Comment by AnthonyMouse
13 hours ago
> Some people have to adjust their mortgage in order to pay property taxes. Most people pay property taxes out of their income.
Most people get their income from wages and then pay the taxes with that. The people who are the target of a wealth tax get most of their income from investments and then to get money to pay a new tax would have to sell that proportion of the investments.
It also doesn't really change anything if they invest in the sort of things that give returns through dividends instead of share price increases, because they reinvest the dividends, and having fewer people buy the stock so they can use the money to pay the tax has the same negative effect on the share price as having more people sell the stock to use the money to pay the tax.
> Property tax has the positive effect of encouraging efficient land usage and discouraging speculation and rent seeking.
Property tax to the extent that it's a tax on buildings/construction does precisely the opposite. Where land is more scarce the most efficient use is to build a high rise to maximize the amount of indoor living space per unit land, which is exactly the thing property tax taxes and thereby disincentivizes.
Asset taxes in general create major perverse incentives because it causes underinvestment in the thing being taxed and overinvestment in any alternative that can act as a tax shelter, whether because the law exempts the alternative for some reason (e.g. lobbying), or it's hard to accurately value and therefore allows for chicanery, or it's in another jurisdiction.
> Property tax to the extent that it's a tax on buildings/construction does precisely the opposite. Where land is more scarce the most efficient use is to build a high rise to maximize the amount of indoor living space per unit land, which is exactly the thing property tax taxes and thereby disincentivizes.
Property tax breaks in my locale lead to empty lots and empty buildings, which is the least efficient use of land imaginable. Property value seems to play a significant enough role in convincing land owners to sell their underutilized land if property taxes provide the activation energy to force them to sell. Otherwise they sit and speculate. So, your argument is convincing in theory, but appears to fall apart in practice. Aside, I’m a fan of Georgism in theory.
> Asset taxes in general create major perverse incentives because it causes underinvestment in the thing being taxed and overinvestment in any alternative that can act as a tax shelter, whether because the law exempts the alternative for some reason (e.g. lobbying), or it's hard to accurately value and therefore allows for chicanery, or it's in another jurisdiction.
I’m sure wealth managers are already devising strategies for reducing taxable wealth based on speculative laws and regulations. This shouldn’t be a reason not to proceed, but instead to put more resources to effective design.
> Property tax breaks in my locale lead to empty lots and empty buildings, which is the least efficient use of land imaginable.
Could you clarify what your locales property taxes are exactly? I'm trying to figure out whether you and Mouse are using the term the same way, in particular, tax on land or tax on buildings or both. (FWIW Wikipedia defines it as both.) It would also be very important to clarify how the tax break is defined, whether it applies to land and buildings equally, for example.
It’s both in my locale, land and improvements. There’s a tax break for vacant commercial space, which leads to commercial RE holding companies to simply speculate on commercial RE and sit on vacant properties. They have such little incentive to find a tenant or even sell that commercial properties sit empty for years, despite plenty of prospective tenants taking tours. I’m on an HOA board in a building with commercial units and it’s shocking how little pushback it takes for us to deny a prospective tenants - the commercial RE company basically doesn’t put up a fight at all when we say “no”.