Land, as apposed to the property on it, is raw nature. If we view raw nature as a common inheritance of mankind, then paying a tax on land is how the exclusionary use of it, balances with the common interest in it.
Economist Henry George in the 1800's, pointed out that taxing land, but not the property on it, incentivizes efficient use of land, because holding land for its passive (parasitic) return even when underused, becomes unprofitable when the land is taxed in proportion to the value it can enable.
And in turn, only taxing land, not property, incentivizes increased development, as higher property investment amortizes land tax against higher returns.
Greater investment in housing being just one way land tax, without property tax, incentives greater productive use.
So many things align for higher growth in ways that more evenly benefit everyone. But our relationship with land is over-complicated, and that is both the reason for change, but the reason change is so hard.
Small attempts have failed, but then, for the rich who can hold land and reap growth in value that outpaces the taxes they pay on it, that remains another inefficient/negative-externality, that pays off for them.
The hard part is that we've structured life such that you are on a fixed income at the end of your life in no position really to deal with inflation. At least when you are still working, in theory at least your wages will go up with inflation. This is really why prop 13 happened to pass at all: the idea of being displaced at the end of your life out of the home you already paid off due to market forces you aren't even a participant in is actually widely unpopular even if it makes better economic sense.
> the idea of being displaced at the end of your life out of the home
I would argue that this is unpopular not only amongst retirees but everyone. And it would have tons of negative side effects.
Why would I fix up my house to look nice, if I’ll be displaced? Why would I invest in my child’s local school system, if we could be displaced? Why would I do any community outreach or support, or get involved in local politics? How can banks underwrite loans if the affordability can fluctuate wildly? Look at the life of people who live in mobile homes and trailer parks - they essentially rent the land, and it’s oppressive because they can’t afford to move (actually moving or repurposing land is hard) but their cost to stay is unpredictable.
The only people this is appealing for are people who fancy themselves analytically minded economists with no interest in the practical humanity of the people living there and renters hoping to finally do the displacing for their own affordability.
For what it's worth, the way Israel deals with this is that property tax is levied on the property resident, not the property owner. In other words, when you rent a house, the person who is legally responsible for paying the tax is the renter.
This makes it exceedingly easy to ensure that old people are not affected by property taxes: if you are elderly resident, you simply get a discount. If you are an elderly landlord who owns multiple properties, your younger tenants don't get a property tax discount, and you pay income taxes (not discounted for age) on the rental income. If you are elderly and want to downsize, your property tax discount follows you into the smaller apartment.
The system has its challenges, but it is far superior to Prop 13 and achieves the same goal.
> fixed income at the end of your life in no position really to deal with inflation.
This might be true if you have everything in cash in a safe at your house and plan on taking out fixed amounts for the rest of your life, I guess, but who are those people?
Most people are on social security, which is inflation adjusted.
Others with more wealth have retirement savings, which are likely mostly in bonds and stocks, which weather inflation not too shabbily. Interest rates go up, and banks start actually yielding interest!
Prop 13 passed mostly as a populist revolt against taxes, but in reality it does a lot more for people in their prime of earning and a toooon more for commercial property tax cuts than it does for retirees.
Every other state has better tax deferral mechanisms, and given the tiny fraction of Prop 14 effect that goes to retirees, I don't really buy this back formation of what was going on. If people really voted for such a lie, it wouldn't be the first time with propositions but from the media I've seen from the time I really don't think people were that duped and probably knew the broad effects of Prop 13.
The key bit is that California is relatively unique here. There are a few other states that have Prop-13-like laws, but California's is the most restrictive and incumbent-homeowner-friendly. All those other states (and the ones with nothing similar) seem to get along just fine.
Of course, the solution to increased demand (driving increases in property market value) is to build more housing. Without Prop 13, a big chunk of the NIMBYs who are currently against more housing would likely change their tune if they had to choose between no new housing or much higher property taxes.
I think it would be reasonable and productive to phase out Prop 13 over time, rather than immediately getting rid of it. We could structure it so a property doesn't lose Prop 13 protection until the next time it's sold (and then it never has that protection again). We could completely remove the inheritance loophole (which was tightened up in 2020 but still exists). We could even set a date, say, 10 or 15 years in the future, when re-assessments at market value will start for everyone, regardless of whether or not they've sold. We could also phase in higher allowed assessment percentage increases over time (right now it's capped at 2% per year, but we could, say, add 0.5% to that figure every year for some number of years).
Hell, we could even leave Prop 13 in place as it is today, and just bump up the assessment increase cap to 5% or 10% or something like that. (Texas, for reference, has their own 10% yearly cap on assessment increases.)
There are so many ways to solve this, but all of them are politically unpopular. (Hell, we couldn't even reform Prop 13 as it applies to commercial properties.) As a homeowner in California, I get it, but I still support Prop 13 reform and eventual Prop 13 abolishment.
This is a solved problem in other jurisdictions. Effectively you can just allow seniors to defer their property taxes at low interest rates and it becomes a liability on the house when it is transferred on death.
