Of course. Everyone wants the money they have to increase, the amount of services they receive increase or stay the same, and the money they pay to decrease or stay the same.
in the case of many economic areas of life, you can increase your income and you can find better prices for things. What's special here is when those same people look at municipal governance and can't see that it's a zero sum game and they can't have both of what they want.
Well good news! Because taxes are there to pay for services, there's absolutely no reason why they should increase just because the value of your property... Oh that's not how local governments see it?
Well at least your property value will go up endlessly. No bubble there. Totally not based on speculation.
Most of local and state gov expenditure is salaries (subject to inflation, particularly local housing) and financial support for low income residents (also tied to inflation and housing).
If the price of housing the rises, the cost of living will rise, employees will demand raises, and the cost of providing services will increase. Even if housing prices remain flat, there will be inflation leading to the same result.
But I agree that pinning all hopes of class mobility or comfortable retirement on perpetually increasing housing costs cannot work for very much longer.
> Because taxes are there to pay for services, there's absolutely no reason why they should increase just because the value of your property... Oh that's not how local governments see it?
Actually that often is how local governments see it in many places.
Local bond issues, which are paid for by property taxes, are often not a fixed rate. They are often a fixed amount (e.g., $2 million/year for 5 years) or a fixed initial amount with some growth allowed (e.g., $2 million/year for 5 years with inflation adjustments, often capped at some maximum adjustment).
With these each year the rate changes to keep the amount collected on target. If aggregate property values go up the rate goes down and if aggregate property values go down the rate goes up. If everyone's property values went up or down by the same percentage the amount of tax each person paid would stay the same.
Your share of the tax is proportional to your share of the aggregate property value, so our individual taxes can change regardless of any changes in aggregate value. For example if aggregate value goes up 5%, but your assessed value us up 10% and mine is up 3% your tax for a fixed amount bond will go up and mine will go down.
> I would like the price of my home to rise, because it increases my wealth, but I would also like the prices of all other homes to fall, so that I could sell my house and buy an even nicer house.
There’s a way to do this. Buy in a VHCOL area like San Francisco, wait for 3-10 years, then move to Texas, Florida, South Carolina, etc. Real estate is highly localized so you do not need to stay in the same area all the time.
The homelab guy at CloudFlare did this because the prices of real estate in Austin are actually falling.
I wouldn’t count somewhere I don’t want to live being cheaper as the prices of all other homes falling… ;) Nor as lack of need to stay either - if real estate prices were the only thing keeping people around, cities might not exist.
Interestingly enough, it’s the opposite in NH. Our taxes just increase 1,000 each year to pay for horrible public schools while also giving state school budget funds to everyone that wants to homeschool or sent their kids to one of the many alternative schools we have. I would love to know how much of the US this actually reads as true for, because my friends in various other states also feel very similarly about their taxes going up and the housing prices not so much.
If the value of a house doesn't increase, then the property taxes, upkeep, mortgage interest, and selling fees would make home ownership untenable and worse than renting. And then if you rent the problem gets pushed up to the landlords anyway.
I don't know how economics escaped basic elementary/middle school curriculum. There is so much confusion in people's lives around money, and so much destruction that results from it, yet we still don't teach the basics of what is going on in school. It's totally perplexing to me.
If calculators had never been invented then perhaps arithmetic and economic literacy would be required of citizens. A big problem is that we invented a tool for something that's most powerful when you can do it easily and constantly in your head. People are not pulling out the tool to use it constantly because there's friction to that.
Hilarious. They were right to do the comparison, but got it oh so wrong.
I was recently trying to understand Elon Musk's wealth, and come up with similar comparison: For example, he could make millionaire's of every single person in Seattle, and still have hundreds billions of dollars of wealth left over. Truly mind boggling.
Elon doesn't have a pile of cash, and it wouldn't be possible to convert his assets into cash either (without an incredible discount). This is true for most billionaires. In fact this very fallacy is part of what I'm alluding to with "we need to educate better".
So while fun thought experiments are excellent selling points, they aren't actually grounded in reality.
Yeah, but you're not required to transfer cash in order to transfer wealth, are you? Stocks are plenty transferable. Sure, the value would likely drop, but what's 20% to 40%, when you have a trillion to start.
I mean -- there's plenty of ways to figure this out. You can take a loan versus the value of the stock, for example, which is what many billionaire's do. The advantage to that, is you don't have to pay any tax at all on the value of the loan.
He could totally go into debt for e.g. 80% or his accumulated wealth, designate said wealth as collateral and get a really good deal in terms of interest.
I think the better comparison is that Elon’s mostly paper wealth amounts to less than the real dollars the federal and state governments spend every single month.
Economics class is usually in high school and it's optional.
Schools are really expensive to operate. Most districts and schools make it easy to graduate to maximize their graduation rates. Standardized testing is suppose to catch local lowering of standards but state departments of education also under pressure to maximize test pass rate. So resources flow into pulling the bottom quintile of students up to a minimum standard. This means teaching to the test on math and English, and de-prioritizing other subjects or dropping them entirely.
We could expand the breadth of educational basic standards. This would require a cultural shift in valuing formal education more, increasing teacher training/recruiting resources, making schools year round, more centralization of education budgets at the state or even Federal level.
Generally speaking public schools tend to be better in states like Massachusetts than Kansas.
In the majority of states in the USA, districts in the state are not allowed to graduate students without taking both an econ class and a personal finance class. Kansas is one of the stricter states. I can only think of three off the top of my head that do not mandate econ/finance classes, Colorado, Massachusetts, and Washington. Pretty hilarious to claim MA has better education requirements than KS LOL when its the other way around. Also hilarious when the average SAT score in Kansas is 1256 vs a mere 1128 in Massachusetts, LOL. I can't immediately think of any way that the schools in MA are better than KS, which is pretty funny. Is there even one stat or requirement where MA beats KS? Maybe college sports scores...
That said, public schools are mandatory pass, and the kids know it.
I think the problem with education is the prepack solutions sold by politicians intentionally don't reflect reality, sometimes intentionally reflect the opposite, and are designed to be ineffective or even actively counterproductive.
Looking around, it looks like MA beats KS on most metrics. For example, 55% of MA students take the SAT, while only 2% of KS students take the test. There is a reason that MA always ends up at the top of lists that rank public education while KS is much lower. To be fair, KS has been improving in rankings quite a bit, which I agree MA has been unable to do.
Likely it just means that college-bound students (which should be ~1/3 of the total population of HS graduates based off educational attainment levels in the US), strongly lean to taking the ACT.
A major problem with property taxes on owner-occupied housing is that the value the owner derives from the house is not dependent on the resale value of the house. An owner occupied house is not primarily a financial investment in most cases. Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living. Any gain in value cannot easily be realized since it’s not a liquid asset. This leads to a fear of being driven out just because the value of the surrounding neighborhood rises doesn’t mean that the owner’s income rises in lockstep.
One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
Exactly. Surely the finance industry can come up with a product that automates this so you automatically sell them a tiny slice of your home to make up the property taxes without it affecting your cash flows.
The private finance industry need not be involved.
Just have government allow taxes to be deferred until time of sale with interest pinned to the cost of borrowing for government. That already exists where I live for people over the age of 65. The government can still get the revenue for free via borrowing and the payback is more or less guaranteed.
This really seems like the most fair situation, if we don't want to a) let retired people stop contributing their fair share, b) kick old people out of their lifetime homes during their most vulnerable years.
I believe you can get a reverse mortgage line of credit that allows you to take out money as needed. That is, a reverse mortgage doesn't have to be a predetermined lump sum or monthly payout.
This doesn't totally automate it, but it takes away the need to manage the proceeds from a reverse mortgage between the time you receive a payout and the time you pay your taxes.
That's basic Econ101: households optimize for (subjective) utility, not for profit on some balance sheet. Taxing households for non-realized gains doesn't take into account liquidity nor the (subjective) negative utility and opportunity cost of selling your home and moving away.
> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home, which would offset some of the costs we currently pay in ad valorem property taxes.
The local real estate community had a meltdown and poured hundreds of thousands of dollars into defeating it, which my neighbors obliged and did.
That is true, but on the other hand if you had to pay a hefty yearly property or wealth tax you might not be able to afford it in the sense that your wealth is bound up in the house.
The counter is of course that when you buy a house you should make sure you have enough income and/or liquid wealth so that you can pay the taxes. And if not, move to a smaller house. Of course, opponents of such taxation will then roll out all kinds of grannies living in mansions on meager pensions. Then again, is it fair that this prices out younger people from the property market?
As difficult as they are, I do think we'll need some form of wealth taxation in order to put a brake on spiraling inequality. Yes, call me a fan of Piketty if you want.
A wealth tax is just a warning shot to your wealthy neighbors, if they can afford to flee, they'll flee.
If you're planning a peasant revolt you should really consider going all-in, bloody revolution, you give the kulaks less time & space to plan for contingencies.
They said millionaires would flee when Massachusetts implemented an income tax surcharge. The amount collected from that tax was in fact more than expected.
If the wealthy in California were willing to give up quality of life to save an amount that's not very meaningful to them, they'd have already moved to Texas. Or North Dakota. Or even Washington, which is an actual small-government state without a personal income tax.
People really want to push wealth taxes to the point of confusing income and wealth taxes, and assuming the willingness to accept an income tax surcharge equates to a willingness to accept a wealth tax, when we have lots of data showing that whenever you tax capital that is mobile (e.g., not real estate) then you get less taxes than you expected as well as capital flight.
It's annoying to list your income, but people do it because the disclosure is limited to one year, and more importantly they can control their income, particularly whatever income is earned in a given state. Only realized income is taxed. But a wealth tax involves questions of valuation - of taxing unrealized gains -- that are in many ways arbitrary and subject to abuse, and a level of disclosure and state control that makes many people feel uncomfortable due to the massive expansion of state power it requires.
I don't know why people are so stubborn about this. Next up, they will argue that because people accepted a higher sales tax, they will accept a higher wealth tax, too. After all, you let the state mandate childhood vaccines, so you should be OK with the state mandating your diet, right? Anyways, we'll see how things work in out in California. The state already has massive deficit problems, so let's see how this addresses their fiscal problems.
Conveniently an article just dropped studying the effects of a new wealth tax in Norway. As usual with these sorts of taxes there were a lot of threats that all the high net worth individuals would emigrate to Switzerland or wherever. In reality, it turned out that threat was mostly hot air and bluster. (And of course, you can combine a wealth tax with some kind of exit tax for those that want to take their ball and go play somewhere else.)
But yes, you're certainly right that taxing unrealized gains is difficult for many types of wealth. But e.g. property taxes are often already based on some estimation of the market value of said property anyway, so no change there. And similarly publicly traded stocks and such have a clear market value. For other types of wealth, sure there are difficulties, but usually it's possible to do it in some way, be it by estimating the worth somehow or then delaying the tax until the thing is sold or the owner dies etc.
Yes, in Norway, an oil state with very little mobile capital. Basically what I said about immobile versus mobile capital.
And I guess we will just pretend that Hollande's wealth tax experiment never happened, when 60,000 millionaires left, the state lost $200 Billion in capital, and the wealth tax cost the state twice as much revenue as was generated by the tax. That was for a country, France, whose wealth was not in the ground.
I think many people would have a hard time believing that a new tax in one area would be offset by lowering taxes in another. Even if they did reduce property taxes shortly after passage, many people would assume they will raise them again later on.
If it wasn’t combined in the same bill, the people will just have two taxes going forward. Effectively every “temporary” tax becomes a permanent tax. During the last local election, our city council was asking people to vote to replace an expiring tax with one at a lower rate and trying to sell it as voting for this reduces your tax.
>> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
>My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home,
First comment suggests taxing the gain (income tax), while second comment suggests a tax on sale price (gross receipts tax). Two very different things.
While I grant you that they are two different things, two-thirds of the average sale price in my area is from gains in value accrued over the time the home was occupied prior to sale, almost all of which is currently untaxed.
I own a home in Berkeley which loves transfer taxes. They’re creative about it though they tax at different rates based on the home sales price. Starting 1/1/27 the transfer tax goes from 2.5% to 3.5% based on the selling price of the home.
It’s been attractive to voters since most homes sell in the first tier.
You can reclaim some of the transfer tax by performing seismic upgrades which is actually something I support in a town with some houses that can be 100 years old.
> One way out could be to tax the value gain at the time of sale
Stamp duty in the UK, horrendous tax. It's better than nothing at offsetting the unearned increase in house (land) value, but far worse than a regular tax.
If you live somewhere for 10 years, then move, then repeat for 40 years, you pay far more than if you never move. This encourages people to live in less suitable houses for longer.
As to your worry about land values increasing -- the owner is deriving benefit. The higher the land value is, the more benefit the owner gets from the land.
The increased land value is because the land is more desirable. If I buy some land next to a rubbish dump, it's cheap because living there is terrible. If the dump is then closed my land improves in value, and I derive value from that.
Likewise if I buy somewhere cheap in a backwater town, and the town becomes more desirable because there are better employment opportunities, better shops, better amenities, all of which serve to mean people will pay more for the land, then I benefit from that immediately.
The value is subjective, if you lived in a quaint town and now it’s become a bustling place it may be a nightmare for you , despite the price increases. That is actually a win win situation, though, since you can now move to another quaint town elsewhere while taking a pile of cash with you, with the perhaps important caveat that you do lose your proximity to places and people you may consider more important than the money.
These imaginary scenarios do not align with typical real world experiences.
Most people’s home values go up because of 1) increasing housing demand and 2) the collective delusion that home prices can continue to far outpace wage growth indefinitely. Neither of these things necessarily result in an increase in amenities or improved quality of life.
My own home value has gone up something like 70% in the last 10 years. Meanwhile, the amenities near me are essentially unchanged. Same schools. Same number and quality of restaurants and grocery stores. My net worth has jumped a fair bit but my immediate benefit seems pretty much flat.
The house is more desirable, evidenced from more people willing to spend more money in there. You benefit from the same things which make it desirable to other people.
Oh, so GP was just incorrect in calling this a tax on gains. That explains why repeat buying and selling incurs more tax.
Large sales tax on home purchases is probably a generally bad idea. Looks like Bay Area pricing would incur a 10-12% tax under the UK scheme which seems pretty crazy.
It's a transaction tax. Setting aside that there's typically a 2% cost on buying and selling a house in the UK anyway due to estate agents and legal costs, and the average house attracts another 1.5% in stamp duty it's not a major obstacle for the majority of transactions, but it's still friction.
It would be far better to replace with a %age tax whether you move or not, but wealthy people in the south east don't like the idea of taxes on unearned wealth.
It's still horrendous, especially at the top end of the market. It reduced movement on the 500k house which trickles down to the 300k where it's an annoyance and then to 150k houses where it doesn't exist other than slowing the current 150k occupiers from moving to 300k, which itself is really treacled because of the move from 300k to 500k.
It's also a major obstacle in the south east, especially for first time buyers
It's a tax on sellers, with some of the proceeds going to FTBs
Lets say two people are after the same house, both are willing to spend 500k on it.
Person A: Next time buyer, has a budget of 500k after legal/moving costs, that leaves 14200 for stamp duty, and that means you can pay 485,500 (plus 14,275 stamp = 499,775).
Person B is an FTB, they have the same 500k budget but can bid upto 490k due to lower stamp
As such person B can bid 486k, thus offering more than Person A, getting the property.
If both were Next Time Buyers the seller would get 500 less
If both were FTBs the seller would get 4500 more
If there was no stamp duty they would both be able to pay 500k, the seller would get 14k more
The issue with that is the disincentive to sell (or buy), which leads a lot of people to stay put in their oversized home during retirement, for example.
In the UK, 'stamp duty' is something that buyers pay (as opposed to sellers), but sellers also have to buy, so everyone pays to move and everyone stays put to avoid paying.
(And of course no one builds, which is the biggest issue).
I'd say it's OK to defer your property taxes until you sell (or die), but it shouldn't be the default, only something you apply for if you're in a vulnerable position.
I think it's a great idea to let land taxes create the incentives to build efficiently.
You don't need to tax the house value, only the land.
You don't get rid of the 'poor'/less wealthy if you allow building higher and thus have a more efficient use of land as land values increase. All owners would share the cost of their land value tax.
The problem is not building higher in areas with very high demand. Of course they become 'rich only neighbourhoods' or whatever.
If a house is worth £1M, a flat in a 5-story building should be less than 200k in the same location. We can't have houses in city centres! We can't have houses 5 min from the city centre! We could definitely have houses 1h from the city centre in a small town. In London or NY we shouldn't, though!
I always tell my internet friends that they should think hard about second order effects. Stamo duty has very negative second order effects. Land value tax has very positive second order effects. Property taxes sit somewhere in the middle.
Instead of being snarky at random people online, I would suggest reading about land value tax. No worries if not, of course, but it's usually something that conservatives brand as 'communism' and progressives brand as 'capitalism' as an easy way out of any discussion.
Anyone supporting it will most likely support removing other taxes, such as stamp duty or council tax, or lowering income taxes to compensate. A net zero change would be massively positive.
I live in California where real estate taxes are 1%. I currently pay $915 per month in real estate taxes alone. I'm not really sure why I should agree to increase that.
I find all these conversations dumb. Real estate taxes after paying for roads and schools are entirely punitive in nature. They grew from real local needs but now I find people saying that we should increase them only to encourage the current owner to sell to those deemed more worthy somehow. Because our taxes are tied to real estate value the budget has actually ballooned far greater than inflation. The schools here are extremely well funded and the roads get repaved long before their natural life time.
I think our balance works really well right now. So I find suggestions to just fall flat.
Oh the funny thing is we already subsidize healthcare so much in this state that it basically is socialized healthcare but surprise surprise that's actually part of the reason we have a deficit right now.
If you want to have an honest conversation, I'm here. Meanwhile, I will assume you didn't respond to anything I said because you were up at 3-4am California time.
In Austria it is even worse. The stamp duty is only for literally buying the house in your name. Thus all sufficiently expensive real estate is wrapped in shell companies where the transfer is untaxed.
The result - stamp duty is exclusively paid by middle class people actually buying homes, never by the rentier class. They already used the money up front to buy the votes for this law apparently
Using shell companies to dodge stamp duty has been specifically made illegal in the UK. Of course the rules around it are really complicated, to avoid legitimate companies that own property from being affected. https://www.gov.uk/guidance/stamp-duty-land-tax-corporate-bo...
A major problem with decoupling property taxes on owner-occupied housing from market prices is that it removes the biggest incentive for a homeowner to vote for policies that keep the local real estate market in check. An owner occupied house in a desirable area where there is no disincentive to politically engineering a supply shortage becomes a financial investment. Any increase in housing value becomes profit for the owner (or their descendants). This leads to supply restrictions and escalating prices and an increasingly unhealthy society as the young and the poorer are pushed out of the city, county, or even state.
This is essentially what has happened in coastal California over the last 60 years.
The land should be expensive, the housing doesn’t need to be.
With different policy, there could be more housing built on the same land. The most scarce land there is shouldn’t be predominantly zoned for only low density single family homes.
We could easily build apartments on the coast in CA and then non multi millionaires might be able to live there. We have decided that only multimillionaires deserve to own a coastal house by restricting zoning in the coast so heavily
The uber wealthy have their gated communities in the hills.
The very wealthy have their lock on places like Carmel.
The upper-middle class in Santa Cruz or Half Moon Bay try to prevent new condos (or student housing) from being built, because it "destroys the community character."
Yea, the point of property taxes is to stop that from happening.
Austin has been begrudgingly growing up, not without a raft of complaints from locals, because the property taxes are high enough to make selling to a developer tempting. In return, Austin has remained relatively affordable in comparison to other tech hubs.
> One way out could be to tax the value gain at the time of sale
This is how it works for sales in Sweden, via the so called "reavinstskatt", or profit realisation tax. Funnily enough, it is mostly applied to individuals in practice. To avoid the taxation, companies package properties in subsidiaries, which can then be sold and traded like any other stock. The tax is then postponed until the de jure sale of the property, which never occurs. Individuals are not eligible because the loophole is closed if the legal owner also occupies the property they own.
> One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
Forcing renters and buyers to pay for the local services instead of property owners seems extremely unfair.
> Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living.
So? If the property values go up then cost of living is going up for renters too. Why should property owners be shielded from this by imposing local service costs on renters who generally have even lower incomes than owners.
> value the owner derives from the house is not dependent on the resale value of the house
Value is always relative - even if the experience hasn't changed, the rising house price does mean that same experience is being value more highly relative to other opportunities. (In most cases this is because the experience actually has changed: if your neighborhood gets nicer, you are indeed benefitting!)
The bigger fallacy in rising property taxes is that civic services don't necessarily get better or more expensive just because property rates rise. And the bigger unfairness is that homeowners with rising values but not rising income don't always have efficient access to the equity of their homes.
A fair property tax regime would avoid presuming budget increases just due to rising value of housing stock, and might subsidize HELOCs or similar structures for folks who need to access property value to pay taxes.
"the value the owner derives from the house is not dependent on the resale value of the house"
An owner can derive value from the house in one of three ways:
A) Occupy the whole place.
B) Receive rent from a tenant.
C) Something in between (e.g. airbnb one room).
When property prices double, it's likely that rents roughly double. This may not increase the value the owner can derive from (A) but it will sure change the value they can derive from (B).
So they might decide to switch from living in the place to renting it out. If they don't decide to switch, then it indicates the value they derive from living in the property has either gone up, or it was always way higher than the market rent.
It seems like market rent is a reasonable benchmark to use to calculate property taxes, and property value is a reasonable proxy for market rent.
What they mean is the day-to-day "value" of having a roof over your head, in contrast to your ability to make money by selling.
If the area around you is improving substantially, then yes that day-to-day value could be improved by better local shops, maybe a closer office building, nicer parks, etc. Generally stuff like that does not happen quickly though, and really big changes like magically teleporting from boring middle of nowhere to a vibrant cultural downtown don't happen at all.
> A major problem with property taxes on owner-occupied housing is that the value the owner derives from the house is not dependent on the resale value of the house
Your better believe it is when it comes time to sell.
Or would owners not mind having 0% property taxes in return for the state taking all gains at sale time
This conveniently ignores all the gains in property value which they can benefit from by refinancing, selling or renting. If they don’t want to pay property taxes on higher values, and don’t care about the value, then we have a simple solution:
Freeze the property taxes and let the government take the entire value gain in the house when its sold.
Parent comment shouldn't have a problem with it, but beyond rhetorical purposes (as in the reply) we should! Shifting tax structure from an ongoing basis towards transactions incentivizes people to hang onto houses in circumstances where they otherwise would not. E.g. retirement-age downsizing that would otherwise increase supply of family-sized housing. SDLT in UK has this effect.
Fwiw, every municipality I've lived in has had some kind of program to help people who own and live in their house to afford property tax if they can't.
I think they're usually called "homestead exemption" or something like that.
If I had billions of dollars of stock it would require a change in the law to tax me on its market value. But you can do exactly this to me if it's a house.
