happen" is a useful generality and not a prescription of every single individual in the community. In this case, we're talking about fairness - which I don't actually care much about myself, but is a point that people most often can emotionally identify with. But, to continue, if you're carrying all that water on behalf of your land value, then good for you! You likely have an existing stake in the community, other than the land that you own (maybe the businesses or houses or other property built on that land or you own a local services business). That is great! The fairness comes from owning the finite resource of land, and not something others can provide (housing, businesses, etc.). I hope you do continue to contribute to your local community and increase its appeal!
2. Your fixation on this point reveals a very fundamental misunderstanding of the goal of an LVT (surely partially my fault). It has to do with efficient taxation. Dollar equal, it's better that your taxes come from the value of the fixed resources of your community rather than things that can be increased. Because then you don't have a depressing effect on productivity and the things, other than land, that make your community nice. It's better that you keep more money from the things you _do_ for your community instead of the monopolies you hold in your community.
I disagree with the fundamental premise on both parts.
In fact, everyone does contribute, positively or negatively, to their community. Either through involvement or absenteeism, or somewhere in between.
The goal is obvious and not a misunderstanding. The goal is a bad goal, precisely because it punishes positive involvement in the community. To improve the community means to increase your own cost of staying.
Imagine someone wants to avoid displacement due to their taxes increasing beyond their ability to pay. I don’t know why they would want to stay in their economically “inefficient” house, but perhaps it’s because home is where the heart is and they have sentimental attachment to their home.
If they want to keep your housing costs down, the best thing to do is poison the ground (metaphorically or literally) because it decreases the “productivity” of the land. Box stores in America famously pay low property taxes because building a box store actually decreases property values - they’re expensive to demolish and limited in utility, while being an eye sore that makes the neighborhood higher traffic and less undesirable. Mississippi as a state is cheap because the voters used the government to destroy public services - it’s in someone’s best interest to do this in a Georgism world if they don’t want to be regularly displaced.
Quite the contrary, it rewards positive involvement in the community and it punishes anti social involvement in the community (leaving your lot empty, letting your neighbors create a vibrant community you do not contribute to, and then selling at a large profit anyway). The reward is the taxes you're not paying on the positive productivity you're bringing to your community (which is how we're currently punishing those who make their communities nicer).
Please just look at the pictures and decide if it peaks your interest enough to read the post: https://www.astralcodexten.com/p/does-georgism-work-five-yea...
Link with highlighted text (It's a single paragraph): https://www.astralcodexten.com/p/does-georgism-work-five-yea...
Yes, if you collapse multi-dimensional problems into a single dimension you can find many logical oddities. If I wanted an easier time finding a doctors appointment, I should murder every non healthcare professional in my local area until all of their calendars are totally clear. Wanting cheaper healthcare is evil! You're really saying things for the sake of saying them and I'm not going to engage further or explain to you when you're saying irrelevant things.
Under the majority of proposed LVT policies (and the ones I support) the vast majority of American housing would see a decrease in net property taxes paid since the majority of American's Building / Land value ratio is orders of magnitude higher than the average parking lot, land speculator, etc.
What if the person who owns the land is working class? That’s who property taxes hit the hardest, working class people with a mortgage.
https://www.minneapolisfed.org/article/2024/how-higher-prope...
The Federal Reserve's research suggests higher property taxes help the young and the working class by improving the immediate affordability of homes.
That article is ridiculous “More expensive tomorrow, more affordable today”. It reads like a predatory credit card offer and is full of what if’s.
High property taxes pushing down the sales price of a house does not help the buyer or seller. The buyer is going to pay the same, just more in taxes vs the loan, and the seller is going to get less because high taxes have reduced the value of their home.
If you're a professional landowner and investor, and the taxes on one parcel of land in your portfolio went up because someone built Disneyland near it, this is fine. You might want to sell that parcel out of your portfolio now; or you might want to do something like build a hotel on it catering to Disneyland-visitors, which will earn you enough in profits to more than make up for the higher land tax.
If you're an ordinary person who owns the home you live in, and they build Disneyland next to it, most of the ways that the value of the land your home is on increases are useless or actively harmful to you. It's actively bad for you if you have to sell your family home and move somewhere else because you can no longer afford the taxes on it. You're probably not a professional real estate developer who knows how to effectively use the land as an investment, after all, you just wanted to live somewhere stable.