> the idea of being displaced at the end of your life out of the home you already paid off due to market forces you aren't even a participant in is actually widely unpopular even if it makes better economic sense.
Once you are old enough it makes a whole lot more sense to move to places designed to care for the elderly. Living alone in a huge house isn't good for your mental health and it isn't for your physical health, either, once you no longer have the energy to maintain it.
Empirically, according to Doucet, a land value tax would only raise average tax rates if you're living on a parking lot, or vacant lot. Aging homeowners would mostly see a slight decline in their property taxes ( California excluded ).
You handle that the same way income taxes do: the first X amount is exempt, like a standard deduction, applied to the land under someone's primary residence. Pair it with a rolling multi-year average for assessment so value spikes phase in gradually instead of hitting all at once. Keeps the incentive against passive land-holding everywhere else intact, without the blanket caps that also protect speculators. Instead of using one tool to fix it all, you use multiple tools that work together to make efficient systems
> being displaced at the end of your life out of the home you already paid off due to market forces you aren't even a participant in is actually widely unpopular even if it makes better economic sense
Whether it makes economic sense or not, it is extremely inhumane and that matters (or should matter) far more.
This idea that it is ok to kick out (via taxes) someone who spent 40 or 50 years contributing to society just so someone else can make more profit on their home is very sad.
Elderly retired people living in large houses close to where the work is has caused massive social, economic, political, and cultural harm. Young people can no longer afford to buy homes close to work, so they're forced to commute long distances. Their taxes then go in part to pay for the elderly person who lives in a million dollar house with multiple rooms, who receives many tax breaks. The young person cannot afford to start a family, cannot afford to buy a home, loses a lot of time each day on commuting, spends a fortune on commuting, has less time for family, and causes enormous inefficiencies in the job market. This is nothing short of a concerted redistribution of wealth from the young to the old. It's a travesty which the elderly today would not have accepted.
I do not feel sorry for the elderly person sitting on a large and expensive property who demands to spend their final decades squatting on land which could house a family and allow parents to get to work within a reasonable amount of time. They have options the young person does not. They can get a reverse mortgage, for example. They get social security, and draw down on whatever pensions and investments they've accrued over their lives. Their costs are much lower - they don't have children to support. Or they can move, and I'm sorry, but it's not impossible for a retired person to move. Millions of them do it every year all over the country. Often to really nice elderly communities full of activities and specialised care.
I say all of this as someone who leans more libertarian than collectivist. Society is interconnected and interdependent. We cannot function if he keep young people under our boots. Asking the elderly to move is a *very* small price to pay if we expect the young to shoulder the enormous tax and debt burdens said elderly have imposed upon them.
Why should the typical old person or couple have a large home all to themselves?
I think (in a semi ideal world) individuals and couples should be entitled to small apartments or tiny houses, which would be cheap enough for an old person on retirement benefits. An average American home is for a family: as the parents age, some of their kids start financing the home, while other kids may move living spaces, or everyone splits up and the house goes to a new family (presumably a couple moving from a small apartment).
displaced because the land has become so valuable you can no longer pay the tax on it and have to sell for a massive profit?
boo hoo? My generation has never even had access to affordable housing. Sorry you have to take your millions and live on a smaller property for your last few years.
The first time I heard about a Land Value Tax it sounded great. You can then go read where it's been tried and find that it's extremely hard to implement.
As just one example, if I place becomes popular then suddenly the taxes rise and people have to move out. Lots of people hate that idea and so vote it away. And then LVT no longer works.
> Economist Henry George in the 1800's, pointed out that taxing land, but not the property on it, incentivizes efficient use of land, because holding land for its passive (parasitic) return even when underused, becomes unprofitable when the land is taxed in proportion to the value it can enable.
That sounds like a terrible idea to me. Efficiency isn't everything. Small stripes owned by many people or by many smaller companies it's less efficient than one hedgefond owning everything and yet it has disadvantages.
A forest is much less efficient than a mall and yet, the forest might still be more important.
There's also no way for a government to effectively determine the potential value of land. Asking them to do it means inviting disaster and corruption.
> A forest is much less efficient than a mall and yet, the forest might still be more important.
This is a good example of a very common problem: data isn't objective, it needs to be interpreted. Metrics will give you information, but they aren't the full story. That's why Goodhart's Law is so prolific. You can't just look at data and act on it without context. It depends what your actual goals are. And a huge part of that is that we have to consider how much we value things, especially things that haven't already been assigned monetary value. Sure, we can assign monetary value to things like a forest (economists do this), but it would also be wildly inappropriate to just accept those estimates as cold hard facts void of interpretation too. What's the saying? Reality has a surprising amount of resolution.
In a weird twist of irony our efforts to be lazy end up costing us a lot of work. But that's also because there's two types of lazy: short term and overall work. We used to say we want to hire programmers that are lazy because they'll find the most efficient way to do something. But now we don't revere that kind of lazy, we like the kind of lazy that procrastinates. Do the quick cheap thing now, telling ourselves that we'll make it better in the future, knowing that's a lie. That pattern isn't unique to programming, it's just marshmallows.