I swear so many societal problems have their roots in the attitude of "I've got mine, screw everybody else"
I've seen people completely change their attitudes about things once they own a home. I know a self-proclaimed liberal who claims to care about people suddenly go all NIMBY because they are buying a $2M house and now they don't want duplexes in their neighborhood and don't like the idea of more housing being built ("we're full"). They feel entitled to a high (and increasing) property value in a desirable area.
But isn't it understandable? You work your whole life to buy a piece of property. But not just a piece of property anywhere. It's a specific one, in a specific neighborhood, in a specific zone. All of these things tie into the $ that you paid for that property. Regardless of the change in value, a change there impacts how you perceive living there.
If all of the sudden the neighborhood behind you gets rezoned to industrial and you get a datacenter nearby, everybody understands you're up in arms.
If at the same time the neighborhood behind you gets converted from 200 single-family homes to 200 8-plexes, complaining is NIMBY. Even though it has the same dramatic impact on the quality of life you bought into. Way more noise, way more street parking, cars racing late at night etc.
You need extremely high levels of trust and community to incentive the kind of behavior you are asking for. That is not reinforced or taught at any of our schools or government institutions. It only exists in small family or religious communities.
So absent of that, I think your personal incentives also lead you to your current housing policy preferences. Don’t you?
I'm of the opinion that these people are short sighted to begin with. I don't own a home and rent in the city, but I am strongly against high density development. I believe housing development should be spread out and the best way is to break up commercial and financial centers. Too many cities focus around a single "downtown" area that becomes the ground zero of high property prices.
Probably depends on when you look. I think the point stands that are drawing a false comparison to serfdom. Tax obligations are not the same as serfdom
Surely one missed tax payment is not enough for the government to evict and assume ownership? I see these cases in SF occasionally and it takes years of non-payment.
Fine, you win. We're all serfs. You've redefined "serfdom" to mean living in a modern civilization with public infrastructure, and the property tax tradeoff that comes with it. I'll choose this serfdom until a better viable option presents itself.
Is there any country where I can walk into town with a bag of money, buy a house in cash, and never have to pay taxes on it again? EU countries either have a property tax or a wealth tax that includes people's first homes.
Said house may not be consuming any finite resources in a sense, but there are various services and amenities that are provided to it and to the other homes in a community. These services need to be paid for. There are roads that take you to your house, which need to be paid for. In addition, firefighters and police are funded via property taxes. So are schools, as are other amenities, including parks, libraries, and in some places, public transit.
You can look up a property tax bill and get an idea of what property taxes pay for. Mine is itemized and it breaks down exactly where my money is going.
And, sure, you could go off the grid and live in a shack in the boonies. That's always an option. If you feel like you don't need the services and amenities that property taxes pay for in a particular place, you can move, and many people do. In that case, yes, your property taxes on said shack-in-the-boonies will be low. But that's going to be in large part due to the lower value attached to this property and the land it sits on, in addition to fewer services and amenities available to it. That's a tradeoff that you can make. But at least in my case, I don't mind paying my property taxes because I can easily afford them, and I and others receive many benefits in return.
They don’t evict you but put a lien on your home. When it’s sold the gov gets their taxes then. Also, a sheriff is an elected official and evicting an 80 year old because they can’t pay their taxes is not good for their career.
I don't like taxes but I also like having roads, sewage treatment, 100+ psi water pressure, multi-gigabit internet access, and a reasonably constant flow of electricity. The cost of public education and the management of that system is the only serious concern I have with my local taxes.
I actually don't mind the cost of living in my neighborhood going up. The $2500/yr HOA fee is a feature for me. I picked this location precisely because of it. I've lived in many places with virtually no maintenance overhead or economic friction. You may eventually learn that there are two sides to this coin. Neighbors who can afford and are willing to participate in ridiculously scaled housing markets also tend to take better care of their properties and local communities.
My friends lost a battle to paint their garage door a slightly different shade of white than the approved Pantone shade. No private entity should ever have that degree of power over one’s private life. Petty tyrants, I tell ya.
all of those services are ones that should be realized by the city, from taxes paid to the city. If they are not, the problem is that people vote for wrong people
HOAs in general are nothing but classic American privatization of that which would otherwise be public, because counties and cities here either lack the tax base (rural), budgeting skills (urban), or both, to provide the services some subdevelopments are built with.
It’s dumb. Here in Washington it’s rather common, I’m finding, for rural land plots to be part of a “Road Maintenance Association”. Exact same legal construct as an HOA, but scoped only to road maintenance on roads the county didn’t want to deal with. It would make so much more sense for the county to socialize those roads and reuse the same maintenance crews and vehicles for these stretches of road! But instead, a private entity pays through the nose to duplicate all that maintenance infrastructure (or pay contractors).
The way I see it many HOAs are the opposite of privatization, at least when they cannot be opted out of. They control land, impose taxes (sorry, "fees"), have elected leadership, provide services, make rules that they have the power to enforce, and the only way to leave them is to move out of their territory.
In my eyes this is essentially the same thing as a form of local government, just on a smaller scale.
The problem with having the city pick things like your trash pickup is that you end up bound to whatever choices they make.
In Canada for instance, I’ve seen towns where they have pick up once every two weeks and the canister is not even a full size one. It’s a “gentle” push to get people to recycle and compost.
This works in other areas of life. A courtesy charge creates a better environment by giving participants skin in the game and filtering out actors who wouldn’t mind abusing you but wont pay to do so.
Wait until you get a tyrannical HOA board and realize you have to make a choice between dealing with them or moving. Dealing with them typically involves lawsuits which come out of your HOA fees, which will go up along with all your neighbors who are now angry that their fees have gone up as well. (Ask me about open records my HOA hasn’t delivered for over 350 days.
I pay my city for sewer, water, and trash. I pay an ISP for fiber to the home, a power company for electricity. If you get all those things for $2500/year from your HOA, congratulations.
> Neighbors who can afford and are willing to participate in ridiculously scaled housing markets also tend to take better care of their properties and local communities.
Whereas you take great care of your local community by even refusing to live around anyone not as well off as you ?
Imagine the horror of having to live within 10 miles of a low class smelly poor plebeian, you might have to lay your eyes on their 3 days overgrown lawn from time to time.
I wish poorer areas of US suburban localities had overgrown lawns. In many cases, those neighborhoods are blighted concrete jungles with no foliage save the occasional pavement weed.
> Yes, I want to choose who I spend time with and around, and I want to choose what people influence my children in their formative years. I fail to see what’s wrong with it.
Nothing is wrong in wanting that, it's probably a good thing even.
What's wrong in this specific case is that your process of choosing is limited to one single criterion: can that person pay up?
Your comment makes it clear you're American. I just don't get why you guys torture yourselves by seeing your pre-tax income then having to pay taxes yourselves. In the UK most people pay tax via PAYE which means we don't even see our pre-tax income. It's just some numbers on a payslip, but your rarely need to look at. Consequently, I've never heard a single person in the UK ever say they "hate paying taxes" because we just don't think about it.
> One might think that homeowners would be happy that their largest asset has appreciated substantially in value, as homes did,...
This is absurd. There's absolutely no benefit to you if the value of your house increases if you have no intention of selling it. That's exactly the point of treating owner-occupied homes differently from commercially owned property. The author should be embarrassed that he, as a an economist, doesn't know that in economic theory, households do not optimize for profit on some balance sheet, but for personal (subjective) utility. That's econ 101.
You're making a valid point, but not in favor of taxing owner-occupied homes, but in favor of treating collateralized homes as commercial property. I'd be okay with that as long as the basis for taxation is the volume of the mortgage.
I think most normal people, including me, don't like it when housing costs are so out of step with everything else. The "value" in your primary residence isn't very useful, unless you sell and move to a more depressed area.
I'm a multi-homeowner and I'd love it if house prices fell, or at least stopped rising.
No property tax where I live, which is true for about half of the Swiss Kantons. There used to be a system where they would calculate how much you would be paid if you rented out your property and then charged you tax on that value. So basically a property tax.
But they got rid of that tax while at the same time removing the ability to deduct mortgage interest. So now it makes most sense to pay off your loans.
Mortgages are different here - they are interest-only loans for usually 1 to 5 years. And when the loan expires you have the opportunity to pay off as much as possible and then renew the loan for the remainder.
This has been a sticking point for me for the better part of my adult life (~20 years now), and it all started with wondering who that dude in the taxi in “Airplane!” was: Howard Jarvis, one of the major proponents of California’s Proposition 13. From Wikipedia:
> The proposition adjusted the property tax rate, pegging it at 1% of the purchase price of the property.
That sent me down a rabbit hole of trying to understand why property taxes go down while home values go up, and why raising property taxes is so damn hard in so many states (it’s largely because of caps etched into law by Boomers in the 70s and 80s). It’s also why I have the strong opinions on the issue I hold today.
Tax displacement is a very real issue, but one that theoretically should be solved by a liquid property market where you can sell your home at FMV and downsize to another one you can afford. Americans, special creatures that we are, instead demanded we get the McMansions without the property tax valuations, while also deciding what housing gets built regardless of demand, while also keeping the distorted value of the home should we sell it for a retirement nest egg.
In other words: homeowners keep all the money, while paying decreasing to no taxes on it. This has been a significant contributor to the housing crisis of today, with shitbox properties in major cities selling for upwards of a million dollars but families pulling in not even a tenth of that in yearly income. The typical soundbite responses of “we need more housing” and “we need to reform or loosen regulations”, while technically correct, ignore the root incentive structure crafted back in the 70s with these sorts of inverse taxation schemes, and therefore leave the problem intact. We’d have to build so much housing, so quickly, that property values halve nationally for there to be any long-term fix to this problem, and nobody seems inclined to do this given the ponzi scheme we’ve discovered suburbia to be (just look at new developments in CA with dirt roads as an example of homeowners having to foot the bill and realizing it ain’t worth it given the thin density of suburbs).
And thus we arrive back at the beginning: we need to raise taxes on homes to reflect their high assessment values, which would displace existing homeowners who couldn’t afford said bill, which is leading to the same demographics as before demanding the same solutions as they enacted in the 70s and 80s: caps, limits, or shifting costs onto less-advantaged demographics (like renters via commercial real estate). As perverse as it sounds to most Americans, the actual solution is to finally let property taxes “float” with valuations in their entirety, no caps or cuts, and let the market sort it out. Will that lead to some folks becoming homeless? Yeah, and that’s a whole other ball of wax we’ve ignored dealing with precisely because we catered to homeowners as a political group, but that’s infinitely more solvable than trying to build our way out of a housing crisis engineered by lower taxes and controls on builds.
We gotta eat the pain up front to find a better collective tomorrow for everyone.
In so many ways it helps to focus more deeply on the fundamentals.
For one thing, in the 1970's lots of true "baby boomers" were still too young to vote.
Maybe what you mean is old folks in general, they were the ones in California who were desperate enough to support the proposition which might be able to save their homes.
They should know, lots of them had been through The Great Depression, and were so much older than boomers they could be their grandparents, well they actually were if you do the math.
And they did the math, getting by just by the skin of their teeth while those just a little bit older who had been on a fixed income earlier had already been taxed out beyond recovery before the proposition.
They already ate the pain, I guess it's difficult to remember how up-front it was if you never spent that many years among Depression survivors.
Nobody ever wanted a depression again, and losing your home through no fault of your own was one of the most visible outcomes that ordinary people could do something about before it got out of hand.
This was supposed to be big, and it is bigger than ever, this is by design.
The problem comes from trying to work against it when the entire economic system surrounding "real estate" was supposed to evolve by now to where nobody pays more tax by now than the most proposition-protected properties.
