The problem is that real estate has become an asset, a form of capital.
The only way out of this mess is to shift taxation away from labor and onto capital.
Higher property taxes (1-2%), that can be subtracted from income tax for working people are the answer.
Let's say Joe the Plumber and Elon the Muskrat both have an income of $100K and pay an income tax of $25K.
Joe owns one property worth $1M that he lives in and pays 2% tax on it, $20K. Which gets subtracted from the $25K income tax, meaning he effectively pays $5K income tax + $20K property tax = $25K combined property and income tax. Pretty sweet deal.
Elon owns 20 properties valued $500M collectively, which means $10M in property taxes. He officially resides in the most expensive $100M property and gets a $50K credit for that. The $50K is larger than the $25K, so he pays zero income tax.
Total tax is $10M.
This (or something like it) is the system the whole world must move towards if we want to simultaneously (a) lower taxes on working people (b) increase taxes on property and (C) not let working people lose economic power relative to the capitalists over the longterm.
The middle class has to outsmart the owning class if we want our children to remain middle class.
I really hate all the replies attempting to poke holes with minimal effort. Thanks for this comment and your robust set of examples.
Housing shouldn't be a vehicle for interest or making a living, I'd take it more extreme than what you have if I'm being honest. You can own the buildings you use 60% of the year for work or for housing but nothing else. We don't sell stocks in bananas, we sell stocks in farms. Housing should be a consumable commodity not a line item in a corp's assets sheet.
This is a good idea which is why it will never implemented
There's a dozen ways to fix the housing problem. Knowing how to fix it isn't the problem. Getting politicians who are paid not to fix the problem to do it anyway, is the problem.
It will if poor people can work together against the common enemy.
Poor people can't come together if you elevate one part of them to a privileged position over the other part which is placed at a right-less position. The privileged workers don't want to lose their power over their degraded compatriots, so they will fight tooth and nail (on behalf of the owners) to prevent any attempt from their degraded compatriots to free themselves.
Scapegoats of the world unite.
What would stop owners from shifting the burden to the renters?
As of right now this is already how property taxes are handled by most landlords: mortgage + tax + est. cost to fix incidentals + time managing paperwork = rent (in a fair situation - though most will tack on as much extra for "profit" as they can)
So if you have a house worth 600k (12k tax), the mortgage is $3500/mo, they would just charge $4500+ a month to cover their costs.
I think the only way is to add extremely progressive property tax to multiple ownerships, and a name always has to be attached as "owner". So your first house and second might have limited property taxes, but your third would be double, fourth would be quadruple, fifth would be 8x etc.
My example is already an extremely progressive property tax on multiple ownership, but yeah, it can be tailored as needed.
I, personlly, would be in favor of doubling the tax if no one is living there.
As for rent: the price of rent cannot be arbitrarily raised. If renters can buy more cheaply than renting, then landlords will have empty units.
So in your example, renters would just buy and pay the $3500 mortgage instead of renting.
Of course real life is more complex. Renters need access to financing, etc.
I feel like the rent crisis is not something that can be resolved by taxes alone. What is needed is a blanket ban on private rentals.
Got an extra house that you're not living in for some reason? If you want to rent it, then you hand over control to the ministry of housing. No more discrimination against renters, no more invasion of renters privacy, and no more extorsionate rents.
Don't want the government renting it out to 'undesirables' or think they arent paying you enough rent? Quit hoarding and sell it.
Why do you think that "ministry of housing" would not discriminate, not invade privacy and charge fair rent? I'm always fascinated how people believe that some government entity would act as a compassionate and just human being, at the same time bashing rich for being assholes.
Power corrupts. In capitalist society capital brings power, and in socialist state it's bureaucracy. So here you have rich assholes, and when you switch more power to government you'll get paper shifting assholes. Not much will change for people with no power. Probably it will be worse because rich people and their corporations produce valuable goods and services, while paper shifters usually don't need to produce anything apart from more papers.
If power corrupts, then why not vest that power in a democratic institution controlled by the people, rather than leaving it in the hands of whoever has exploited enough of the lir peers to monopolise housing?
Oh, that's a very different discussion... if that housing institution would be elected, preferably on local level, then maybe it could be more accountable.
can we hold private sector accountable more easily than govt?
Absolutely. Government oversight exists for that.
This sounds awfully lot like communism, not socialism.
Blanket bans are never the answer as it will hurt just as many people as it might help.
Not being able to rent a property will mean people with money won't buy them. Which in turn will mean no one wants to pay or finance large developments.