The main problem with this view is that land value is laggard to the economy. You will end up taxing people more than what the land is actually worth during downturns, instigating a vicious feedback loop to cause further problems. The logical path is to tax money where there is money - income.
What gives the taxman a right to the fruits of a persons labor? There is of course no other argument for this than "or we kill you". Tax on income is another form of slavery and serfdom. Especially when you consider that a large proportion of slaves through history were free to roam and had to find their own source of income to pay a weekly or monthly fee to their owner.
All other forms of taxation at least have arguments to ethically justify them, including land taxation.
Yeah, because the value of your land just went up and you didn't do anything to make that happen. Only right that excess value goes back to society and reduces the tax burden of the working class.
If you don't want to pay the taxes, thanks to Disneyland you can now sell your land for a nice fat gain, buy cheaper land elsewhere, and pocket the difference. And whoever bought your land will likely use it for the social good (maybe build a hotel or something).
Obviously. If you live in a single family home next door to Disneyland you’re ducking over all the people who want to stay in a hotel there. You should have to pay for that privilege.
>If we view raw nature as a common inheritance of mankind, then paying a tax on land is how the exclusionary use of it
This will have some of the unfortunate effect of collectivism. We don't want the govt to tax you into poverty.
A simpler overall approach (I've left out the nuances) would be to have an equal amount of land per person completely tax free. Individuals can then rent out their land for others to use as needed. Forests/rivers/conservation lands etc. can be seen as truly a common inheritance of mankind and should generally have the least of commercial activity.
p.s - a govt will never agree to such an arrangement because it will not favor them.
Raise X in land tax and then you spend it evenly amongst the population. Anyone using less than their fair share gets a bonus, anyone uses more has to pay.
If you just allow using X value, but tax free, then those who use less don’t get rewarded.
Effectively one non transferable share, one per citizen, with proceeds as a dividend.
> p.s - a govt will never agree to such an arrangement because it will not favor them.
IDK, governments tend to align with what results in the most economic activity being created / moved into their country ("growth"). If you were able to convince that overall economic growth would be multiple times higher over a few decades with the system, it might just become appealing.
A problem I see with implementation in the US, though, is that local municipalities are who tax land and property value, so entire rural counties and cities would have their funding stunted. And asking the government to buy into that while subsidizing low-growth areas for a long time (decades / forever, if a rural area never develops) is a really hard sell.
> A simpler overall approach (I've left out the nuances) would be to have an equal amount of land per person completely tax free
I like the thought, but the challenge in most places is that the poor are already paying massive "negative tax" in the form of various social subsidies.
So if you add tax exemptions on top of it, it becomes increasingly impractical to raise enough taxes.
And no, it can't be done simply by taxing the rich more. That should be done too, in my view! But the math is simply such that we need a pretty broad tax base to support our spending.
So a data center pays the same taxes as a homeowner, foot for foot? It seems unfair at first, but then it occurs to me that data centers would not be so desirable if they were not paying higher taxes. If land value tax helped to pop the data center bubble it would make the more off-putting aspects (organic farming is a less efficient use of land than factory farms) more palatable. Why not have a hybrid approach, where the local community can decide to apply different types of tax systems to different types of land and land uses?
A hedge fund or a lawyer office with with a huge income but a a small office pays some tax. A sandwich shop close to them which barely had ends meet pays the same amount of tax.
I believe we should tax hedge funds much more than sandwich shops.
I wouldn't say it's coordinated. This is an old article, published in June. A lot of people came to the land economics blog from the ACX article that ran today, someone likely saw this one and then posted it to HN.
wonderful -- now take the modern case where the most fertile land, covered with farming, is converted to cement and home sales due to 100x immediate cash returns. The price? pavement is forever
I would challenge you to point out exactly where in OP's comment that he advocates abolishing all taxes except land taxes. I see only a comparison to taxing land vs property.
Why care about wealth disparity at all as long as everyone is better off? If I offered you to double your real wealth but also Bezo's real wealth, would you reject that offer just because wealth disparity went up?
I like Georgism, but I don't think it should be limited to just LVT. I think ownership of all natural resources (especially scarce ones) should be taxed at an aggressively progressive rate. Own one oil well? Cool. Own enough oil wells to supply the entirety of the Allied Forces throughout the duration of the European Theater in World War 2? Meh.
GP doesn't appear to be advocating for abolishing all tax. The thrust of it seems to be to abolish property tax and replace with a land value tax. There's no mention of abolishing income, capital gains, sales, use, etc. taxes.
Maybe don't attack a straw man you've stood up yourself?
> The land value tax can’t be dodged by leaving nor can it be passed on to renters.
In what sense can't it be passed to renters? Esp if all landlords in the market were faced with a new land tax that they had not previously planned for, why would it not be passed on?
Rent is a function of supply and demand, not a landlord's costs, otherwise we would expect changes in e.g. mortgage interest costs to be passed on to, but in practice we don't see this effect. We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
Landlord costs affect supply in the long term, so you will see changes, just not necessarily immediately over a one year period, but definitely over a 5-10 year period.