The idea was for it not to end up making any difference as the years went by, nothing could be more fair than that.
The pearl-clutching comes from the failure of following generations to evolve away from taxing properties or wealth, with all levies eventually falling exclusively onto commerce so that only those who are actively making big transactions at the time are logically expected to be able to afford anything at all at the time.
Otherwise things are going to stay as medieval as they can, and the torture will continue until the attitude improves.
In most jurisdictions (not califoria) property tax increases are somewhat unlinked from your actual property value
1) the tax entity sets their budget (usually an increase)
2) the valuation group values all properties
3) the tax entity sets a tax rate to raise their budgeted amount. budgeted amount = tax rate * total value
Most people think if their value doubles, their tax doubles. This mostly isnt the case. If everyone's value doubles, the rate decreases so they raise the budgeted amount. Mostly property tax increases are due to ever increasing budgets not rising values.
1) If everyone's value stayed the same, and the budget increased, your tax would increase by the amount of the budget increase
2) if everyone's value doubled, but the budget stayed the same, your tax would not increase
3) if your value doubled, everyone else's stayed the same, and the budget stayed the same, your tax would double.
Let’s say you wee solid middle class and bought your forever home, in what was at the time, the near suburbs. Now that neighbourhood is unaffordable. The city might set a percentage of the home value as their target but now your well placed forever home is beyond your what your pension can afford. This happened a lot in Canada.
The worst part is that for all these taxes, the level of service has dropped since that home was bought.
Isn't it better for society if retirees downsize to a retirement community and allow young families to move in to the neighborhood with schools and amenities?
If we're going for a "better for society" angle, I have so many other things that are far more impactful for society and less damaging to the individuals that we will never get around to messing with evicting pensioners so younger families can use their spot to get to school.
While that may be useful, there should never be a necessity to move out of a house you’ve paid off, and quite well may have built up to support your own aging in place. Some people want a “forever home”, and that’s okay.
In some countries and cultures the good of the many comes before the good of the individual, no matter the sacrifices required to get there. The US (and to a slightly lesser degree, Canada) generally does not subscribe to such a cultural mantra.
Edit to add: for the cases where the societal good really does outweigh the personal good, we have a tool for that: eminent domain, which is how we build train lines and so forth.
A point against: if someone was an early adopter in a community that urbanized over 30 years, in effect the increased value means their future ownership at present rates requires the collective subsidy of their neighbors. Young families subsidizing the elderly in this way is a huge issue in tax burden disparity where I live.
How so? e.g. anywhere I've looked, schools are a huge part of the budget. The elderly wouldn't be contributing to service demand there. They're likely also not going on tons of crime sprees necessitating police, generally another large budget item.
Like another poster said, things like pensions and medicare might overall drain the entire economy, so the end result is the same, but that seems more diffuse than local tax bases, and wouldn't appear in a city/county budget.
>While that may be useful, there should never be a necessity to move out of a house you’ve paid off
This line of logic doesn't follow. There's plenty of old people who need to move out for non-financial reasons (e.g. can't live independently anymore), and it doesn't really make sense to me that having to move out because you can't afford your mortgage is okay while not being able to afford your taxes isn't. In any case, we can have our cake and eat it too by building more housing. Homes become affordable for young people if supply increases and the tax base broadens enough that taxes go down for established homeowners.
People make the best decisions for them and they have the freedom to do so. Who am I to decide that their 2 bedroom bungalo needs to be torn-down for a massive 5 bedroom infill for example.
I live in a municipality that taxes like OP and you don't understand how OP described it. Lets try with easy numbers:
Y2K: buy an 1/8th of a million dollar house. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $1.25M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.
If your mental model is the city tax rate is 0.8%, that is ... numerically correct but its mere numerology.
2026: house is now worth 1/2 of a million dollars. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $5M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.
If your mental model is the city tax rate historically was 0.8%, then you'd have to pay $4K/yr, but it doesn't even remotely work that way, so it simply doesn't matter. Its just numerology. My fraction of total property ownership "value" times the annual village budget is what I'll be taxed, which in this case is the same old $1K.
In reality grandma gets kicked to the street because inflation raises the price of everything, including real estate, but real estate is not even remotely the problem or the solution. Grandma might have afforded a house and its taxes when a McDonalds Big Mac was 75 cents each but now that its $13.49 the village budget has gone up 10x, 20x what it was when she bought, so she better find a way to make 10x, 20x more money or not only is she not going to pay her fair share of the budget via taxes, she's not going to eat food either.
"Now that neighbourhood is unaffordable." Thats the real problem. No one can move in and pay the city budget, and the city budget explodes because now they have to pay the dog catcher at least $250K/yr to live there and nobody can afford to rob peter to pay paul quite that much...
Because boomers voted to defer fully funding pensions until later. Now it's later. We're paying for past work and current work.
In Washington State, Puget Sound Energy is a for-profit utility owned by mostly pension plans! Their guaranteed ROI is sucked out of the productive economy. Everywhere you look rent is being extracted either by the 0.01% or the elderly, and the working class must slave to get 1/10 what they gave themselves.
At the level of an economy, I don't see how funding model can make a difference. Ultimately, there are now old people that want/vote for some level of service, and young people that provide it to them. The young people can and perhaps will at some point decide to revolt, or the old people will die.
Not an economist but I don't see how money can be anything other than an accounting tool at that level. If they had "paid for it" back in the day, young people would still be screwed.
The two big ways to increase prosperity that I see are for people to take care of their health so they need fewer medical services, and for fewer people to be devoted to administration and more people devoted to actually doing things.
> there are now old people that want/vote for some level of service
The problem isn't that there are old people, is that there's currently a glut of old people, which puts real strain on the system. Being old is expensive for governments. Not only do older people not typically pay nearly as much in taxes, they also require more resources to support.
So many of today's problems come down to the simple demographic fact: there's a lot of baby boomers, and they're getting old.
This is but one of the ways well-meaning people get displaced. And, frankly, th the is hypothetical family is the most fortunate of that class. They have equity and a pension. Playing my tiny Monoprice violin, from the 4th apartment I've lived in over the past 10 years (not including couch-surfing). And even I'm still on the "fortunate" side of the line, if just barely.
I don't think people really understand how bad it is out here. I imagine that if a dignified line on the base standard were held, there would be less of a need for this kind of middle-class pearl-clutching.
Depends on the jurisdiction. I've lived in both, budget based rates like you describe (Minnesota), and fixed rates with market based assessments (D.C.). I wonder which is more common.
There’s no reason the local government budget should increase at the same rate as the property values in the taxed area. Property taxes should generally increase at the rate of inflation not because property values increase.
However, where I live local government is wildly inefficient. So in that case property taxes should go down while property taxes go up via the expedient of competent governance. Alas.
We seem to have valued comfort for the landowning class over general productivity or creative endeavors in America, and now our tax systems reflect this. Whether comfort is the greatest virtue in the long term remains to be seen.
I can see how, conceptually, shifting tax burden to companies rather than individuals puts public services at risks. Companies don’t really have a lot of incentive to want things like quality schools, parks, and other non-profit public services.
On the other hand, property taxes seem to be a pretty flawed system that still result in inequalities. Individual homeowners hate them and will do anything to lower their burden. More wealthy and mobile people will move to different jurisdictions specifically to save on tax burden. There are extreme examples like The Villages in Florida where the heavy demographics skew toward older residents means that minimal funding reaches services that benefit younger families who work there as service industry workers. My understanding is that this is a particularly extreme arrangement in the villages: if you lose your employment within the jurisdiction you have to pull your kids out of the local schools immediately.
Then you have issues where you get poor jurisdictions and wealthy ones based on property values. Some states help mitigate this by pooling property taxes across the state for school funding.
I’ve heard that many condo buildings in my area have a standing arrangement with a law firm to submit appraisal appeals every single year and the law firm is paid on a percentage based on the savings they achieve.
This system can’t be efficient for anyone involved. When you really think about it this is like a siphon of money that could be going into public services into a private law firm.
The thing about property taxes especially those that have owner-occupier exceptions is that they sort of work okay because they’re a good approximation for wealth. They’re still regressive but you can pretty safely assume that someone who owns a second home is wealthy enough to pay a high tax rate.
On the other hand, that arrangement passes more costs on to the lower income renter. Their property owner landlord has higher property taxes than owner-occupiers and theoretically passes those costs on to the renter.
I think someone could devise a better system and do away with property taxes as they function today entirely. We need a system that makes all the stakeholders in our society feel like every dollar they invest is a positive investment with returns.
> Thus, older voters who tend to have higher accumulated wealth, partly in the form of home equity, but also lower current income, are a politically powerful and sympathetic group in the push to reduce or eliminate property taxes.
Miss on two points: there are exemptions for retired that freeze prop tax and equity is wealth that’s rare to access before death
I think land-value taxation, with a cap on properties based on income (and wealth) for your first home, is the way.
I do think there is something special about the idea of home, and that home ownership should be encouraged. It brings people stability. People shouldn't be pushed out just because others have more income than them.
At the same time, we do need property taxes. In California, rate increases are capped, so older owners often pay pennies compared to new homeowners. Harmonize the taxes, while capping it.
Maybe you’re referring to someone who owns multiple properties… But I think if someone owns the house they live in, there should be a cap once they reach a certain age. My Mom is retired and owns her home, but she still effectively pays rent on the property. She has a fixed income and the property tax comes in around 16% of her monthly income.
That doesn’t seem too bad, until you see all of her other costs have gone up dramatically because inflation has been high post pandemic. She only has so much money to spend every month, and if her property taxes kept going up too, she’d eventually be unable to afford to live in her house. She only owns her home because she was worried about being secure later in life and prioritized it above things like vacations or cars.
For a lot of folks as they age, even if they’re frugal, it’s not easy to survive. If you live for 20-30 years after retirement you’re likely to have your buying power cut by half if not more.
With that said, if someone’s home is worth more than say 10x the average price in your area, or your assets are $10+ million[1], I think there’s room for increased taxation. My primary point was simply being a property isn’t necessarily the right measure to determine a reasonable tax rate.
[1] The number obviously depends on where someone lives. Living in New York or SF, $10 million dollars of assets would be an extremely comfortable life but most likely not a lavish lifestyle. But… $10 million dollars in rural Mississippi is going to have you living an extremely lavish lifestyle.
Raise capital gains taxes then on those who inherit the property. It’s not extremely unfair to reward folks with a home to live the rest of their life in… I’m also not sure at all how it’s excess wealth to own a home. Most people in retirement now bought their homes at reasonable prices, that well exceed what they paid for or perhaps even made in life. If they sell they can’t buy something else.
By your logic anyone who is retired and has an asset appreciate should immediately sell it, and be forced to move somewhere else.
I cannot afford a home in Portland where I live. I could probably make the mortgage but it’s too risky in my opinion to have a 30 year debt obligation. None of my friends own their own home, not a single one. We’ve all just entered our 40s. The lack of somewhere to live won’t be fixed by a lien, nor will liens on an individuals actual home due at death fix it. It will absolutely incentivize investors who can exploit that, who will pay the liens and add to their portfolio.
If we want more housing at better prices we need to encourage development of more housing. That means making cities more dense and removing NIMBY policies which prevent it. Sure some of these homeowners may be voting for those policies, but they are the minority in larger cities.
Likely because of legacy homeowners who bought their $2m home 50 years ago for $25k and are now retired. They don’t have the income to pay those taxes even though their non-liquid net worth is way high
Land value taxation is the worst idea ever. I already don’t like the idea of property taxes, where you have to pay for a piece of land you own. The ideal should be that unless you’re making use of public services you can live a free life. You should not have to pay just to exist. I’d much rather that income is taxed for the higher tax brackets more.
