Comment by shawnee_
9 years ago
> taxing wealth is probably the single most efficient way to do it.
It's not taxing wealth so much as taxing the mechanisms that create undue inequality that would work: yes, I'm talking about taxing rental income. The number one driver preventing people from building savings is draining their income through rent.
The solution is sort of obvious, but hated by people who love the AirBnB model: https://news.ycombinator.com/item?id=14493769
Pardon me but the solution you claim is already in place, well understood and totally ineffective.
Income is already taxable, including rental income. On top of that there are various taxes for owning/occupying a property. It varies with what state/country you live in.
Generally speaking, a property is a poor investment if you already have the money, they have poor returns and they don't grow in value outside of a few bubbles.
That being said, I agree that the pressure of rent is unbearable and growing for most of the population. The rebalance historically happened with wars. Properties ain't worth much when people die and buildings are bombed.
"Generally speaking, a property is a poor investment if you already have the money, they have poor returns and they don't grow in value outside of a few bubbles."
Real estate is a great investment for the risk averse (probably the best one too). Housing usually grows at the same rate as inflation if not a bit more and people will always need it. It doesnt drop 10% overnight unlike stocks. What other investments did you have in mind that you would recommend over real estate? (in the same risk spectrum)
>>> It doesnt drop 10% overnight unlike stocks.
You can tell that to the people in Houston who lost their home overnight. Home ownership is not risk free. ;)
I am not familiar with the entirety of the US territory. If you look at properties outside of the major cities, they should be relatively stable, renters have no jobs to sustain ever increasing rent. In the far country side, properties should be deflating because de industrialization.
Agreed that it is great for a diversified portfolio. Especially the primary home, it's self sustaining because you'd have to pay rent anyway. A second home is safe, it can host your child now or yourself after retirement, then it's lower returns.
There are a lot of index funds with various risk profiles. There is no general strategy. It depends on your personal situation, how much there is, where your live, and you family.
Now, that might sound stupid. If you own your home and have some savings, you can basically retire. There aren't much expenses outside of the rent.
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"Pardon me" but rental income is deductible more than it is taxable; everything to do with owning a property and generating "investment income" from it is incentivized to be deductible; it's a great and super fast way to make lots of money.
I don't know what you do for a living, but I have two graduate degrees in accounting and economics, as well a decade and a half researching and studying this very problem. The solution I outline would work... if the goal is to empower people with "equity" as Sam's article suggests he wants to.
If we remove deductions on rental income, wouldn't that just cause property owners to charge higher rent? If so, then yes, that would of course generate more tax revenue, but at the expense of the renters.
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That proposal is rather complicated, and probably inefficient. Why not just go with a land value tax?