> We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
If costs are uniform for each landlord (they have to pay for), it limits the amount of money they can invest in new capacity, and you will see the effects over a decade. If one landlord has cost advantage over another, then they will of course probably just take the extra money as extra profit.
> Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
They provide friction with what can be done with the land, because the cost of owning the land has to be paid. If it is just a land tax, however, you can game it by building as much as possible on it so the landowners who can't build as much as you can subsidize your usage (long term, you either have to build as much as you can on your land, or sell the land to someone who can).
> Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
Taxes may not affect the amount of land that physically exists, but they absolutely can and do affect the amount of land available for rent as opposed to other income-generating use cases.
On top of that, a tax that applies equivalently to all of the land available to the rental market in a given area will simply push prices upwards across the board, which is likely to just be absorbed by renters given the usually low price elasticity of demand for housing.
> We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages.
Why would they as long as they find a renter? The market always charges the marginal cost.
A transaction can occur if the price is >= the seller's cost, and <= the value to the buyer. If it's at the minimum, the seller must pass on the tax or not trade, at the maximum (down to the max minus the tax) , the seller can't pass on (all of) the tax and still trade. We observe that landlords make profit, so we are not at the minimum. Are we at the maximum?
I think there are cases where we are in between for significant periods of time. Consider a positive shock to wages. Can landlords put up prices overnight? I don't think so, unless the landlords all co-ordinate to do so, prices will be sticky as there are always some properties in the market, so it's difficult to be the first to increase rent. Unlike a purchase, a landlord who waits for a buyer at the right price is forgoing income during the void. So the market price can be a Schelling Point.
A tax increase, however, happens at the same time to all landlords. All of them would prefer to pass it on, and they know that so they can assume all other landlords will try to pass it on. If the rent is currently below the maximum possible, they will succeed.
How long it takes prices to adjust I don't know. It is an empirical question, but I don't know what data would answer it. But it seems like it took decades for landlords to capture the two-income surplus after it became common for women to have a career.
> otherwise we would expect changes in e.g. mortgage interest costs to be passed on
These aren't a universal cost. When rates change, some landlords' costs go up. But some don't. That lets the latter set the marginal price.
If everyone's costs go up the same amount, it's collusion without communication. In an inelastic market like San Francisco's, you'd expect prices to rise.
> Rent is a function of supply and demand, not a landlord's costs
Only in one direction. If that rent, based on supply and demand, does not cover all of the owner's costs (+profit) then that rental property simply disappears off the market. No owner is going to rent out at a loss, so either the renter is paying for all expenses (+profit), or they get kicked out.
If I own £100K worth of land, and the government announces a 1% annual land tax, it's likely the value of my land will fall by about ~25-33% overnight.
If you think that's morally unobjectionable, fine, but I'd love to know what happens when all the landowners who own rural land that doesn't have a profitable development path attached to it can't pay their tax bills. Have the state seize it all?
Or do they just claim it's of negligible value and avoid the tax?
I do acknowledge that rent is a function of supply and demand in the big picture, at least. I don't think the whole foundation of economics is wrong.
Demand for apartments will be constant.
Supply of apartments will be constant.
But I think what's going on here is that we are way off the equilibrium point. The supply of good places to rent is far outpaced by demand for them, at most price points, and especially so where all the value is (on the coast). So, this means if you're a landlord and you know you'll owe another $1200 tax to Sacramento this year, you should be very confident that if you raise rent by $100 a month, even if an individual tenant would rather move than pay it, someone who can afford $100 more exists and will almost certainly fill that vacancy promptly. It may represent a slight step down in what their buying power would buy. Like, they may have rented a $3000 apartment before, and they'll now rent what used to be a $2900 apartment from you for $3000.
Most mortgages are fixed interest. So it makes since that today's rate change doesn't impact a renter cost in the near future. Probably not until the next time the property is sold.
Is there really a market dynamic in rent pricing anymore? I thought that algorithmic collusion had eliminated the need for landlords to compete on price.
That cost will, of course, be passed on to renters unless the rental prices cannot be raised at all.
If they can't be raised, and the costs end up being ruinous to the landlords, they will find other solutions like mass arson. That isn't hyperbole; this was a serious problem in the 1970s:
https://en.wikipedia.org/wiki/1970s_South_Bronx_building_fir...
That was obviously not acceptable... but it was predictable.
All legal proposals should be viewed like a chess move. Presume others will respond, and make sure you're ok with that response. In a sense that's also the point of the original article too, a law was passed without adequqtely thinking through what would happen.
>If they can't be raised, and the costs end up being ruinous to the landlords, they will find other solutions like mass arson
Landlords who have their entitlements to land rents or other natural resource rents they've captured ripped away from them would almost assuredly endorse the use of violence.
Land redistribution (of which this is a form) from the landed rentiers to the landless has historically resulted in brutal violence in order to protect their privileged claim on non-human created wealth.
It is quite disingenuous to attribute the South Bronx fires as a result of landlords unable to raise rental prices. I mean that is technically true, but your comment makes it sound like it was a result of a particular legal proposal. It was not. It was a period of urban decay in NYC and many cities in the United States. It was the continuation of white flight into suburbs that started in earlier decades. It was a large demographic change with complex causes.