Get rid of the fixed mortgage rate. Owners will sell when they can't afford the mortgage rate; the new owner will pay property taxes at the current rate.
Apart from the US, there aren't may other countries that allow fixed rate mortgages, and not a 30-year fixed.
Land-value taxation is an idea that only works because we restrict building homes. If we said, look starting tomorrow anyone who wants a permit to build housing can get it in 30 days and if the local control won't permit it we have a state-wide (I live in CA) office that will review your building permit (and zoning), issue you a building permit, and do the inspections, specifically for housing, there wouldn't be a housing shortage in 15 years.
Basically land-value scarcity is not because we lack the homebuilding capacity, its because we severely restrict building in places that have high demand
What I don't understand is (because I honestly haven't been afforded the time to sit down and think about it, also it's frustrating), why do taxes generally trend upwards for the average person? Doing napkin math it seems to have gone from ~10% to ~28% for average family. These are %-based, why does it need to change? Why can't cities/towns/counties work with the money their citizens can give?
Happening in Austin, Texas recently. City cites:
- Rising cost of core services
- Weak sales tax revenue. This is the city’s second-largest revenue source, and it has slowed or dipped.
- A shrinking property tax base. Officials point to falling property values, appraisal protests, more business tax exemptions, and little new construction adding value to the tax rolls.
- Disappearing one-time money. Pandemic relief funds have run out, and federal funding cuts were anticipated.
- Rising service costs. The new budget’s highlights include $6 million more for permanent supportive housing services, $6 million more for fire overtime to keep four-person staffing, and extra EMS overtime. Employee raises and social services were also major line items.
It is frustrating... if core services are costing more, cut extracurricular services? Why would you lean so much on sales tax, seems obvious this would revert to a mean? If your budget is reliant on infinite new construction it seems a bad budget? Why is pandemic relief cuts a shock to anyone? More housing services? I'm empathetic but there's more homeless than ever before. I know it's simplifying the problem but it just feels like people are punished with permanent tax increases for governments spending more than they should... we start with a new "floor" tax rate and repeat forever? Is it going to get to the point where we work 50% of our time just to pay taxes?
In New York state half of property taxes is for county contributions to the state medicaid fund. This excludes the seperate schools tax which is property based. Health care costs drive up many costs in the US including all libality insurances. The second part of this tax mess comes from the excessive military budgets since the late 1970s most of our national debt as of the mid 1990s was from that waste of resources. I understand we shouldn't just cut abruptly but our spend on weapons needs to slowly decline while we fund the transfer of workers out of the military industrial complex. And there are a lot of structural accounting problems like how personal credit card and automobile financing isn't tax deductbable but leveraged buyout interest is. The tax exemption for share buybacks is another budget drain. My instinct is we need a universal national income tax along with a land tax that in some ways exempts housing up to some middle or upper middleclass level.
> In New York state half of property taxes is for county contributions to the state medicaid fund.
That is an insane statistic. Surely the state can throw some weight around to say enough is enough?
I just had my own insane encounter with healthcare. They "accidentally" billed us insurance rate which was about 4-5x more than self-pay. Why is there 4-5x overhead when dealing with insurance? (I know there's the negotiation stuff) but also seems to be quite a mess. I'm actually more mad at hospitals and clinics lately than insurance. Seems they have agreements with companies to "dispense" things at 4-5x the actual price, expecting insurance or taxpayers to pick up the tab. Seems like blatant fraud.
Sorry for the rant, I agree with everything else you mention :)
>Surely the state can throw some weight around to say enough is enough?
How do you know that it's enough? Baby boomers are old now, which means demand for healthcare has skyrocketed. There's an odd thing I've noticed in political commentary where nobody really thinks that healthcare is expensive, but it absolutely costs a ton to keep people alive. America might have problems with too much overhead, but even here in Ontario, healthcare is by far the province's biggest expense.
Because that is 17% above the US average, at an average of $13k per year per patient. This is _after_ medicare handles the bulk of the cost. I'm not disagreeing that healthcare is expensive, just the costs are excessive.
Taxpayers are getting milked by providers and insurance. I was given an arm sling that cost almost $500. If I got it outside of the clinic it would have been $50.
I seem to recall that NY state medicaid expenditures are completely out of line even when comparing other liberal states with Medicaid expansion, when you compare how much every resident pays.
The answer is almost certainly large scale fraud by organized criminal groups, but investigating and publicizing this is, currently, extremely politically inconvenient.
Not NY resident but recently had an experience that I think is basically fraud but also "legal."
Went to clinic for fractured arm. Was given a sling, told it was included with the visit, verbally by the staff.
Later get a bill for nearly $500 for the sling that costs $50 if you get it outside of the clinic. Was told they think they accidentally billed me the insurance price. I can understand "convenience" being baked into the price but not at a 10x markup. The more I talked with the clinic trying to get them to fix it, the more it sounded like they had a partnership with the stupid sling company where they put slings on people and bill the insurance 10x the cost of the sling.
There is this whole stupid game between insurance companies and medical suppliers where the medical suppliers put a huge markup on the price and then the insurance companies negotiate a big 'discount' on that price. It's thoroughly unproductive for anything other than inflating the size of the bill the patient sees (and, in the case of someone uninsured, putting a ton of pressure on them to negotiate the price with the supplier themselves).
> In New York state half of property taxes is for county contributions to the state medicaid fund.
Chicago..hold my beer. 80% of taxes here go to funding pensions for 2% of city population. Our parking meter money goes to gulf countries because we sold them to pay for city services back in 08.
I don't know about Austin, but where I am the single biggest source of rising costs for the city seems to be its pension fund. Which seems to have severely underperformed the market thanks to the efforts of hedge fund managers who were all hype about dotcoms in 1999, mortgage-backed securities in 2006, cryptocurrencies in 2018, and are probably pretty excited about AI right now.
Percentage increases are the result of your money being worth less. That’s why every good government fights inflation. Stable values of money make it easier to plan budgets, estimate costs, lure investors, and collect taxes.
It’s when the value of money decreases that government has to choose among reducing spending (often by reducing services), increasing tax rates, and electoral losses. Most choose incremental tax rate increases because it’s easiest and the people likely to complain are unwilling to run for office to replace the people who raised the taxes.
Not arguing that sequence of thought doesn't occur, but it bothers me because the reasoning is faulty. If money's worth less, then the appraised value of my home measured in dollars should correspondingly increase. If the biggest taxes are assessed as rates on things that tend to scale with inflation, then it ought to be relatively indifferent to inflation. The only changes to your taxes you should have to make to your tax system in response to inflation should be raising flat rate taxes.
As the cost of living increases, so does the cost of providing public safety workers and their union-guaranteed pensions and benefits. You yourself can advocate for lower pay and pensions if that's a concern. In most cities, public safety eats up a large chunk of the operating/general fund budget (in Austin it's 45.9%), and reducing public safety budgets kills your representative's clout.
Extracurricular services are highly visible and therefore highly defended by the advocates that claim they reduce crime (by providing structure to youth with nothing else to do). Representatives are replaced with those that defend those services.
Since you can't outlaw homelessness, citizens that complain about homeless activity motivate local governments to provide more services that make homelessness less visible/likely.
As the population ages and needs more medical care they can't afford, demand for EMS and senior services increases.
You can outlaw abortion, but that creates more welfare service demand over time.
To me, private businesses not increasing wages to meet a standard cost of living increases the demand for welfare services. Local governments can attempt to hold private businesses to a higher tax burden, but are usually preempted by state law in Republican-led states. Your local government has no control over that and has to respond somehow.
Effective federal tax rates declined across every income quintile between 1979 and 2023. What’s strange is seeing all the folktale explanations in the replies explaining why your characterization occurred when it never did.
> why do taxes generally trend upwards for the average person?
One-time money from development runs out, but services like sewers, roads, power, emergency services, snow removal, and so on, need to be paid or saved for every year. Most US cities are sprawling, low-density affairs, meaning they're developed (and paid for) once, but all those roads still need money to maintain. Quoting from [0] to draw attention to what I'm talking about:
> What the tax productivity data shows is that "rich-people housing" with big lots and plenty of room for cars, which were subsidized when the neighbourhood was developed, continue to be subsidized throughout their long existence. Suburban single-family houses on big lots simply do not cover the municipal expense of things like repairing all that asphalt and clearing all that snow
People have asked previously how, if this were true, we would see more cities declaring bankruptcy - and some do [1], while others do what you've noticed, and raised taxes. The car-centric, driving-as-the-only-transportation-method way of life is financially unsustainable.
I'm not going to yell death to the automobile, but to make it the default, and in many cases only way to get around, is not a good long-term plan for cities beyond a certain size.
1. because taxes have trended downward for the ultra-rich. So they are just shifting.
2. Because overall, society's working class is working 90-year high hours for 130-year low effective wages. I don't know if the percentage taxes are absolutely lower, but it will feel like that under such conditions.
We've been boiling for a while now. I wonder if/when we'll collectively realize it.
The maintenance costs on urban sprawl are driving many municipalities towards insolvency. Property taxes have to rise because the fiscal efficiency of land in sprawling US cities is very low.
I think society should be structured in such a way as to incentivize contributing to society. Heal the sick, get rewarded, feed the hungry, get rewarded, teach the ignorant, get rewarded. Own a thing; no reward as far as I'm concerned. Owning stuff _is_ the reward, not something to be incentivized. It's its own incentive. Why should society give a gold star to someone for owning a toothbrush, or a house? They're a reward in themselves.
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[ 2.4 ms ] story [ 65.5 ms ] threadThis isn't something special with taxes.
Well at least your property value will go up endlessly. No bubble there. Totally not based on speculation.
But I agree that pinning all hopes of class mobility or comfortable retirement on perpetually increasing housing costs cannot work for very much longer.
Also, economies can grow rather than just inflate
Actually that often is how local governments see it in many places.
Local bond issues, which are paid for by property taxes, are often not a fixed rate. They are often a fixed amount (e.g., $2 million/year for 5 years) or a fixed initial amount with some growth allowed (e.g., $2 million/year for 5 years with inflation adjustments, often capped at some maximum adjustment).
With these each year the rate changes to keep the amount collected on target. If aggregate property values go up the rate goes down and if aggregate property values go down the rate goes up. If everyone's property values went up or down by the same percentage the amount of tax each person paid would stay the same.
Your share of the tax is proportional to your share of the aggregate property value, so our individual taxes can change regardless of any changes in aggregate value. For example if aggregate value goes up 5%, but your assessed value us up 10% and mine is up 3% your tax for a fixed amount bond will go up and mine will go down.
There’s a way to do this. Buy in a VHCOL area like San Francisco, wait for 3-10 years, then move to Texas, Florida, South Carolina, etc. Real estate is highly localized so you do not need to stay in the same area all the time.
The homelab guy at CloudFlare did this because the prices of real estate in Austin are actually falling.
https://news.ycombinator.com/item?id=42156977
How does this work? VHCOL does not mean that prices will appreciate or even sustain.
Piece of cake really, compared to getting lucky trying to lower taxes.
not my downvote btw
I was recently trying to understand Elon Musk's wealth, and come up with similar comparison: For example, he could make millionaire's of every single person in Seattle, and still have hundreds billions of dollars of wealth left over. Truly mind boggling.
So while fun thought experiments are excellent selling points, they aren't actually grounded in reality.