I'm glad we currently don't have this tax system in place otherwise rents would be absurd and growing right now!
It's such a simple proposal, but I think this might actually be the solution.
It wouldn't. They already run around solutions like this by using proxies, so they are never the official owner of assets they wish to hide from the tax man.
I am all to reform, but this can only ever successfully happen if you target these oligarchs directly and dedicate extraordinary amounts of resources on taking them down and whacking every single loop hole until you finally got them cornered.
This is a never ending cycle.
By shifting the tax to property and away from income tax, you break that cycle.
Elon can have a Panama based LLC that doesn't pay income tax, but that only means he avoids the $25K income tax and loses the $50K tax benefit.
The $10M property tax must still be paid, because it is levied on the properties.
He might be able to then subtract the $10M from his tax obligations in Panama, but for the country where the property resides (e.g. USA), that does not matter.
Unless it isn't in his name, but someone who looks like a working Joe, then it doesn't really matter.
That mode of attack won't work.
Elon could take a risk by putting each property on the name of some homeless person and paying them an income so that the benefit matches the tax savings. It would avoid some tax, but it would also be quite easy for the homeless person to renege on the deal and keep (or sell) the property.
Trying to sue in court would massively backfire, since you'd have to admit in court that you were engaging in tax evasion.
And putting it on the name of some middle class homeowner will have all the same risks, without any tax benefit.
You'll have to be more specific with how you see this failing.
Tax evasion with existing laws works predominantly because the agencies are underfunded and not equipped to track and follow the tax evasion schemes of the ultra rich, while they simultaneously lobby for that to stay that way or become even worse.
No matter the change of code, these issues will not go away, because there's always some way to hide what you have, no matter the laws. While the current state of tax laws (no matter where) is very sub-optimal and heavily favors the rich, there is no way that a mere change in law would change that status whatsoever.
Since I personally do not evade taxes, I couldn't tell you all the loop holes some high powered, high paid professional would find in your proposed scheme, so my assumptions are pretty low level.
Your proposal hinges on even knowing what they own. That's already heavily obfuscated beyond some prestige projects they like to flaunt. I don't think that it would be feasible to enforce finding and knowing what they own, because it's already hidden in layers and layers of proxies, including non-profits, charities, etc.
Okay, so I have to trust your ignorance?
Sorry.
Large scale tax evasion and avoidance happens on capital gains tax and inheritance tax.
Sales tax, property tax and labor income tax are mostly immune, since it is much more difficult to move property or economic activity to Panama and much easier to move ownership of financial assets.
These are well known truths that I am not going to debate or ignore.
How about instead of calling me ignorant you take the opportunity to share your insights? Share some sources for the claims you just made and teach, rather than attack me for not knowing better.
My point is that laws are nearly irrelevant at a certain point of wealth unless they're aggressively enforced specifically against that class of wealthy individuals and companies that are the main culprits in not only evading but also continually eroding tax laws and enforcement. Laws alone do (nearly) nothing to stop any of this.
You literally said you don't know how tax evasion works.
Your words, not mine.
And no, I am not your personal tutor to give you a tax education.
Housing cannot be both affordable and an investment.
It theoretically can. Yes. It realistically won't, no. Your home should be a security and not an investment. Speculation and hoarding with relation to housing should be largely outlawed. And usury being restricted to the point of being almost pointless.
If we, as a society prioritize desirable public housing for members of our society. Who the fuck cares if a house is an investment or not. That simple security is worth far more than any so-called investment could ever be. If people wanted to work extra hard and save up for something better, that's always an option. But that shouldn't be the premise for basic housing entirely.
Whats your plan for investment groups that back corporations buying 1000 houses each month to rent?
They will need to pay the property tax with no possibility of getting a tax discount, so they will have a competitive handicap against owner-occupiers, who will be able to outbid them in contrast to the current situation.
Government could consider providing a discount if the houses are rented out at affordable rates.
That just makes the asset more expensive and would likely get passed onto the renter. There's got to be something done to curb their purchases. Making it more expensive on the backend won't change them paying cash up front to outbid a regular family.
What if the property tax is higher than the income tax? They get money back?
What about those who have to sell at a loss and are now stuck with a debt instead of profit for their retirement? Heck, some of them might be forced to go bankrupt because you can't have a mortgage for a house you don't own anymore!
I literally covered these situations in the example, which leads me to believe you are just slinging mud and not seeking to understand.