In fact, the increase of value of your land and the consequent tax increase under Georgist land value schemes, would be so bad for you, that you might decide to protestthe construction of that Disneyland to begin with. This is typically called "NIMBYism", and it happens all the time even under current property-tax schemes because the negative externalities of many different types of construction are bad for the quality of life of existing homeowners.
OK great make a homestead exemption. Lots of those already.
You can defer your property taxes and have them paid out of the proceeds when you sell your home/land.
How is this different from just having higher taxes on capital gains? (Obviously higher capital gains taxes would also impact other assets, but I mean in the context of land. Seems like both result in the same effect if you're able to defer LVT until sale.)
Liquidity is a value of its own. 10% equity in a $1M non-fungible residentially-zoned lot is much less valuable than $100K in cash, ready to wire at a moment's notice.
Makes sense to me.
If you don't want to pay the taxes, thanks to Disneyland you can now sell your land for a nice fat gain, buy cheaper land elsewhere, and pocket the difference. And whoever bought your land will likely use it for the social good (maybe build a hotel or something).
So through no plan of my own, I get to uproot my family. That is indeed great
/s
I would imagine that if Disneyland were built next door, that might be in the cards regardless of the tax situation...
It's just a reality of life that not every homeowner can possibly be entitled to fully control what gets done with the land around them, and that's going to cause some friction.
It's a difficult job to navigate who gets to decide what, while still enabling necessary development. LVT is just one of the more elegant ways to do this.
I'm not a big LVT fan - pushing for maximally productive use of land is going to result in displacing people, displacing small businesses, displacing artistic/cultural/environmental spaces, etc.
I would much rather see an overall assets tax that scales with the value of the assets. That would incentivize more smaller businesses, long-term thinking, and wealth distribution. It would hit big corporations in the same way a LVT would, forcing them to be more and more productive with their assets the more they have, without pricing out smaller entities.
Is this a collective push right now for LVT ? I got an e-mail this morning from Astral Codex Ten on the same topic - seems like a campaign is a foot.
Twice in one day for a topic as not specific as this seems intentional.
ACX has been on the Georgist tip for awhile.
I wouldn't say it's coordinated. This is an old article, published in June. A lot of people came to the land economics blog from the ACX article that ran today, someone likely saw this one and then posted it to HN.
That sounds like a terrible idea to me. Efficiency isn't everything. Small stripes owned by many people or by many smaller companies it's less efficient than one hedgefond owning everything and yet it has disadvantages.
A forest is much less efficient than a mall and yet, the forest might still be more important.
There's also no way for a government to effectively determine the potential value of land. Asking them to do it means inviting disaster and corruption.
This is a good example of a very common problem: data isn't objective, it needs to be interpreted. Metrics will give you information, but they aren't the full story. That's why Goodhart's Law is so prolific. You can't just look at data and act on it without context. It depends what your actual goals are. And a huge part of that is that we have to consider how much we value things, especially things that haven't already been assigned monetary value. Sure, we can assign monetary value to things like a forest (economists do this), but it would also be wildly inappropriate to just accept those estimates as cold hard facts void of interpretation too. What's the saying? Reality has a surprising amount of resolution.
In a weird twist of irony our efforts to be lazy end up costing us a lot of work. But that's also because there's two types of lazy: short term and overall work. We used to say we want to hire programmers that are lazy because they'll find the most efficient way to do something. But now we don't revere that kind of lazy, we like the kind of lazy that procrastinates. Do the quick cheap thing now, telling ourselves that we'll make it better in the future, knowing that's a lie. That pattern isn't unique to programming, it's just marshmallows.
In WA state (maybe others too?), the county assess my land value and the building value separately on my property taxes.
Point being: the government has been assessing land value for a long long time
https://en.wikipedia.org/wiki/Land_value_tax_in_the_United_S...
The main problem with this view is that land value is laggard to the economy. You will end up taxing people more than what the land is actually worth during downturns, instigating a vicious feedback loop to cause further problems. The logical path is to tax money where there is money - income.
The first time I heard about a Land Value Tax it sounded great. You can then go read where it's been tried and find that it's extremely hard to implement.
As just one example, if I place becomes popular then suddenly the taxes rise and people have to move out. Lots of people hate that idea and so vote it away. And then LVT no longer works.