Schools are really expensive to operate. Most districts and schools make it easy to graduate to maximize their graduation rates. Standardized testing is suppose to catch local lowering of standards but state departments of education also under pressure to maximize test pass rate. So resources flow into pulling the bottom quintile of students up to a minimum standard. This means teaching to the test on math and English, and de-prioritizing other subjects or dropping them entirely.
We could expand the breadth of educational basic standards. This would require a cultural shift in valuing formal education more, increasing teacher training/recruiting resources, making schools year round, more centralization of education budgets at the state or even Federal level.
Generally speaking public schools tend to be better in states like Massachusetts than Kansas.
LOL, no.
In the majority of states in the USA, districts in the state are not allowed to graduate students without taking both an econ class and a personal finance class. Kansas is one of the stricter states. I can only think of three off the top of my head that do not mandate econ/finance classes, Colorado, Massachusetts, and Washington. Pretty hilarious to claim MA has better education requirements than KS LOL when its the other way around. Also hilarious when the average SAT score in Kansas is 1256 vs a mere 1128 in Massachusetts, LOL. I can't immediately think of any way that the schools in MA are better than KS, which is pretty funny. Is there even one stat or requirement where MA beats KS? Maybe college sports scores...
That said, public schools are mandatory pass, and the kids know it.
I think the problem with education is the prepack solutions sold by politicians intentionally don't reflect reality, sometimes intentionally reflect the opposite, and are designed to be ineffective or even actively counterproductive.
This makes me think an interesting metric would be total SAT points per 100k population.
If only 2% of Kansas students are taking the SAT, that's kind of shocking, actually. But maybe the state University there doesn't require it?
One way out could be to tax the value gain at the time of sale, or when the house gets rented out, thus no longer being “owner occupied”.
Reverse mortgage
Just have government allow taxes to be deferred until time of sale with interest pinned to the cost of borrowing for government. That already exists where I live for people over the age of 65. The government can still get the revenue for free via borrowing and the payback is more or less guaranteed.
This doesn't totally automate it, but it takes away the need to manage the proceeds from a reverse mortgage between the time you receive a payout and the time you pay your taxes.
My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home, which would offset some of the costs we currently pay in ad valorem property taxes.
The local real estate community had a meltdown and poured hundreds of thousands of dollars into defeating it, which my neighbors obliged and did.
The counter is of course that when you buy a house you should make sure you have enough income and/or liquid wealth so that you can pay the taxes. And if not, move to a smaller house. Of course, opponents of such taxation will then roll out all kinds of grannies living in mansions on meager pensions. Then again, is it fair that this prices out younger people from the property market?
As difficult as they are, I do think we'll need some form of wealth taxation in order to put a brake on spiraling inequality. Yes, call me a fan of Piketty if you want.
If you're planning a peasant revolt you should really consider going all-in, bloody revolution, you give the kulaks less time & space to plan for contingencies.
If the wealthy in California were willing to give up quality of life to save an amount that's not very meaningful to them, they'd have already moved to Texas. Or North Dakota. Or even Washington, which is an actual small-government state without a personal income tax.
It's annoying to list your income, but people do it because the disclosure is limited to one year, and more importantly they can control their income, particularly whatever income is earned in a given state. Only realized income is taxed. But a wealth tax involves questions of valuation - of taxing unrealized gains -- that are in many ways arbitrary and subject to abuse, and a level of disclosure and state control that makes many people feel uncomfortable due to the massive expansion of state power it requires.
I don't know why people are so stubborn about this. Next up, they will argue that because people accepted a higher sales tax, they will accept a higher wealth tax, too. After all, you let the state mandate childhood vaccines, so you should be OK with the state mandating your diet, right? Anyways, we'll see how things work in out in California. The state already has massive deficit problems, so let's see how this addresses their fiscal problems.
https://www.nber.org/system/files/working_papers/w35854/w358...
But yes, you're certainly right that taxing unrealized gains is difficult for many types of wealth. But e.g. property taxes are often already based on some estimation of the market value of said property anyway, so no change there. And similarly publicly traded stocks and such have a clear market value. For other types of wealth, sure there are difficulties, but usually it's possible to do it in some way, be it by estimating the worth somehow or then delaying the tax until the thing is sold or the owner dies etc.
And I guess we will just pretend that Hollande's wealth tax experiment never happened, when 60,000 millionaires left, the state lost $200 Billion in capital, and the wealth tax cost the state twice as much revenue as was generated by the tax. That was for a country, France, whose wealth was not in the ground.
>My local government put exactly this on the ballot: a small percentage transfer tax on the sale price of the home,
First comment suggests taxing the gain (income tax), while second comment suggests a tax on sale price (gross receipts tax). Two very different things.
It’s been attractive to voters since most homes sell in the first tier.
You can reclaim some of the transfer tax by performing seismic upgrades which is actually something I support in a town with some houses that can be 100 years old.
Stamp duty in the UK, horrendous tax. It's better than nothing at offsetting the unearned increase in house (land) value, but far worse than a regular tax.
If you live somewhere for 10 years, then move, then repeat for 40 years, you pay far more than if you never move. This encourages people to live in less suitable houses for longer.
As to your worry about land values increasing -- the owner is deriving benefit. The higher the land value is, the more benefit the owner gets from the land.
This sounds like a problem with the way the particular tax is written, not with the idea of taxing housing gains at the time of sale.
> The higher the land value is, the more benefit the owner gets from the land.
What benefit does a homeowner derive from increased land value before selling?
Likewise if I buy somewhere cheap in a backwater town, and the town becomes more desirable because there are better employment opportunities, better shops, better amenities, all of which serve to mean people will pay more for the land, then I benefit from that immediately.
Most people’s home values go up because of 1) increasing housing demand and 2) the collective delusion that home prices can continue to far outpace wage growth indefinitely. Neither of these things necessarily result in an increase in amenities or improved quality of life.
My own home value has gone up something like 70% in the last 10 years. Meanwhile, the amenities near me are essentially unchanged. Same schools. Same number and quality of restaurants and grocery stores. My net worth has jumped a fair bit but my immediate benefit seems pretty much flat.
Rents will have increased to reflect this increase in desirability, but you just expect to make a profit from it.
Merely insisting it’s true doesn’t make it so.
It's absolute insanity
Large sales tax on home purchases is probably a generally bad idea. Looks like Bay Area pricing would incur a 10-12% tax under the UK scheme which seems pretty crazy.
It would be far better to replace with a %age tax whether you move or not, but wealthy people in the south east don't like the idea of taxes on unearned wealth.
> it's not a major obstacle for the majority of transactions
You simultaneously call it horrendous and also say it’s not a big deal. What is the point of this except to argue?
It's also a major obstacle in the south east, especially for first time buyers
Lets say two people are after the same house, both are willing to spend 500k on it.
Person A: Next time buyer, has a budget of 500k after legal/moving costs, that leaves 14200 for stamp duty, and that means you can pay 485,500 (plus 14,275 stamp = 499,775).
Person B is an FTB, they have the same 500k budget but can bid upto 490k due to lower stamp
As such person B can bid 486k, thus offering more than Person A, getting the property.
If both were Next Time Buyers the seller would get 500 less
If both were FTBs the seller would get 4500 more
If there was no stamp duty they would both be able to pay 500k, the seller would get 14k more
In the UK, 'stamp duty' is something that buyers pay (as opposed to sellers), but sellers also have to buy, so everyone pays to move and everyone stays put to avoid paying.
(And of course no one builds, which is the biggest issue).
I'd say it's OK to defer your property taxes until you sell (or die), but it shouldn't be the default, only something you apply for if you're in a vulnerable position.
I think it's a great idea to let land taxes create the incentives to build efficiently.
It's basically excuse to get rid of poor that made a mistake of buying a house in area that turned more expensive 2 decades after.
Tax anything after first house, sure, but taxing house by value is terrible idea that never actually worked in a way proponents are saying it would
You don't get rid of the 'poor'/less wealthy if you allow building higher and thus have a more efficient use of land as land values increase. All owners would share the cost of their land value tax.
The problem is not building higher in areas with very high demand. Of course they become 'rich only neighbourhoods' or whatever.
If a house is worth £1M, a flat in a 5-story building should be less than 200k in the same location. We can't have houses in city centres! We can't have houses 5 min from the city centre! We could definitely have houses 1h from the city centre in a small town. In London or NY we shouldn't, though!
I always tell my internet friends that they should think hard about second order effects. Stamo duty has very negative second order effects. Land value tax has very positive second order effects. Property taxes sit somewhere in the middle.
Then get all surprised Pikachu face when the people who found profitable companies all leave.
At least the name checks out.
Anyone supporting it will most likely support removing other taxes, such as stamp duty or council tax, or lowering income taxes to compensate. A net zero change would be massively positive.
I find all these conversations dumb. Real estate taxes after paying for roads and schools are entirely punitive in nature. They grew from real local needs but now I find people saying that we should increase them only to encourage the current owner to sell to those deemed more worthy somehow. Because our taxes are tied to real estate value the budget has actually ballooned far greater than inflation. The schools here are extremely well funded and the roads get repaved long before their natural life time.
I think our balance works really well right now. So I find suggestions to just fall flat.
Oh the funny thing is we already subsidize healthcare so much in this state that it basically is socialized healthcare but surprise surprise that's actually part of the reason we have a deficit right now.
The result - stamp duty is exclusively paid by middle class people actually buying homes, never by the rentier class. They already used the money up front to buy the votes for this law apparently
This is essentially what has happened in coastal California over the last 60 years.
With different policy, there could be more housing built on the same land. The most scarce land there is shouldn’t be predominantly zoned for only low density single family homes.
The uber wealthy have their gated communities in the hills.
The very wealthy have their lock on places like Carmel.
The upper-middle class in Santa Cruz or Half Moon Bay try to prevent new condos (or student housing) from being built, because it "destroys the community character."
Everyone wants to pull the ladder up behind them.
Austin has been begrudgingly growing up, not without a raft of complaints from locals, because the property taxes are high enough to make selling to a developer tempting. In return, Austin has remained relatively affordable in comparison to other tech hubs.
This is how it works for sales in Sweden, via the so called "reavinstskatt", or profit realisation tax. Funnily enough, it is mostly applied to individuals in practice. To avoid the taxation, companies package properties in subsidiaries, which can then be sold and traded like any other stock. The tax is then postponed until the de jure sale of the property, which never occurs. Individuals are not eligible because the loophole is closed if the legal owner also occupies the property they own.
Forcing renters and buyers to pay for the local services instead of property owners seems extremely unfair.
> Any increase in housing value (and thus property taxes) is mostly an increase in the cost of living.
So? If the property values go up then cost of living is going up for renters too. Why should property owners be shielded from this by imposing local service costs on renters who generally have even lower incomes than owners.
Value is always relative - even if the experience hasn't changed, the rising house price does mean that same experience is being value more highly relative to other opportunities. (In most cases this is because the experience actually has changed: if your neighborhood gets nicer, you are indeed benefitting!)
The bigger fallacy in rising property taxes is that civic services don't necessarily get better or more expensive just because property rates rise. And the bigger unfairness is that homeowners with rising values but not rising income don't always have efficient access to the equity of their homes.
A fair property tax regime would avoid presuming budget increases just due to rising value of housing stock, and might subsidize HELOCs or similar structures for folks who need to access property value to pay taxes.
An owner can derive value from the house in one of three ways:
A) Occupy the whole place.
B) Receive rent from a tenant.
C) Something in between (e.g. airbnb one room).
When property prices double, it's likely that rents roughly double. This may not increase the value the owner can derive from (A) but it will sure change the value they can derive from (B).
So they might decide to switch from living in the place to renting it out. If they don't decide to switch, then it indicates the value they derive from living in the property has either gone up, or it was always way higher than the market rent.