If you own $500M in property and have a $10M tax bill but only have $100K in income, you can figure it out, even if it means downsizing and hoarding less real estate.
We have to stop feeling sorry for the top 0.1% of society and start taking care of the 99.9%.
I'm talking about my 90 years old grandma who bought her house in the 70s and now lives on whatever's left of my late grandfather's pension, my parents who will have a mortgage to pay and never had a pension fund at work, they're not fucking millionaires! You guys always seem to forget about regular folks that will lose their house while the rich will find ways to dodge whatever tax you would love to see implemented because they have the means to do it
I, too, have retired parents.
You should have a look at their income tax.
You apparently have no clue what it looks like.
Spoiler: they are still paying tax, well into retirement.
In a typical example they might have a $60K per year retirement income (social security plus pension), paying $20K income tax, owning a $500K house (if they downsized after the kids moved out). A 2% property tax on that would be $10K and leave them with $10K income tax + $10K property tax = $20K total tax, just as they have now.
You don't get what I'm saying. Your tax reform happens, house are now flooding the market. Their house would lose so much value that what they had saved for their retirement (i.e. the money they put in their mortgage) will now have disappeared and if they ever needed to sell before paying off more of their mortgage they might have to go bankrupt instead because they wouldn't be able to sell for what they owe on the house.
And you wouldn't need to own a big expensive house for that to be the situation you would be put in.
Heck, you're just recreating 2008 but now it's the government/municipality that's responsible instead! A house is worth less than what's owed on it? Might as well stop paying and go bankrupt instead of paying off your mortgage!
Ok, you are just opposed to houses becoming more affordable too quickly.
That won't happen. Some math geeks working for the government would have to work out the details, but these type of changes are always engineered to not disrupt markets.
So what would realistically happen is that property tax rates rise by a certain percentage per year until the target is met. Property prices will grow at less than inflation, but won't stagnate.
What happened in 2008 was an uncontrolled subprime crisis that imploded, not the controlled introduction of a tax reform.
Yeah the "make it progressive"solution just means a reversal whenever the party in power changes.
It's the same across the world.
The problem is that real estate has become an asset, a form of capital.
The only way out of this mess is to shift taxation away from labor and onto capital.
Higher property taxes (1-2%), that can be subtracted from income tax for working people are the answer.
Let's say Joe the Plumber and Elon the Muskrat both have an income of $100K and pay an income tax of $25K.
Joe owns one property worth $1M that he lives in and pays 2% tax on it, $20K. Which gets subtracted from the $25K income tax, meaning he effectively pays $5K income tax + $20K property tax = $25K combined property and income tax. Pretty sweet deal.
Elon owns 20 properties valued $500M collectively, which means $10M in property taxes. He officially resides in the most expensive $100M property and gets a $50K credit for that. The $50K is larger than the $25K, so he pays zero income tax.
Total tax is $10M.
This (or something like it) is the system the whole world must move towards if we want to simultaneously (a) lower taxes on working people (b) increase taxes on property and (C) not let working people lose economic power relative to the capitalists over the longterm.
The middle class has to outsmart the owning class if we want our children to remain middle class.
I really hate all the replies attempting to poke holes with minimal effort. Thanks for this comment and your robust set of examples.
Housing shouldn't be a vehicle for interest or making a living, I'd take it more extreme than what you have if I'm being honest. You can own the buildings you use 60% of the year for work or for housing but nothing else. We don't sell stocks in bananas, we sell stocks in farms. Housing should be a consumable commodity not a line item in a corp's assets sheet.
This is a good idea which is why it will never implemented
There's a dozen ways to fix the housing problem. Knowing how to fix it isn't the problem. Getting politicians who are paid not to fix the problem to do it anyway, is the problem.
It will if poor people can work together against the common enemy.
Poor people can't come together if you elevate one part of them to a privileged position over the other part which is placed at a right-less position. The privileged workers don't want to lose their power over their degraded compatriots, so they will fight tooth and nail (on behalf of the owners) to prevent any attempt from their degraded compatriots to free themselves.
Scapegoats of the world unite.
What would stop owners from shifting the burden to the renters?
As of right now this is already how property taxes are handled by most landlords: mortgage + tax + est. cost to fix incidentals + time managing paperwork = rent (in a fair situation - though most will tack on as much extra for "profit" as they can)
So if you have a house worth 600k (12k tax), the mortgage is $3500/mo, they would just charge $4500+ a month to cover their costs.