The effectiveness of other taxes aside, the argument that billionaires will leave if taxed at a higher rate isn't compelling.
Billionaires are not struggling to meet their expenses. If you raise their taxes, they aren't suddenly unable to afford things. They don't need to change their behavior just to get by. A carbon tax forces average people to drive less, but doesn't affect billionaires at all.
Billionaires live where they want to because they can afford to. They're not going to let themselves be chased from jurisdiction to jurisdiction because of numbers that have zero impact on their daily lives. That's what happens to poor people. If California raises taxes on billionaires, very few will actually leave. They're where they want to be and they can afford to stay there. What's the point of having a really big number in your bank account if you have to move to the middle of nowhere in Alabama to keep it from falling just a little?
----------
Edit: Yes, some billionaires have changed their tax residency, but not necessarily their physical location. They likely still own properties in California and can likely be found on them rather a lot. This is evasion, in spirit if not law. Taxing land is just one way to make them pay. Others should be pursued as well. The argument that we shouldn't tax billionaires because billionaires are good at not paying taxes is complete hogwash.
It may not be logical, but money effectively turns into a scoreboard at a certain point. The ultra-wealthy care whether they show up to the yacht club in a 100m or 150m yacht.
That individuals won’t optimize their wealth beyond $100m, $1b, or really any number just doesn’t square with observable behavior.
Starting a business self-selects for people that desire money (over other benefits).
The purpose of a business is money (otherwise you start a hobby or charity or something non-businessey).
Being very successful at business is a selection bias for people that are highly competitive at chasing money.
There's a bunch of traits in very wealthy self-made people due to the filter they have run through.
Tax too much, and we kill the golden geese of the economy. Examples abound around the world of crappy economies that can't afford good socialist stuff because they've demotivated the rain makers.
I agree with this. California’s climate and culture will keep many a billionaire within tax nexus reach of the state. Of course, this isn’t a strategy every locale can pursue, but I don’t see a reason for California not to exploit its advantages.
A dozen billionaires already left California.
Why move to Alabama, do you know Austin is very good
The article quite literally states the opposite, showing that almost half of the taxable base left because of the Jan 1, 2026 cutoff.
The article claims that 6 individually named billionaires already left (presumably recently), and another is likely to leave if he loses his court challenge.
This is a strange argument coming from the side of the argument that usually talks about billionaires being greedy and doing anything to make the numbers go up even though they can't feel the difference.
They can certainly afford it but they obviously like their money to stay theirs and like getting more of it, not less.
so what if they do leave?
they're bad for the world around them, and you can add an exit tax if you want to
The greatest feat that Mao achieved was to take the land that had been tightly gripped by generations upon generations of owners and to shake up the distribution of it so that the land could produce again. People naturally want to work the land, but you end up with suboptimal inertia because owners just end up letting it sit fallow if it doesn't immediately return. It's how you turn a billion serfs into a billion entrepreneurs.
We're already way past the point where a creative cocktail of 10 different progressive taxation schemes could feasibly fix the root of the problem, and you feel this especially if you were born after the year 2000. You're more likely to see results if you pick up a red scarf than if you pass a higher wealth tax, sales tax, land tax, consumption tax, estate tax...
In your telling, how does the resulting famine that killed of tens of millions fit in?
Famine along the yellow river and yangtze river has been happening for thousands of years across all dynasties, its specifically what land distribution was meant to fix, and since 1960s there hasn't been a famine since. My parents and grandparents lived through it and left cities to work in countryside fields during the cultural revolution. You tell me how the famine fits in and I'll let you know if you're accurate or not.
I think not. Your framing thus far is so wildly inaccurate that I believe this is a propaganda account, and hesitate to engage further. But in case any not familiar with the history read this in passing, I will leave a reference to an actually reputable source:
"Mao’s violent collectivization and forced labour campaigns during China’s Great Leap Forward (1958–1962) led to as many as 45 million deaths in what is widely regarded as the worst famine in human history." [1]
[1] https://www.cambridge.org/core/journals/china-quarterly/arti...
The famine is unrelated to the land distribution but also the farm land distribution didn't last. They changed course and put the land into collectives and it is still in collectives today so the famine cannot be blamed on collectives.