It seems like market rent is a reasonable benchmark to use to calculate property taxes, and property value is a reasonable proxy for market rent.
It often is, instead. Eg the resale value of my flat increased because the area where I live became a better place.
If the area around you is improving substantially, then yes that day-to-day value could be improved by better local shops, maybe a closer office building, nicer parks, etc. Generally stuff like that does not happen quickly though, and really big changes like magically teleporting from boring middle of nowhere to a vibrant cultural downtown don't happen at all.
Your better believe it is when it comes time to sell.
Or would owners not mind having 0% property taxes in return for the state taking all gains at sale time
Freeze the property taxes and let the government take the entire value gain in the house when its sold.
I find this so funny, it completely takes the wind out of the sails of the parent comment's argument.
People really really want to have their cake and eat it too, and it's very difficult to convince them that it's not the natural way of things.
I think they're usually called "homestead exemption" or something like that.
If I had billions of dollars of stock it would require a change in the law to tax me on its market value. But you can do exactly this to me if it's a house.
I've seen people completely change their attitudes about things once they own a home. I know a self-proclaimed liberal who claims to care about people suddenly go all NIMBY because they are buying a $2M house and now they don't want duplexes in their neighborhood and don't like the idea of more housing being built ("we're full"). They feel entitled to a high (and increasing) property value in a desirable area.
I hate it so much
If all of the sudden the neighborhood behind you gets rezoned to industrial and you get a datacenter nearby, everybody understands you're up in arms.
If at the same time the neighborhood behind you gets converted from 200 single-family homes to 200 8-plexes, complaining is NIMBY. Even though it has the same dramatic impact on the quality of life you bought into. Way more noise, way more street parking, cars racing late at night etc.
So absent of that, I think your personal incentives also lead you to your current housing policy preferences. Don’t you?
"America, where you can spend your entire life paying off mortgage and then still be one missed tax payment from losing it all."
How is this not perpetual serfdom if you can't ever really own a home?
https://www.youtube.com/watch?v=-Em96NVxO9Q — So This is Progress (Terry Jones, BBC, 1991)
https://phillipslytle.com/a-review-of-new-yorks-response-to-...
Until 2023, some (many?) would sell off your house and pocket the difference, even if it exceeded the tax liability!
https://en.wikipedia.org/wiki/Allodial_title
Could someone go off the grid to some "commons" land and build a log cabin there or something?
You can look up a property tax bill and get an idea of what property taxes pay for. Mine is itemized and it breaks down exactly where my money is going.
And, sure, you could go off the grid and live in a shack in the boonies. That's always an option. If you feel like you don't need the services and amenities that property taxes pay for in a particular place, you can move, and many people do. In that case, yes, your property taxes on said shack-in-the-boonies will be low. But that's going to be in large part due to the lower value attached to this property and the land it sits on, in addition to fewer services and amenities available to it. That's a tradeoff that you can make. But at least in my case, I don't mind paying my property taxes because I can easily afford them, and I and others receive many benefits in return.
I actually don't mind the cost of living in my neighborhood going up. The $2500/yr HOA fee is a feature for me. I picked this location precisely because of it. I've lived in many places with virtually no maintenance overhead or economic friction. You may eventually learn that there are two sides to this coin. Neighbors who can afford and are willing to participate in ridiculously scaled housing markets also tend to take better care of their properties and local communities.
all of those services are ones that should be realized by the city, from taxes paid to the city. If they are not, the problem is that people vote for wrong people
It’s dumb. Here in Washington it’s rather common, I’m finding, for rural land plots to be part of a “Road Maintenance Association”. Exact same legal construct as an HOA, but scoped only to road maintenance on roads the county didn’t want to deal with. It would make so much more sense for the county to socialize those roads and reuse the same maintenance crews and vehicles for these stretches of road! But instead, a private entity pays through the nose to duplicate all that maintenance infrastructure (or pay contractors).
In my eyes this is essentially the same thing as a form of local government, just on a smaller scale.
In Canada for instance, I’ve seen towns where they have pick up once every two weeks and the canister is not even a full size one. It’s a “gentle” push to get people to recycle and compost.
No way that would fly in Freedom Town USA.
Miracle is garbage doesn’t stink if you don’t put food in it.
I pay my city for sewer, water, and trash. I pay an ISP for fiber to the home, a power company for electricity. If you get all those things for $2500/year from your HOA, congratulations.
Whereas you take great care of your local community by even refusing to live around anyone not as well off as you ?
Imagine the horror of having to live within 10 miles of a low class smelly poor plebeian, you might have to lay your eyes on their 3 days overgrown lawn from time to time.
Yes, I want to choose who I spend time with and around, and I want to choose what people influence my children in their formative years.
I fail to see what’s wrong with it, especially if it’s also done on my dime.
Nothing is wrong in wanting that, it's probably a good thing even.
What's wrong in this specific case is that your process of choosing is limited to one single criterion: can that person pay up?
Unless you are running a business or self-employed it isn't something you have to worry about.
This is absurd. There's absolutely no benefit to you if the value of your house increases if you have no intention of selling it. That's exactly the point of treating owner-occupied homes differently from commercially owned property. The author should be embarrassed that he, as a an economist, doesn't know that in economic theory, households do not optimize for profit on some balance sheet, but for personal (subjective) utility. That's econ 101.
I can take a loan against or collateralized my home value.
I can have greater operational flexibility if I know I have a deep financial backup.
There is something to it, even if overstated
Why should you be able to drive on roads that I paid for without spending a cent? You want to sleep in my bed and eat out of my fridge too?
If someone wants to stay home and be a subsistence farmer then fine.
If they want to start using and consuming public resources, why shouldn't they pay their fair share?
I'm a multi-homeowner and I'd love it if house prices fell, or at least stopped rising.
But they got rid of that tax while at the same time removing the ability to deduct mortgage interest. So now it makes most sense to pay off your loans.
Mortgages are different here - they are interest-only loans for usually 1 to 5 years. And when the loan expires you have the opportunity to pay off as much as possible and then renew the loan for the remainder.
> The proposition adjusted the property tax rate, pegging it at 1% of the purchase price of the property.
That sent me down a rabbit hole of trying to understand why property taxes go down while home values go up, and why raising property taxes is so damn hard in so many states (it’s largely because of caps etched into law by Boomers in the 70s and 80s). It’s also why I have the strong opinions on the issue I hold today.
Tax displacement is a very real issue, but one that theoretically should be solved by a liquid property market where you can sell your home at FMV and downsize to another one you can afford. Americans, special creatures that we are, instead demanded we get the McMansions without the property tax valuations, while also deciding what housing gets built regardless of demand, while also keeping the distorted value of the home should we sell it for a retirement nest egg.
In other words: homeowners keep all the money, while paying decreasing to no taxes on it. This has been a significant contributor to the housing crisis of today, with shitbox properties in major cities selling for upwards of a million dollars but families pulling in not even a tenth of that in yearly income. The typical soundbite responses of “we need more housing” and “we need to reform or loosen regulations”, while technically correct, ignore the root incentive structure crafted back in the 70s with these sorts of inverse taxation schemes, and therefore leave the problem intact. We’d have to build so much housing, so quickly, that property values halve nationally for there to be any long-term fix to this problem, and nobody seems inclined to do this given the ponzi scheme we’ve discovered suburbia to be (just look at new developments in CA with dirt roads as an example of homeowners having to foot the bill and realizing it ain’t worth it given the thin density of suburbs).
And thus we arrive back at the beginning: we need to raise taxes on homes to reflect their high assessment values, which would displace existing homeowners who couldn’t afford said bill, which is leading to the same demographics as before demanding the same solutions as they enacted in the 70s and 80s: caps, limits, or shifting costs onto less-advantaged demographics (like renters via commercial real estate). As perverse as it sounds to most Americans, the actual solution is to finally let property taxes “float” with valuations in their entirety, no caps or cuts, and let the market sort it out. Will that lead to some folks becoming homeless? Yeah, and that’s a whole other ball of wax we’ve ignored dealing with precisely because we catered to homeowners as a political group, but that’s infinitely more solvable than trying to build our way out of a housing crisis engineered by lower taxes and controls on builds.
We gotta eat the pain up front to find a better collective tomorrow for everyone.
For one thing, in the 1970's lots of true "baby boomers" were still too young to vote.
Maybe what you mean is old folks in general, they were the ones in California who were desperate enough to support the proposition which might be able to save their homes.
They should know, lots of them had been through The Great Depression, and were so much older than boomers they could be their grandparents, well they actually were if you do the math.
And they did the math, getting by just by the skin of their teeth while those just a little bit older who had been on a fixed income earlier had already been taxed out beyond recovery before the proposition.
They already ate the pain, I guess it's difficult to remember how up-front it was if you never spent that many years among Depression survivors.
Nobody ever wanted a depression again, and losing your home through no fault of your own was one of the most visible outcomes that ordinary people could do something about before it got out of hand.
This was supposed to be big, and it is bigger than ever, this is by design.
The problem comes from trying to work against it when the entire economic system surrounding "real estate" was supposed to evolve by now to where nobody pays more tax by now than the most proposition-protected properties.
The idea was for it not to end up making any difference as the years went by, nothing could be more fair than that.
The pearl-clutching comes from the failure of following generations to evolve away from taxing properties or wealth, with all levies eventually falling exclusively onto commerce so that only those who are actively making big transactions at the time are logically expected to be able to afford anything at all at the time.
Otherwise things are going to stay as medieval as they can, and the torture will continue until the attitude improves.
And by “we” you mean not you.
1) the tax entity sets their budget (usually an increase)
2) the valuation group values all properties
3) the tax entity sets a tax rate to raise their budgeted amount. budgeted amount = tax rate * total value
Most people think if their value doubles, their tax doubles. This mostly isnt the case. If everyone's value doubles, the rate decreases so they raise the budgeted amount. Mostly property tax increases are due to ever increasing budgets not rising values.
1) If everyone's value stayed the same, and the budget increased, your tax would increase by the amount of the budget increase
2) if everyone's value doubled, but the budget stayed the same, your tax would not increase
3) if your value doubled, everyone else's stayed the same, and the budget stayed the same, your tax would double.
The worst part is that for all these taxes, the level of service has dropped since that home was bought.
In some countries and cultures the good of the many comes before the good of the individual, no matter the sacrifices required to get there. The US (and to a slightly lesser degree, Canada) generally does not subscribe to such a cultural mantra.
Edit to add: for the cases where the societal good really does outweigh the personal good, we have a tool for that: eminent domain, which is how we build train lines and so forth.
Like another poster said, things like pensions and medicare might overall drain the entire economy, so the end result is the same, but that seems more diffuse than local tax bases, and wouldn't appear in a city/county budget.
This line of logic doesn't follow. There's plenty of old people who need to move out for non-financial reasons (e.g. can't live independently anymore), and it doesn't really make sense to me that having to move out because you can't afford your mortgage is okay while not being able to afford your taxes isn't. In any case, we can have our cake and eat it too by building more housing. Homes become affordable for young people if supply increases and the tax base broadens enough that taxes go down for established homeowners.
They're also economically and socially viable participants in the community.
Y2K: buy an 1/8th of a million dollar house. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $1.25M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.
If your mental model is the city tax rate is 0.8%, that is ... numerically correct but its mere numerology.
2026: house is now worth 1/2 of a million dollars. There are 10 houses in the village and an annual budget of $10K. The total value of all houses in my village is $5M but it really doesn't matter. As the owner of 1/10th of the "total housing value" in the village, I pay 1/10th the annual budget of $10K which is $1K prop tax.