I think the only way is to add extremely progressive property tax to multiple ownerships, and a name always has to be attached as "owner". So your first house and second might have limited property taxes, but your third would be double, fourth would be quadruple, fifth would be 8x etc.
My example is already an extremely progressive property tax on multiple ownership, but yeah, it can be tailored as needed.
I, personlly, would be in favor of doubling the tax if no one is living there.
As for rent: the price of rent cannot be arbitrarily raised. If renters can buy more cheaply than renting, then landlords will have empty units.
So in your example, renters would just buy and pay the $3500 mortgage instead of renting.
Of course real life is more complex. Renters need access to financing, etc.
I feel like the rent crisis is not something that can be resolved by taxes alone. What is needed is a blanket ban on private rentals.
Got an extra house that you're not living in for some reason? If you want to rent it, then you hand over control to the ministry of housing. No more discrimination against renters, no more invasion of renters privacy, and no more extorsionate rents.
Don't want the government renting it out to 'undesirables' or think they arent paying you enough rent? Quit hoarding and sell it.
Why do you think that "ministry of housing" would not discriminate, not invade privacy and charge fair rent? I'm always fascinated how people believe that some government entity would act as a compassionate and just human being, at the same time bashing rich for being assholes.
Power corrupts. In capitalist society capital brings power, and in socialist state it's bureaucracy. So here you have rich assholes, and when you switch more power to government you'll get paper shifting assholes. Not much will change for people with no power. Probably it will be worse because rich people and their corporations produce valuable goods and services, while paper shifters usually don't need to produce anything apart from more papers.
If power corrupts, then why not vest that power in a democratic institution controlled by the people, rather than leaving it in the hands of whoever has exploited enough of the lir peers to monopolise housing?
Oh, that's a very different discussion... if that housing institution would be elected, preferably on local level, then maybe it could be more accountable.
can we hold private sector accountable more easily than govt?
Absolutely. Government oversight exists for that.
This sounds awfully lot like communism, not socialism.
Blanket bans are never the answer as it will hurt just as many people as it might help.
Not being able to rent a property will mean people with money won't buy them. Which in turn will mean no one wants to pay or finance large developments.
I'm glad we currently don't have this tax system in place otherwise rents would be absurd and growing right now!
It's such a simple proposal, but I think this might actually be the solution.
It wouldn't. They already run around solutions like this by using proxies, so they are never the official owner of assets they wish to hide from the tax man.
I am all to reform, but this can only ever successfully happen if you target these oligarchs directly and dedicate extraordinary amounts of resources on taking them down and whacking every single loop hole until you finally got them cornered.
This is a never ending cycle.
By shifting the tax to property and away from income tax, you break that cycle.
Elon can have a Panama based LLC that doesn't pay income tax, but that only means he avoids the $25K income tax and loses the $50K tax benefit.
The $10M property tax must still be paid, because it is levied on the properties.
He might be able to then subtract the $10M from his tax obligations in Panama, but for the country where the property resides (e.g. USA), that does not matter.
Unless it isn't in his name, but someone who looks like a working Joe, then it doesn't really matter.
That mode of attack won't work.
Elon could take a risk by putting each property on the name of some homeless person and paying them an income so that the benefit matches the tax savings. It would avoid some tax, but it would also be quite easy for the homeless person to renege on the deal and keep (or sell) the property.
Trying to sue in court would massively backfire, since you'd have to admit in court that you were engaging in tax evasion.
And putting it on the name of some middle class homeowner will have all the same risks, without any tax benefit.
You'll have to be more specific with how you see this failing.
Tax evasion with existing laws works predominantly because the agencies are underfunded and not equipped to track and follow the tax evasion schemes of the ultra rich, while they simultaneously lobby for that to stay that way or become even worse.
No matter the change of code, these issues will not go away, because there's always some way to hide what you have, no matter the laws. While the current state of tax laws (no matter where) is very sub-optimal and heavily favors the rich, there is no way that a mere change in law would change that status whatsoever.
Since I personally do not evade taxes, I couldn't tell you all the loop holes some high powered, high paid professional would find in your proposed scheme, so my assumptions are pretty low level.
Your proposal hinges on even knowing what they own. That's already heavily obfuscated beyond some prestige projects they like to flaunt. I don't think that it would be feasible to enforce finding and knowing what they own, because it's already hidden in layers and layers of proxies, including non-profits, charities, etc.
Okay, so I have to trust your ignorance?
Sorry.
Large scale tax evasion and avoidance happens on capital gains tax and inheritance tax.