My understanding is the famine was essentially the middle managers of these collectives over stating yields and being too afraid to admit their lies. To maintain the lie, they shipped off food while the farmers starved.
Painting it as if Mao era collectives are the same as the state quotas that exist today is highly misleading. The HRS was 1979:
"The household responsibility system replaced collective farming." [1]
Broadly speaking, the collectives can and should be blamed for the famine, just as in the Ukraine. Getting into the weeds on the specific mechanisms is fine, but using it to undermine the broader lesson is apologetics.
[1] https://en.wikipedia.org/wiki/Household_responsibility_syste...
those who advocate for land value tax are usually advocating for single/minimal types of taxes (and, in fact, against sales and income taxes) rather than a cocktail of them. "Single Tax" predominantly refers to a single land value tax. https://en.wikipedia.org/wiki/Single_tax
My point is that a single land value tax would have the same effect as piecemeal improvements to current tax portfolio - none of it would fix the inertia already priced and baked into the system.
Let's not glamourize the Mao's land reforms. It required the killing of 1-2 million people. Even then, the collectivization was a massive failure - not only did the peasantry not get to enjoy the benefits of land reform, a further 15 million people would die from the resulting famine.
The deep irony is that Taiwan was actually able to do the same reform but with much better outcomes, with much less loss of life or political violence.
Taiwan did not have anywhere near the land distribution occur under CKS/CCK, nor the same veracity of landlord clique ownership. And, you're further wrong in that a big part of white terror was specifically due to 外省人 owners of factories and farms, from land stolen from the aborigines. The white terror wasn't by any means less violent and senseless than cultural revolution.
I prefer sun yat sen’s Land reform ideas to mao’s
Solon did this in Athens. The French Revolution did it. They actually maintained it and had historic states with strange liberty.
Mao pretended to do it but then introduced the familiar Stalinist collectivization that had killed everyone in Ukraine - as he knew.
I don’t have experience elsewhere but in Santa Clara county, the county assessor calculates a very much incorrect split between land value and value of the improvements (buildings) when they assess the property tax. Sometimes they just divide the total value by two and call it value of the land; in other cases the value seems to match reality more, and the value of improvements match the actual cash value (but not replacement cost) from insurance companies.
How would a land value tax accurately compute the land value?
https://www.openavmkit.com
Not all assessors do this accurately, especially in California, but there are many that do. This article includes a section on land valuation which summarizes and links out to various other articles about various approaches
https://www.astralcodexten.com/p/does-georgism-work-five-yea...
The calculation of the "unimproved value" always perplexed me.. it seems like you're not taxed for the things you build on your land, but instead for the things other people built around your land. After all, why would property in a city be valuable if not for all the high rises, subways, and office buildings?
Correct.
The article includes a section on land valuation that gets into those details.
It, in effect, turns out not really to be a land value tax at all. It turns out to be a tax on the most valuable thing that _could_ be built there because that's what gives land it's value.
So you're completely correct, the value of the land changes with what's around it because it opens up new options for what someone might build there.
this is the idea - if theres a lot of value around you, you should build to make sure you are meeting the bar of whats around you in terms of economic activity.
if you build even more and get more out of the land than whats around you, you essentially get a lower tax rate until your neighbors catch up.
if you lag behind, you pay a premium in taxes to not develop
But I think the purpose of a wealth tax is precisely to get rid of greedy billionaires.
So if they vote with their feet and leave, then that's an even better outcome. Now they can't manipulate the government anymore. They can go manipulate and continue extracting wealth from some other place.
Yeah, kind of a win-win in my mind too.
Let's hope other states follow suit and they keep on truckin'.
Truckin straight to the trash heap where you can sort recycled cans by hand for a living. What an abysmal vision.
Yeah because they got billions by extracting it like mosquitos. It came mostly from your billions I assume. Without that it would have been all yours. Clearly you have zero concept of how an economy works.
You know the extraction is more like 10000-to-1 than 1-to-1.
But in essence I do believe that I (and thousands of others) could have had at least $100k more net worth if they hadn't monopolized all user-acquisition channels and if they hadn't helped bring about the many laws and regulations which made this possible.
I have no ill feelings towards them but I just don't want them in my state competing against me for limited resources using money which they acquired through an unjust scheme which I was coercively made a part of but which I never agreed to and have been protesting for almost a decade (on deaf ears).