If your mental model is the city tax rate historically was 0.8%, then you'd have to pay $4K/yr, but it doesn't even remotely work that way, so it simply doesn't matter. Its just numerology. My fraction of total property ownership "value" times the annual village budget is what I'll be taxed, which in this case is the same old $1K.
In reality grandma gets kicked to the street because inflation raises the price of everything, including real estate, but real estate is not even remotely the problem or the solution. Grandma might have afforded a house and its taxes when a McDonalds Big Mac was 75 cents each but now that its $13.49 the village budget has gone up 10x, 20x what it was when she bought, so she better find a way to make 10x, 20x more money or not only is she not going to pay her fair share of the budget via taxes, she's not going to eat food either.
"Now that neighbourhood is unaffordable." Thats the real problem. No one can move in and pay the city budget, and the city budget explodes because now they have to pay the dog catcher at least $250K/yr to live there and nobody can afford to rob peter to pay paul quite that much...
In Washington State, Puget Sound Energy is a for-profit utility owned by mostly pension plans! Their guaranteed ROI is sucked out of the productive economy. Everywhere you look rent is being extracted either by the 0.01% or the elderly, and the working class must slave to get 1/10 what they gave themselves.
Not an economist but I don't see how money can be anything other than an accounting tool at that level. If they had "paid for it" back in the day, young people would still be screwed.
The two big ways to increase prosperity that I see are for people to take care of their health so they need fewer medical services, and for fewer people to be devoted to administration and more people devoted to actually doing things.
The problem isn't that there are old people, is that there's currently a glut of old people, which puts real strain on the system. Being old is expensive for governments. Not only do older people not typically pay nearly as much in taxes, they also require more resources to support.
So many of today's problems come down to the simple demographic fact: there's a lot of baby boomers, and they're getting old.
I don't think people really understand how bad it is out here. I imagine that if a dignified line on the base standard were held, there would be less of a need for this kind of middle-class pearl-clutching.
However, where I live local government is wildly inefficient. So in that case property taxes should go down while property taxes go up via the expedient of competent governance. Alas.
On the other hand, property taxes seem to be a pretty flawed system that still result in inequalities. Individual homeowners hate them and will do anything to lower their burden. More wealthy and mobile people will move to different jurisdictions specifically to save on tax burden. There are extreme examples like The Villages in Florida where the heavy demographics skew toward older residents means that minimal funding reaches services that benefit younger families who work there as service industry workers. My understanding is that this is a particularly extreme arrangement in the villages: if you lose your employment within the jurisdiction you have to pull your kids out of the local schools immediately.
Then you have issues where you get poor jurisdictions and wealthy ones based on property values. Some states help mitigate this by pooling property taxes across the state for school funding.
I’ve heard that many condo buildings in my area have a standing arrangement with a law firm to submit appraisal appeals every single year and the law firm is paid on a percentage based on the savings they achieve.
This system can’t be efficient for anyone involved. When you really think about it this is like a siphon of money that could be going into public services into a private law firm.
The thing about property taxes especially those that have owner-occupier exceptions is that they sort of work okay because they’re a good approximation for wealth. They’re still regressive but you can pretty safely assume that someone who owns a second home is wealthy enough to pay a high tax rate.
On the other hand, that arrangement passes more costs on to the lower income renter. Their property owner landlord has higher property taxes than owner-occupiers and theoretically passes those costs on to the renter.
I think someone could devise a better system and do away with property taxes as they function today entirely. We need a system that makes all the stakeholders in our society feel like every dollar they invest is a positive investment with returns.
Miss on two points: there are exemptions for retired that freeze prop tax and equity is wealth that’s rare to access before death
I do think there is something special about the idea of home, and that home ownership should be encouraged. It brings people stability. People shouldn't be pushed out just because others have more income than them.
At the same time, we do need property taxes. In California, rate increases are capped, so older owners often pay pennies compared to new homeowners. Harmonize the taxes, while capping it.
That doesn’t seem too bad, until you see all of her other costs have gone up dramatically because inflation has been high post pandemic. She only has so much money to spend every month, and if her property taxes kept going up too, she’d eventually be unable to afford to live in her house. She only owns her home because she was worried about being secure later in life and prioritized it above things like vacations or cars.
For a lot of folks as they age, even if they’re frugal, it’s not easy to survive. If you live for 20-30 years after retirement you’re likely to have your buying power cut by half if not more.
With that said, if someone’s home is worth more than say 10x the average price in your area, or your assets are $10+ million[1], I think there’s room for increased taxation. My primary point was simply being a property isn’t necessarily the right measure to determine a reasonable tax rate.
[1] The number obviously depends on where someone lives. Living in New York or SF, $10 million dollars of assets would be an extremely comfortable life but most likely not a lavish lifestyle. But… $10 million dollars in rural Mississippi is going to have you living an extremely lavish lifestyle.
The only fair thing to do is to allow some portion of the taxes into a lien that is paid out when the he is sold.
It's extremely unfair to reward excess wealth to the wealthy people of a community, while everyone else is struggling just to find a place to live.
Not only is it unfair, but it skews financial incentives and results in very poor politics for improving the unfair housing situation.
By your logic anyone who is retired and has an asset appreciate should immediately sell it, and be forced to move somewhere else.
I cannot afford a home in Portland where I live. I could probably make the mortgage but it’s too risky in my opinion to have a 30 year debt obligation. None of my friends own their own home, not a single one. We’ve all just entered our 40s. The lack of somewhere to live won’t be fixed by a lien, nor will liens on an individuals actual home due at death fix it. It will absolutely incentivize investors who can exploit that, who will pay the liens and add to their portfolio.
If we want more housing at better prices we need to encourage development of more housing. That means making cities more dense and removing NIMBY policies which prevent it. Sure some of these homeowners may be voting for those policies, but they are the minority in larger cities.
The wealth gains far outpace any potential tax increase.
We would be a poorer society if we followed your advice 50 years ago.
Apart from the US, there aren't may other countries that allow fixed rate mortgages, and not a 30-year fixed.
Basically land-value scarcity is not because we lack the homebuilding capacity, its because we severely restrict building in places that have high demand
Happening in Austin, Texas recently. City cites:
- Rising cost of core services
- Weak sales tax revenue. This is the city’s second-largest revenue source, and it has slowed or dipped.
- A shrinking property tax base. Officials point to falling property values, appraisal protests, more business tax exemptions, and little new construction adding value to the tax rolls.
- Disappearing one-time money. Pandemic relief funds have run out, and federal funding cuts were anticipated.
- Rising service costs. The new budget’s highlights include $6 million more for permanent supportive housing services, $6 million more for fire overtime to keep four-person staffing, and extra EMS overtime. Employee raises and social services were also major line items.
It is frustrating... if core services are costing more, cut extracurricular services? Why would you lean so much on sales tax, seems obvious this would revert to a mean? If your budget is reliant on infinite new construction it seems a bad budget? Why is pandemic relief cuts a shock to anyone? More housing services? I'm empathetic but there's more homeless than ever before. I know it's simplifying the problem but it just feels like people are punished with permanent tax increases for governments spending more than they should... we start with a new "floor" tax rate and repeat forever? Is it going to get to the point where we work 50% of our time just to pay taxes?
That is an insane statistic. Surely the state can throw some weight around to say enough is enough?
I just had my own insane encounter with healthcare. They "accidentally" billed us insurance rate which was about 4-5x more than self-pay. Why is there 4-5x overhead when dealing with insurance? (I know there's the negotiation stuff) but also seems to be quite a mess. I'm actually more mad at hospitals and clinics lately than insurance. Seems they have agreements with companies to "dispense" things at 4-5x the actual price, expecting insurance or taxpayers to pick up the tab. Seems like blatant fraud.
Sorry for the rant, I agree with everything else you mention :)
How do you know that it's enough? Baby boomers are old now, which means demand for healthcare has skyrocketed. There's an odd thing I've noticed in political commentary where nobody really thinks that healthcare is expensive, but it absolutely costs a ton to keep people alive. America might have problems with too much overhead, but even here in Ontario, healthcare is by far the province's biggest expense.
Because that is 17% above the US average, at an average of $13k per year per patient. This is _after_ medicare handles the bulk of the cost. I'm not disagreeing that healthcare is expensive, just the costs are excessive.
Taxpayers are getting milked by providers and insurance. I was given an arm sling that cost almost $500. If I got it outside of the clinic it would have been $50.
The answer is almost certainly large scale fraud by organized criminal groups, but investigating and publicizing this is, currently, extremely politically inconvenient.
Went to clinic for fractured arm. Was given a sling, told it was included with the visit, verbally by the staff.
Later get a bill for nearly $500 for the sling that costs $50 if you get it outside of the clinic. Was told they think they accidentally billed me the insurance price. I can understand "convenience" being baked into the price but not at a 10x markup. The more I talked with the clinic trying to get them to fix it, the more it sounded like they had a partnership with the stupid sling company where they put slings on people and bill the insurance 10x the cost of the sling.
Chicago..hold my beer. 80% of taxes here go to funding pensions for 2% of city population. Our parking meter money goes to gulf countries because we sold them to pay for city services back in 08.
It’s when the value of money decreases that government has to choose among reducing spending (often by reducing services), increasing tax rates, and electoral losses. Most choose incremental tax rate increases because it’s easiest and the people likely to complain are unwilling to run for office to replace the people who raised the taxes.
As the cost of living increases, so does the cost of providing public safety workers and their union-guaranteed pensions and benefits. You yourself can advocate for lower pay and pensions if that's a concern. In most cities, public safety eats up a large chunk of the operating/general fund budget (in Austin it's 45.9%), and reducing public safety budgets kills your representative's clout.
Extracurricular services are highly visible and therefore highly defended by the advocates that claim they reduce crime (by providing structure to youth with nothing else to do). Representatives are replaced with those that defend those services.
Since you can't outlaw homelessness, citizens that complain about homeless activity motivate local governments to provide more services that make homelessness less visible/likely.
As the population ages and needs more medical care they can't afford, demand for EMS and senior services increases.
You can outlaw abortion, but that creates more welfare service demand over time.
To me, private businesses not increasing wages to meet a standard cost of living increases the demand for welfare services. Local governments can attempt to hold private businesses to a higher tax burden, but are usually preempted by state law in Republican-led states. Your local government has no control over that and has to respond somehow.
One-time money from development runs out, but services like sewers, roads, power, emergency services, snow removal, and so on, need to be paid or saved for every year. Most US cities are sprawling, low-density affairs, meaning they're developed (and paid for) once, but all those roads still need money to maintain. Quoting from [0] to draw attention to what I'm talking about:
> What the tax productivity data shows is that "rich-people housing" with big lots and plenty of room for cars, which were subsidized when the neighbourhood was developed, continue to be subsidized throughout their long existence. Suburban single-family houses on big lots simply do not cover the municipal expense of things like repairing all that asphalt and clearing all that snow
People have asked previously how, if this were true, we would see more cities declaring bankruptcy - and some do [1], while others do what you've noticed, and raised taxes. The car-centric, driving-as-the-only-transportation-method way of life is financially unsustainable.
I'm not going to yell death to the automobile, but to make it the default, and in many cases only way to get around, is not a good long-term plan for cities beyond a certain size.
[0] https://www.cbc.ca/news/business/evs-cities-climate-column-d...
[1] https://wmtxlaw.com/cities-declared-bankruptcy/
2. Because overall, society's working class is working 90-year high hours for 130-year low effective wages. I don't know if the percentage taxes are absolutely lower, but it will feel like that under such conditions.
We've been boiling for a while now. I wonder if/when we'll collectively realize it.