Comment by xbmcuser
1 hour ago
For me the true problem which most countries dont even acknowledge is low wealth and capital gains tax. Salaries are not enough because of land prices and the prices inflation it causes through out the economy. You bring down price of home land rent then price of everything else comes down. And their is a lot more economic activity as trillions of dollars are not parked in real estate for wealth generation.
I have had this sneaking suspicion for years now that most of the money needs to be locked up because if we actually gave it to the masses to spend we'd see massive inflation and/or environmental catastrophe (worse than the current one). I don't mean to defend the wealth gap, and I'm not trying to make a statement on how things should be. I just think there may be an unfortunate reality that we need most of the world to have less because we can't currently support a middle class globe.
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A land value tax would fix rich people parking money in real estate. A wealth tax or capital gains tax would not.
A wealth tax would also be beneficial in reducing wasteful stock buybacks. Without any benefits from high stock prices, boards and shareholders will be less inclined to impose those price targets on CEOs, CEOs will be less incentivised to "cheat" on quarter-based performance and the myopic share price performance view of their companies, hence will reduce stock buybacks and returning money to shareholders. That leaves very few options - either reinvest into the company or pay out dividends, and the latter is unfavorable for shareholders compared to the former.
better off taxing people that own more than 1 property and leave people just trying to live alone.
If a land value tax would fix rich people from parking money in real estate, it would price regular people out of real estate.
I know LVT is the libertarian dream, but in practice it means only the rich can own real estate long-term, in most cities. It also means the rich can drive out the poor by driving up land values around them, to the point where the taxes are too much to afford.
LVT simply wouldn't be a good system, if applied in the real world.
What if a first owned property is not taxed, but additional properties are?
LVT can be deferred to the time of sale.
3 replies →
Income from capital has a low tax rate in the US (and many other countries) because you can deduct neither losses due to inflation nor losses due to risk, both of which are substantial for capital income but non-existent for wage income. The lower tax rate is simpler than actually accounting for these differences.
Treating wage and capital income equivalently would require recognizing losses due to inflation and risk that simply don’t exist in a meaningful way for wage income. Taxing them similarly without very negative consequences requires recognizing these differences in some fashion.
Taxing wealth has myriad additional problems. In the US, about 2/3 of wealth is completely non-liquid so any theoretical valuation is fiction and highly leveraged.
Is capital gains / wealth tax a fix here though? Definitely not saying it doesn't work, I have no idea. But I'd be curious to hear both sides of the argument.
Or you tax it. Or, more correctly, you remove the current protections that allow land to appreciate tax-free for decades. That would move capital out of land and free it for other uses. The current system was designed to put money/people into houses post WWII but has gone too far in promoting radical multi-generational wealth structures.
We already assess property each year for purposes of local property taxes. Treating a 10% rise in value as taxable income each year would shake up the real estate market. Speculative gentrification would certainly stop. And those sitting on empty houses would either sell or try to find renters.
I agree, but taxing real estate as an investment would break the wealth structure of many voters (and politicians) above the 80th percentile of wealth. For half a century, in France, it's been told that real estate was the safest/best investment for households; everyone was passively peer pressured each year, whatever the macroeconomic situation at the moment, to buy. This is a Ponzi scheme, so even the middle class households that recently bought their own shitty flat in Paris will never vote for such a tax because their overpriced asset would lose value and it's often their only lifelong investment.
The same fear will happen if you just target investors owning multiple real estate with this tax, or simply forbid by law from owning several flats in high demand areas. The right wing would scream that the hard working French guy won't be able to invest his hard won money, but the very rich foreigners from Saudi Arabia or investments funds from USA will find a loophole thanks to their infinite money and buy all the french real estate.
Hell, most people in my country are against inheritance tax despite a huge part of them not rich enough to pay it, meanwhile inequalities are rising because of inherited wealth. So taxing the land won't happen, the bourgeoisie has been too effective in its propaganda.
> I agree, but taxing real estate as an investment would break the wealth structure of many voters (and politicians) above the 80th percentile of wealth
Most places do tax real estate. I was surprised to look it up and find that Paris has some of the lowest property tax rates in the world.
Land Value Tax would be a little different, though. It's a proposal to replace most or all taxes with a simple tax on the estimated value of the land. One of the key features of LVT is that if land becomes valuable over time, the tax on that land becomes so high that the owner is forced to sell it. The idea is that the LVT ensures optimal usage of the land by forcing people who own land in valuable areas to use it for a business. So if you buy a house and the area becomes popular 10 years later, your tax bill might get so high that you have to sell it to a developer who will build a high-rise on it, or a grocery store that can afford the high tax rate.
It would never be accepted in practice when everyone's 70 year old parents were being forced to sell their modest forever homes. There's also a major problem where the structures aren't considered at all, so one person with a $2 million home living next to someone with a $200,000 100-year old home would pay the same tax rate if they're on the same size lot, because it only cares about the value of the land.
I don't know why Land Value Tax has become the default solution to everything on the internet, because I think most people would actually hate what it did to society. Having progressive taxes that scale with people's income, spending, and size of their home is good for making the tax burden proportional to wealth and consumption. Replacing it all with a tax that just taxes how much your property is worth ignores everything except the value of your land, which is completely out of your control over several decades of life as the world changes around you.