It's not personal or even saying anything negative about their character or abilities. From my perspective it's just pure self-preservation. They either need to contribute more tax to make up for the injustice or they leave.
When they sell their assets, it makes those assets more affordable for the rest of us. So any forced sale is good for society. I don't see any issues with it. We were/are forced to prop up their stocks through government contracts, grants and regulatory monopolies... So they should contribute something on their end too.
And I don't care about the "jobs they create" - They created jobs for my competitors to get easy money in cushy jobs. I want those jobs gone too! I don't want FAANG employees bidding up house prices in my area.
I only want to compete against people who are playing by the same rules as me! I don't want to compete against people who can rewrite the rulebook as we go, to suit them.
See also this recent post on the practicalities and rationales of a Land Value Text: https://www.astralcodexten.com/p/does-georgism-work-five-yea...
"None of this is really about billionaires; California reaches for exotic taxes because its normal one has been broken since 1978."
The author then goes on to talk about CA's property taxes ... but LAND HAS NOTHING WHATSOEVER TO DO WITH THE BILLIONAIRE'S FORTUNES!!! Zuckerberg did make his money trading property, he made it through companies.
Nothing about California's property tax decisions have anything to do with 99.9% of Zuck's (and others') wealth not being taxed!
That may be true, but you appear to have missed the part of the sentence you quoted that came after the semicolon:
Property taxes make up a large portion of many states' tax income. 1978's Proposition 13 made it so that California is -more or less- unable to tax the actual value of any property in the state. Wealthy people who've held on to property for decades get to borrow against the "market value" of that property, but the value of the property used to calculate the tax owed to the state only increases at a maximum of something like 2% per year. This means that you'll see long-term landlords (and holding companies) getting the financial benefits of a -say- multi-million dollar property, but the state only gets the tax of -say- a multi-deca-thousand dollar property.
Because of Proposition 13, property tax increases in California will affect an extremely tiny slice of landowners, [0] so it must turn to other mechanisms when it needs more tax revenue.
In regards to private "wealth creation", it turns out that money is fungible and you absolutely can built a bunch of wealth off of a mortgage if the "market" value of that property has increased by a huge amount, but the costs of holding that property haven't increased much at all.
[0] This doesn't contradict what I've said, I've just left out some details. A quick summary:
Ignoring a few exceptions, when a property changes ownership its property tax is adjusted to be based on the current "market" rate. When nontrivial improvements are made to a property, the property tax is adjusted to account for the "market" value of only those improvements. [1] Some "clever" people have been known to get around the "property changes hands" trigger by making the property be owned by a company and distributing private shares in that company. Want out? Get rid of all of your shares. Want in? Get shares from someone who already has them, or maybe convince those who are in to make more for you. The property is still owned by the company, so its tax is not adjusted.
[1] It's important to note that repairs are not improvements. It's also important to note that the government can choose to ignore all of these rate-reset rules whenever it wants, as it did when all those extremely wealthy people in LA got their houses burned down in that big wildfire that hit LA.
So what? The goal is to fund the government. You may want to stick it to Zuck and other billionaires (and I admit, there's appeal to that), but if fixing our broken property tax system will fund the government (without causing mass displacement as people's property taxes go up), then we should do that. It's a fix to a structural problem, and a fix that will be durable and be reliable in the future.
Taxing billionaires is not a durable fix to budget deficits. The article very clearly explains why this is the case.
Has there been a good study that firmly demonstrates that tax rates are the primary motivation that rich people have to live in one place or another?
Good plan. Raise property taxes so non-billionaires are forced to sell property to billionaires who have an insane surplus of wealth.
Billionaires aren't going to leave, they're going to acquire more property.
I was talking to a friend about the billionaire's tax and this issue came up. Here's how I see it: either individually wealthy people stay here, and we take their money to build state capacity to even out the distortions created by their wealth, or, they leave, and the distortions fix themselves.
The easiest one to point to is property prices. Wealthy people buy land, and drive up the price of land and rent for everyone else. If a lot of people suddenly make a lot of money in San Francisco, in general, for me and most of the people I know, there's no "rising tide" that lifts our boats. Our income remains the same, but our rent goes up, and maybe our lives don't make sense anymore, and we have to move.