Rents are already as high as renters can bear. If a tax is introduced, you'd expect landlord competition to drive down the landlord margins, not increase rents.
I don't think this is why it won't get passed on. In theory the lowest income could leave the state and higher income renters would come in.
But in reality a land value tax incentivizes higher density housing. A single house and an apartment complex pay the exact same amount of tax, while the apartment building can split it up over many occupants. Land value taxes are a very natural hands off way of encouraging the right use of land, empty lots and car parks become unaffordable in highly desirable areas while apartments become relatively very cheap.
In theory the land value tax could be set so the overall taxation is the same as before, but but the distribution is such that the people with massive blocks of land in highly desirable areas foot most of the bill. This would over time make housing cheaper over time as more housing is built to reduce the tax burden.
the rent is already priced to the maximum of purchasing power of the local renters ability.
if landlords were able to raise rent, they would have done that already as its pure profit for them. The fact that they can't, means they will have to eat any marginal tax imposed on them
The author makes the comment about the land value tax not being able to be passed on to renters in the context of comparing it to a property tax.
If I’m understanding the argument you’re making here correctly, wouldn’t what you’re saying be equally true for a property tax?
I’m not saying you’re wrong, but I don’t think the author would agree with your point since I don’t see how your argument could be true for a land tax, but not for a property tax.
Landlords are competing with each other, and renters can take their next best alternative. If everything gets strictly more expensive, the next best alternative is not necessarily any cheaper...
This is the problem with governments who think they can synthesize value. They think all businesses can too.
If these communists succeed, they will use the very fact that a landlord cannot synthesize money to prove the landlord passed the cost to the tenant and seize the land.
The author probably has a very superficial understanding of economics. It's economics 101, like VAT, the cost will be passed to BOTH the renter and the landlord. The portion of each is dependent on market dynamics and hard to calculate.
>In the instance of perfect elasticity of the demand or perfect inelasticity of the supply, the price will remain the same and the entire tax burden is on producers. An example of perfect inelastic supply curve is unimproved land (the supply of improved land is elastic because more or less could be created by investment in improvements) or crude oil. Thus, the whole tax burden is on landowners and owners of the oil.
LVT is incoherent, it pretty much only benefits people who are cash rich and land poor. Which is why it gets so much oxygen from tech elites with lots of cash and an inability to buy a house somewhere like mill valley, or wherever.
Essentially taken to the logical conclusion, there will be people competing for more cash to pay their increasing taxes on the same land, it doesn't fundamentally solve the problem. It's such a joke.
Wealth taxes are a symptom of a broken tax system. If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
> If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system
This is to once again mistake net worth for money. Net worth is not real. It is not a good measure of the money someone may be able to realise. They do not have hundreds of billions. There is nothing to tax until they sell some shares.
It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes. If "net worth is not real" neither is equity in real estate.
The actual mistake is pretending like they can't leverage those shares to access fiat, for example securities-backed loans. The proceeds aren't taxable income, the bank gets its interest, and the latter is typically substantially cheaper than realizing the shares and paying capital gains tax. Meanwhile, they keep the assets, which on average continue appreciating.
They play a clever little game where they borrow against those shares to live on. Since there’s no realized gain, there’s no income (and the interest is deductible against any incidental gains that might happen along the line). Then when they die, the sale of shares to pay off the loan is a non-taxable event and the estate value is reduced so the heirs won’t pay as much (or any) estate tax.
That’s just a decision we made about what is taxable.
Purely an accounting artifact. We can pass a wealth tax tomorrow and it’ll suddenly be taxable.
Net worth is real money, and is usually a very accurate measure of what people can realize. There are a few outliers who own so much that they’d move the market if they sold it all. Selling 2% to cover taxes? Not going to move the market very much.
Another thing with taxing unrealized gains is that no one in the government is willing to return any money if the unrealized losses happened. Somehow it's all hunky-dory when someone loses 1M in stock value, but as soon as someone's stock went up 1M they all want to tax it right away.
Try this - go to a bank and say “I’d like to borrow money using my 401k/Roth IRA as collateral. If I fall behind in payments you can liquidate the entire thing, including penalties, and make yourself whole.”
You’d think they’d jump over each other to lend money against such a stable, secure asset right?
Except they’ll say “sorry, this isn’t allowed. IRS treats borrowing against an untaxed retirement account as an early withdrawal, even if the asset itself stays untouched.”
Turns out the government fully understands the concepts of stocks, gains, unrealized net worth and more, and has laws on the books to make sure you are being taxed appropriately for them.
Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth. Because it’s “paper money”. It doesn’t exist. There’s nothing to tax. Just cannot be done, or it’ll bend the laws of spacetime.
You are ignoring the most common approach, borrow against the asset. In that case the sufficient assets turn into essentially unlimited untaxed cashflow. Especially with how the market has been lately, the gains erase any burden of the loan. Sounds like a broken tax system to me.
Well then why are people able to borrow against it and then also deduct taxes on the interest on that borrowed amount?