Sales tax, property tax and labor income tax are mostly immune, since it is much more difficult to move property or economic activity to Panama and much easier to move ownership of financial assets.
These are well known truths that I am not going to debate or ignore.
How about instead of calling me ignorant you take the opportunity to share your insights? Share some sources for the claims you just made and teach, rather than attack me for not knowing better.
My point is that laws are nearly irrelevant at a certain point of wealth unless they're aggressively enforced specifically against that class of wealthy individuals and companies that are the main culprits in not only evading but also continually eroding tax laws and enforcement. Laws alone do (nearly) nothing to stop any of this.
You literally said you don't know how tax evasion works.
Your words, not mine.
And no, I am not your personal tutor to give you a tax education.
Here is a primer if that's what you want.
https://taxfoundation.org/taxedu/educational-resources/primer-not-all-taxes-are-created-equal/
So what? It's the property the owes the tax, is the point. Someone has to pay it. In this case it would be whatever the proxy is.
Housing cannot be both affordable and an investment.
It theoretically can. Yes. It realistically won't, no. Your home should be a security and not an investment. Speculation and hoarding with relation to housing should be largely outlawed. And usury being restricted to the point of being almost pointless.
If we, as a society prioritize desirable public housing for members of our society. Who the fuck cares if a house is an investment or not. That simple security is worth far more than any so-called investment could ever be. If people wanted to work extra hard and save up for something better, that's always an option. But that shouldn't be the premise for basic housing entirely.
Whats your plan for investment groups that back corporations buying 1000 houses each month to rent?
They will need to pay the property tax with no possibility of getting a tax discount, so they will have a competitive handicap against owner-occupiers, who will be able to outbid them in contrast to the current situation.
Government could consider providing a discount if the houses are rented out at affordable rates.
That just makes the asset more expensive and would likely get passed onto the renter. There's got to be something done to curb their purchases. Making it more expensive on the backend won't change them paying cash up front to outbid a regular family.
What if the property tax is higher than the income tax? They get money back?
What about those who have to sell at a loss and are now stuck with a debt instead of profit for their retirement? Heck, some of them might be forced to go bankrupt because you can't have a mortgage for a house you don't own anymore!
I literally covered these situations in the example, which leads me to believe you are just slinging mud and not seeking to understand.
If you own $500M in property and have a $10M tax bill but only have $100K in income, you can figure it out, even if it means downsizing and hoarding less real estate.
We have to stop feeling sorry for the top 0.1% of society and start taking care of the 99.9%.
I'm talking about my 90 years old grandma who bought her house in the 70s and now lives on whatever's left of my late grandfather's pension, my parents who will have a mortgage to pay and never had a pension fund at work, they're not fucking millionaires! You guys always seem to forget about regular folks that will lose their house while the rich will find ways to dodge whatever tax you would love to see implemented because they have the means to do it
I, too, have retired parents.
You should have a look at their income tax. You apparently have no clue what it looks like.
Spoiler: they are still paying tax, well into retirement.
In a typical example they might have a $60K per year retirement income (social security plus pension), paying $20K income tax, owning a $500K house (if they downsized after the kids moved out). A 2% property tax on that would be $10K and leave them with $10K income tax + $10K property tax = $20K total tax, just as they have now.
You don't get what I'm saying. Your tax reform happens, house are now flooding the market. Their house would lose so much value that what they had saved for their retirement (i.e. the money they put in their mortgage) will now have disappeared and if they ever needed to sell before paying off more of their mortgage they might have to go bankrupt instead because they wouldn't be able to sell for what they owe on the house.
And you wouldn't need to own a big expensive house for that to be the situation you would be put in.
Heck, you're just recreating 2008 but now it's the government/municipality that's responsible instead! A house is worth less than what's owed on it? Might as well stop paying and go bankrupt instead of paying off your mortgage!
Ok, you are just opposed to houses becoming more affordable too quickly.
That won't happen. Some math geeks working for the government would have to work out the details, but these type of changes are always engineered to not disrupt markets.
So what would realistically happen is that property tax rates rise by a certain percentage per year until the target is met. Property prices will grow at less than inflation, but won't stagnate.
What happened in 2008 was an uncontrolled subprime crisis that imploded, not the controlled introduction of a tax reform.
Yeah the "make it progressive"solution just means a reversal whenever the party in power changes.
Yes, he's slinging mud. Can't possibly be that there are holes in your perfect plan or that you explained it poorly
Should've thought about that before they decided to hoard real estate!
Hoard? Owning one house as a couple is hoarding them?