But if there's a wealth tax, and it encourages rich people to leave the state? Awesome. Go drive up rents in Texas or Montana or somewhere else. Or pay the tax, and then the state can use that money to build affordable housing.
Before you say anything: I lived through the 90s, and you can't trick me with "WOW YOU THINK THE GOVERNMENT CAN DO THINGS? WHAT ABOUT THE DMV???" Go somewhere else.
It's always funny how often people ignore this. 99% of the problem would go away if the outliers moved away.
And I'd ask them: "What about the DMV?".
Perhaps I'm uniquely able to read and understand simple instructions, or maybe I've never asked the DMV to do anything especially complicated, but I've never had the DMV fail to do what I came there to have it do for me. The worst I've gotten from a DMV was having to wait for literally an entire day when I made the mistake of going to the San Francisco DMV to get something done, rather than doing the smart thing and going to an office in one of the nearby towns. It's... very stupid that there's a single DMV office for a city of -last I checked- nearly a million people.
I don't think that makes sense. The wealth tax, as written affects a pretty small percentage of "rich people". Most "rich people" will not pay a wealth tax.
So sure, let's say for the sake of your argument that everyone who would be subject to the wealth tax moves away. That won't move the needle when it comes to housing affordability in California.
So, ok, change the wealth tax so it applies to a lot more people. Ok, so maybe more people leave. Do you really think driving people with money out of your state will actually be good for you and the state? That's just not how economics works.
If your state is selling 500sqft condos for $3,000 a month, then yes, it probably would increase the average quality-of-life for that state's residents.
The problem is the wealthy people can still buy and own the land without being residents. These billionaires "moved" to Austin or Florida or wherever, but they still own the same multi-million dollar mansions in the bay area or LA or wherever. They just spend less time in them.
California is full of people who do not understand how investment works and want it gone. This is progress missing from progressive. It is the social missing from socialist. Ists and ivs with nothing, merely a pack of stupid ideas. The residual is reality: no-teeth, drug-induced stupor sleeping in street squalor and their rent-seeking enablers cozying up to the tax authorities.
You're being too generous. California is full of envious dysgenics who want free stuff and don't care how they get it.
Not sure if anyone could get such a policy change made given that California politics is now just "Whatever the California Democratic Party Wants" and they are very rigid in the ideas they accept.
But I think the proposal being discussed is 1000% more consistent with the principles of a free, non-communist society than the crazy "wealth tax," which sets the precedent that if the government thinks you have "too much" stuff, they can just declare that to be so, and come and take it. Given that the people in charge of drawing the line between "so rich that we need to take your stuff" and "not that rich" will be the same people who have blown up the state budget, I don't see why anyone would trust them.
(No, I'm not Zuck's sock puppet account -- I expect it won't be my turn for "wealth" confiscation for at least 5 years, worst case.)
wealth taxes are from the old roman republic. the wealthy showed off their worth to each other by how much they could pay in taxes.
its not particularly crazy and is far older than communism or socialism which have the much more straightforward setup of seizing the means of production rather than taxing it.
however, it didnt stop the ultrawealthy from seizing power for themselves
I don't live in California but the article mentioned Proposition 13 which capped property tax rates and the reassessment is only when the property changes ownership?
Is that right?
That seems unfair to people who recently moved compared to the people that stay in their house for decades.
Reading more it looks like California created alternative types of property taxes like Mello-Roos.
In my state we used to have property tax values reassessed every 8 years, then they changed it to every 4 years. But my bill goes up every year. I started off paying about $2000 25 years ago and now it is about $5000 but my property value has also increased about 3X
It seems like if you just taxed an ordinary house at a percentage and you taxed a billionaire's huge house at the same percentage that you would get more money from the billionaire without needing to create special laws and special taxes.
Yup, Prop 13 is a mess and is a big part of why housing in CA is broken. But it's politically toxic to even mention substantial reform, let alone abolishing it or even just phasing it out over time.
California made its bed with regulation and housing costs. Now the productive folks are just finding better places to build.
This is an old argument. Remember how all the billionaires were going to flee NYC if/when Mamdani was elected. And... then they didn't.
Except that several billionaires have already left California, in anticipation of this law, as the article notes.