Also I pay property taxes. Somehow the worth of the property goes up every year and gets gets taxed accordingly. Then why can’t wealth get the same treatment?
Yeah, it's all illiquid illusory non-wealth when they have to pay taxes, but when they want to buy a newspaper or social network they suddenly have 40 billion in hand.
Forced liquidation hurts more than the sticker price, but with billionaire taxes, that's a feature, not a bug. They make the most sense as a check on concentrated power rather than a revenue driver.
> There is nothing to tax until they sell some shares.
That's tautological. I mean, it's true under current federal tax law. It's obviously not true under new California law, which is what the article is about.
Clearly the government can tax non-cash assets, and they do all the time. People act like "wealth taxes" are some moral horror or logical impossibility, while tossing their mortgage statement into a big file and pretending to ignore the property tax line on the escrow account.
Are there practical problems like "wealth has feet"? Sure. Taxation is hard and all systems can be gamed. But let's not pretend that there's a greater principle at work here.
that net worth is still power, which is even more valuable than money.
if you are claiming the high net worth, almost certainly you have raised significant actual money on things you own. a wealth tax means that if you dont actually think your business is worth a billion, you cant raise money as if it was.
thays a net good thing.
if peter theil is lying about being rich and he only has a couple hundred thousand bucks to his name, the publiv overall deserves to know, and it should cost him quite a lot to raise or borrow money.
these people are commiting fraud and should be forced into texas prisons without AC because theyre lying to banks about the value of their assets, and the bankers too beed to go to those same prisons because theyre defrauding their depositors.
this is only a good thing for routing how whos lying about their worth
> There is nothing to tax until they sell some shares.
Why can't they pay tax in shares?* If net worth isn't real it shouldn't really matter...right?
*Please no pedantry about how the IRS doesn't currently accept shares as payment for taxes. If laws can be written to add wealth taxes on stocks and bonds, they can easily have a clause to allow payment in kind. Address the question I'm actually asking.
I dont know why it's so complicated to just say "Money is Money when it's Liquid, tax it then". Any loans on wealth should be taxed..nationwide.
But even in California's case this doesn't feel like anything anybody would object to. Given how much California Billionaires liquidate using loans on their wealth, I bet, they could do a middle class tax cut too to offset it a little bit too.
I am little baffled as to why the politicos haven't latched on to this whole-heartedly. You can still proudly say you're taxing Billionaire wealth. Because you are! Just more sensibly.
Absolutely ridiculous statement, it's not an accurate measure but it's definitely a good measure of money.
If you have 100B to your name even if it's post IPO stock in a possibly ponzi company that's your current wealth and you can easily convert a staggering portion of it into material realized wealth depending on several factors.
If I use cash to buy 1B dollars in Microsoft shares today, am I not worth a Billion dollars...?
The value may not be exactly convertible agreed so let's just force everyone to book all gains every year, and force sell a net percent of your share.
Not 100B$ of share, but 2% of 100 Million units of stock that you own. Why does this not work?
If I take 2% of your shares why can't it work the same way? I can then pick and sell it over the next year or two however I see fit, in case of govt they can slowly sell back this share to not affect the prices too much.
I am baffled by the fact that we have a tractible quantity and people call it hard to use to measure money.
Paintings, Jewels, etc. are what's truly the hard part of the wealth equation not the stocks, which is over 99% of what a wealthy billionaire owns.
I am not even considering pro or against taxes on billions people make but it's ridiculous to say stocks aren't money? Then what is money really... Currency is also traded, it's value can also go up or down....
I would care more about the broken tax system if the politicians didn't waste our tax money. Stop the fraud and the corruption and the incompetence and then let's talk about increasing taxes.
$24 B unaccounted for and lost that was supposed to be for homelessness.
$12 B already spent on high speed rail and they want $120 B more.
$50 B in EDD unemployment fraud during the pandemic.
This is just in California in the last year or two.
How much more fraud and corruption and incompetence is there that we just don't know about?
There is no way I will agree to any increase in taxes just to see it wasted and going to corruption and political buddies on every side of the aisle.
>Stop the fraud and the corruption and the incompetence and then let's talk about increasing taxes.
Zero taxes is the only right answer. Any talk of taxation means that you have already given in to being exploited, because it's a slippery slope. Let's be realistic - corruption will never end. The only way to reduce it is to starve the beast.
Larry Page owns about 5% of Alphabet, which is worth $4T, so he has $200B give or take. Which part of that do you think reflects a "broken tax system"? Companies should get kneecapped if their market cap gets too high? Founders shouldn't be allowed to keep even a single digit percent of the company?
The broken part is that there is third world-level poverty on the streets outside Google’s offices, working class people cannot afford to live in the Bay Area, and a fifth of California lives in poverty.
> Companies should get kneecapped if their market cap gets too high?
Yes. They should be broken up because competition is good for consumers and society. If we had functional anti-trust enforcement Google would not have a near-monopoly on search ads where they own both the ad inventory and the marketplace where you have to buy those placements.
If you taxed him half of that wealth he'd still have single digit percentage of the company.
The broken tax system is that I get taxed about 50% on my marginal income dollar --- the system doesn't wait for me to spend it first --- but when his stock portfolio appreciates by a dollar, he's not taxed! Not until he sells in order to spend. Why are we taxing labor so much more than capital?
And no, I don't think that inventing pagerank really entitles two people to $200B. Although in their case I don't think they've done as much harm with it as some other billionaires.
The part where he has access to essentially unlimited untaxed cashflow by borrowing against that asset. Especially with how the market has been lately, the gains erase any burden of the loan. Something has be done about this, at least. Otherwise broken sounds about right.
like, if a company's market cap gets too big, the law should stop applying to them? they should be allowed to start their own militaries and enforce martial law a la east india company?
how does a founder keep a single digit of their company after theyve been dead for a thousand years?
These arent nearly as absolute as you are making them to be.
a founder can keep their percent by paying their taxes with other money they have, or by decreasing the worth of their company. theyre a founder, they have control. Maybe founders wont be so keen to enshittify their products if theres a downside to continued growth forever. considering google dropped "dont be evil" in exchange for making larry page's 1% grow for the sake of growing, how's society at large benefiting from continuing to subsidize it?
Yes perhaps there should be wealth caps. Did Larry Page really do 5% of all that labor that made google as big as it is? And should a single company get so big and have so much power? Yes, I get that they took risks and invested early, and we shouldn't take away that type of incentive, but perhaps it should have caps, or an S curve tax schedule.
> If you let someone get to hundreds of billions in net worth
"Let someone"? I guess the right to pursue one's happiness is not all that self-evident after all. One should first ask permission, and, if we are in a good mood, we might "let them" pursue their happiness.
Norway, Spain, and Switzerland have wealth (net worth) taxes. Why don't we see the same outrage from rich people living there? Also, most billionaires get rich with equity in a business that they built. How else can we tax that net worth?
Not only that but they are actively moving into these countries, because, like everybody, they like a functioning government that provides infrastructure, housing and health care for their citizens. This makes for much more livable cities and a happy society.
Actually, in Norway there is some outrage. Many people with (a lot of) money move to Switzerland. There is also the issue that startups are being taxed on "paper money" — the value of the firm on paper based on expected future income — even though they have not yet started earning money.
We're in a situation where it's already "too late". We can't go back 100 years. How do you propose we fix it, assuming time machines won't get invented soon?
Additionally, the state gets to tax you on what they say you’re worth based on the markets. That’s a pretty weird way to assign dollar value to someone instead of, say, looking at how many dollars they have.
While stock markets provide useful liquidity for investors entering and exiting positions, they are also rampant with finbro kids doing nothing more than jumped-up gambling. We don’t know which market trades fall into the serious wheels-of-capitalism bucket, and which are gambling, because we don’t have to know. The real world works in dollars so, to date, the state taxes people on the realized capital gain in dollars.
If a bunch of kids are selling handfuls of leaves to each other for a nickel each is the state now valuing my unkempt forest at $99bn? The state is welcome to pull up a chair and watch me try to sell 5 kilotons of leaves to every kindergarten playground in the country. If I succeed then it will take its cut of the capital gain. If I fail, it will not.
When the state starts looking inside the market black box and guesses, based on little Johnny and Becky’s recent playground trades, that I might be able to get at least $300 a tonne for my damp, rotting leaves, then the state is doing something at best weird and at worst unfair, and states doing unfair things is really bad.
Fix the system properly: when you inherit stock, you inherit the cost basis as well. Rinsing off capital gains liabilities through “buy/borrow/die” is the real villain here.
If the $100B+ was created through ownership of a company and is unrealized wealth, how would you have taxed it if not through a wealth tax? Nobody is getting to $100B by way of income.
If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
And care about the rule of law. You cannot pass retroactive laws, you cannot pass laws that target individual people. If you pass a general law (which could very well have reasonable objections), people have to have a chance to leave.
"I'm passing this law that is effective the exact millisecond I sign it, tough shit if you don't like it" is tyranny and despotism. But based on your comment I think you know that.
Property tax increases are hamstrung by Prop 13 and until that’s repealed, will continue to be.
And while the wealthy always threaten to leave when faced with higher taxes, the fact is that they never seem to actually do so.
The site is based around georgism whose fundamental premise is that taxing land is the universal solution (much like for republicans cutting taxes is their solution to everything: economy going great? We should cut taxes. Economy going poorly? Cut taxes. Deficit too high? Cut taxes.) I don’t put much stock in analysis by single-solution thinkers.
They're hamstrung by property tax increases being massively politically unpopular. Prop 13 only bans taxes on the value of land, there's nothing stopping politicians from approximating LVT by an "urban acreage tax" based off plot size in cities other than the fact that it'd get them all voted out.
Even the conservative states who supposedly stand for the individual can’t get anything like proposition 13 passed through their state legislature and it’s been over 48 years.
Whats wild is the commercial side didn’t get closed. I understand the argument for individuals or households (I don’t love it - I’m on the wrong side of it, but at least it’s somewhat defensible), but if you’re running a business and your income isn’t keeping up with inflation, that’s called failing.