Well Mamdani's pied-a-tierre tax was specifically a real estate tax, levied on the real estate of people who don't have residency in the city. It's a marginal tax in the grand scheme of things, but unlike the billionaire wealth tax, it actually works, because the real estate can't move. And the owners can't just threaten to leave because they've already left, that's why the tax hits them.
He also hasn't really done anything. Mostly because he made a bunch of promises to do things he doesn't have the authority to do.
Prop 13 should only cover primary residences. No vacation homes, no investment homes, no apartment complexes, no Airbnbs, no commercial properties, no offices. This single change would fix the majority of the state's tax shortfall. Going on about billionaires and not fixing this obvious loophole should tell you that people in charge aren't actually interested in solving the problem, just using populism to get votes.
Most land I bet is leveraged (hence the high price!) and taxing it will put pressure on home owners and investors. It is great for the truely rich who have a $50m mansion because it is chump change and will pay $375k which is approx zero but for someone with a typical house $1m it is $7500 which is less money for food and other household expenses and they may be paying a big mortgage already and not rich in the true sense.
Taxation ain't simple. There are always second order effects.
I am not against land tax but using it as a kneejerk levy could have unintended consequences.
Instead taper onto a reasonable land tax. Just raise taxes if you need more money in a fair and progressive way.
Of all the places you can avoid flight from to avoid tax California must be the easiest.
Since so much of land value is in downtowns, in a theoretical shift to land value tax, most of the increased land value revenue would come from vacant and underdeveloped parcels downtown. The median tax burden on single or multi family homes would actually be reduced. An example is this model of Spokane: https://landeconomics.org/reports/spokane-report#:~:text=sin...
And a lot of the time, it’s those truly rich people who own those vacant/underdeveloped parcels in downtowns.
This is an asinine claim - any cost can be passed along to a willing payer.
Spot on. Seen too many colleagues pack up for lower tax states, taking their equity and talent with them.
I think the author may be right about multiple points but I think it doesn't matter? This is one of those, don't let the perfect be the enemy of the good situations. A state-level, one-time wealth tax _is_ something that billionaires can run away from. And this law seeking to apply to people who lived in the state _before its passing_ seems structurally sketchy. This article has some fair concerns.
But we have a one-time billionaire's tax proposal on the upcoming ballot, and we don't have an LVT proposal on the ballot. Saying that the Billionaire's tax will be less effective than promoters say maybe true -- but we're definitely going to get exactly $0 from a statewide LVT for 2026. If the Center for Land Economics gets an LVT on the ballot in a future year, I would strongly consider voting for it -- but that's not on its own a reason to not do the Billionaire Tax this year.
What _would_ be a convincing piece of info, and which no one knows, is what the long-term impacts of a one-time wealth tax are. E.g. Zuckerberg is moving his residence to FL but Meta isn't going to stop employing Californians. And if the state is _credible_ in saying it's a one-time tax, will the billionaires who fled come back after it's done?
No, once you've spent the time and hassle to immigrate, moving back is unlikely.
From what I can tell the residency change for a billionaire is about how often you fly to your various homes. Zuckerberg I think hasn't gotten rid of his Palo Alto or Lake Tahoe property, he just added a FL house and will have a cap on how many days per year he's in CA right? This isn't like a normal person with 1 house relocating.
It's very expensive to move the business that owns the assets, and then you need to ensure you don't become resident again.
Once the money moves, it won't come back to where it can be grabbed.
That's why the USA has exit taxes when giving up green cards and citizenship.
But the business didn't move. Meta not moving to FL, and Prop 40 doesn't give any reason to move it; it's a tax on the resident, not the business.
“ Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Travis Kalanick, and Steven Spielberg, worth roughly $540 billion combined — had already moved their tax residency out of state before the measure”
Imagine being worth billions USD and rather than being a part of the solution to support the state that helped build your wealth, you spend your money to just get around paying your small share.
It is trivial for the wealthy to buy another house elsewhere and “move” their primary residence.
More money isn't going to solve our issues. The limiting factor of affordable housing is policy
you spend your money to just get around paying your small share
I wonder how much they spend on lobbying compared to what their tax bill would be.
Comedic article related: https://www.mcsweeneys.net/articles/i-will-pay-any-amount-to...
Isn’t California one of the richest states in the richest nation? Does that government really need more revenue?
This article is nonsense.
California already has a property tax, about half of which is based on the land value, and the other half on the structure on the land. So this is not some brilliant idea, just a renaming of what we already have.
If the author is suggesting to repeal Prop 13, that is also not a new idea, and has been discussed for decades. Good luck.
Tax - why not both billionaires and land.
Why not both?
Property tax increases are hamstrung by Prop 13 and until that’s repealed, will continue to be.
And while the wealthy always threaten to leave when faced with higher taxes, the fact is that they never seem to actually do so.
The site is based around georgism whose fundamental premise is that taxing land is the universal solution (much like for republicans cutting taxes is their solution to everything: economy going great? We should cut taxes. Economy going poorly? Cut taxes. Deficit too high? Cut taxes.) I don’t put much stock in analysis by single-solution thinkers.
do they believe its a universal solution? or one tax among many that triggers a certain asset, land, to be used more efficiently?
Even the conservative states who supposedly stand for the individual can’t get anything like proposition 13 passed through their state legislature and it’s been over 48 years.
if its got feet, why all the focus on RTO all over the place?
California is already collecting way more taxes than needed, perhaps the state needs to learn how to better manage existing taxes
This is the reason I would leave if I was a billionaire. Living in California I never felt like my tax dollars got me anything more than they got me in other states and if the city/country/state got even more I knew it would go to some sort of tomfoolery like a high speed rail that doesn’t actually get built or a $1m bathroom.
If you are a billionaire or 100 millionaire, you probably got rich in California, Washington, or Oregon, or probably in the northeast of America in the last 50-60 years, if prop 40 passes, it will have the same effect as prop 13, a positive effect long-term that is, if you manage your finances, most of the states in the Union you are out of luck. why is that?
The Noe valley bathroom was enough of an anomaly that it made the news. Do you have actual evidence that California taxes are not well spent?
The billionaire tax is an experiment, they did put the bar pretty high to measure how many families will relocate (that's super easy to track); once that's measured, it's easy to build a model to adjust this threshold to whatever is advantageous for the state and keep things in balance this way, where the outflow is carefully measured and weighted against the tax threshold. The "hard part" was just getting this to pass the vote; then they can adjust this threshold anytime as voters have already approved it. What isn't measured is that billionaires create jobs "around them"; and, implicitly, jobs will be created somewhere else; unfortunately this model will not measure that.
They are neither competent enough nor incentivized to perform this optimization for the benefit of the state.
I’m not convinced billionaires “create jobs” in any meaningful numbers.
Sure, the companies that made them wealthy do, but the billionaires themselves? Doubt.
So if the only consequence of this is that the billionaires flee to Texas, with its regressive taxes, and take the wealth inequality and corruption that goes with them… I’m not seeing that as a bad thing.
The article contains significant inaccuracies. Individuals in the lower and middle economic strata need not advocate for the interests of billionaires or those with assets exceeding $100 million; these individuals have already benefited disproportionately.
Over the past 50 to 60 years, wealth concentration in many Western nations—coupled with the relocation of jobs to East Asia—has primarily favored the upper class rather than the middle class. Similarly on a different battlefield, Brexit has not served the majority of the United Kingdom’s working class population the average citizen has experienced a decline in wealth. In Great Britain, most residents did not benefit from North Sea oil revenues, which were largely directed toward affluent groups—a contrast to Norway’s more unselfish. forward thinking approach of establishing a sovereign wealth fund which benefit it all to the consternation of the wealthy well connected conservative class within Norway.
Remarkably, adherence to sound financial principles—living within one’s means, settling obligations, and saving—can enhance long-term economic stability across all income levels and even at the governmental level.
Much like Proposition 13, voting in favor of Proposition 40 is a straightforward choice. Historically and currently, western political leaders have failed to act in the best interest of the majority usually, they have to be dragged along kicking, and scratching.
It shall be interesting will the middle and lower end carry water for the wealthy again and vote against their interests to save the lucky 214 billionaires in California, that’s right you heard it right, 214 out of 40 million people…
The billionaires won’t be going anywhere. There’s a reason why the West Coast, California, and Oregon are what they are, when compared to the rest of the United States outside the Northeast, climate, higher education, better business opportunities, better political climate for the population, particularly if you look a little different or have a different religion in comparison to a large part of the United States, particularly after 1945.