Old voters like the house they brought 20 years ago for 100k being worth 1.5 million today. They also like not paying taxes on that 1.4m in wealth accumulation.
I think not wanting to pay some yearly tax on that $1.4 million because the government pretends that the same as having $1.4M cash in the bank, or making $1.4M in a year, is fine.
Not wanting to pay the property taxes associated with a $1.5M home is the problem.
It drives me crazy that California voters will wave through every single regressive sales tax hike that is placed in front of them, yet they will crawl through broken glass to vote against a property tax hike on corporations.
If the SEIU healthcare workers union is going to amend the state constitution, they should chip away at Proposition 13 instead of amending the constitution to make a bad tax that encourages capital flight.
But neglects to consider why it won a majority of votes. Why did it? And how does Prop 13 relate to the more recent Prop 19, which substantially weakened it?
Why would someone spend their time online advocating for themselves to pay a higher percentage of their wealth to taxes than people who make more than them?
This is the reason I would leave if I was a billionaire. Living in California I never felt like my tax dollars got me anything more than they got me in other states and if the city/country/state got even more I knew it would go to some sort of tomfoolery like a high speed rail that doesn’t actually get built or a $1m bathroom.
If you are a billionaire or 100 millionaire, you probably got rich in California, Washington, or Oregon, or probably in the northeast of America in the last 50-60 years, if prop 40 passes, it will have the same effect as prop 13, a positive effect long-term that is, if you manage your finances, most of the states in the Union you are out of luck. why is that?
As someone who lives in California. Goodbye please move to one of those red states. Florida? This percenter will stay in California, and if I had to, the only other two places I would go would be Washington or Oregon, and if the United States was still on good terms with Canada, British Columbia which doesn’t look too bad, but I’m staying on the west coast of North America.
214 out of 40 million people, there is no need to carry water or suck up to them.
I don’t have experience elsewhere but in Santa Clara county, the county assessor calculates a very much incorrect split between land value and value of the improvements (buildings) when they assess the property tax. Sometimes they just divide the total value by two and call it value of the land; in other cases the value seems to match reality more, and the value of improvements match the actual cash value (but not replacement cost) from insurance companies.
How would a land value tax accurately compute the land value?
Not all assessors do this accurately, especially in California, but there are many that do. This article includes a section on land valuation which summarizes and links out to various other articles about various approaches
> In its ideal form, this tax would capture and redistribute the annual rental value of land; that is, the recurring value of the land excluding the value of any buildings or other improvements on top of it.
> but you see the same basic patterns everywhere. Land in the city center is worth much, much more than outlying areas.
The calculation of the "unimproved value" always perplexed me.. it seems like you're not taxed for the things you build on your land, but instead for the things other people built around your land. After all, why would property in a city be valuable if not for all the high rises, subways, and office buildings?
There is a very weird but real phenomenon where it costs more to build/remodel in an upscale part of town. Roof repair: same roof, same company, two jobs 10 miles apart with wildly different invoices.
I don't think this assessment is connected with reality. Land on its own isn't valuable, its the labour and investment people put in while on the land that produces taxable value. Just because the land can't leave doesn't mean the value of the land stays. As long as the government spends more than it can collect, simply charging more people to operate will cause regular people to leave. The higher you tax above the laffer optimal you are just destroying value. My opinion.
California spends an insane amount on combating homelessness with nothing to show for it. This is a difficult problem to solve for sure; I'm not an expert in this field and would be speaking out of turn were I to suggest preferable alternatives. Suffice it to say that billions of dollars are being flushed down the toilet doing whatever is being done right now.
Idaho. No. Idaho has almost the worst per-capita GDP in the country but California dollars go a long way there, although not as far as they used to. Californians also like to use the phrase “don’t Califonicate Idaho”, because high wages there would ruin their lifestyle, which is paid for by their California dollars.
Prop 13 should only cover primary residences. No vacation homes, no investment homes, no apartment complexes, no Airbnbs, no commercial properties, no offices. This single change would fix the majority of the state's tax shortfall. Going on about billionaires and not fixing this obvious loophole should tell you that people in charge aren't actually interested in solving the problem, just using populism to get votes.
I was talking to a friend about the billionaire's tax and this issue came up. Here's how I see it: either individually wealthy people stay here, and we take their money to build state capacity to even out the distortions created by their wealth, or, they leave, and the distortions fix themselves.
The easiest one to point to is property prices. Wealthy people buy land, and drive up the price of land and rent for everyone else. If a lot of people suddenly make a lot of money in San Francisco, in general, for me and most of the people I know, there's no "rising tide" that lifts our boats. Our income remains the same, but our rent goes up, and maybe our lives don't make sense anymore, and we have to move.
But if there's a wealth tax, and it encourages rich people to leave the state? Awesome. Go drive up rents in Texas or Montana or somewhere else. Or pay the tax, and then the state can use that money to build affordable housing.
Before you say anything: I lived through the 90s, and you can't trick me with "WOW YOU THINK THE GOVERNMENT CAN DO THINGS? WHAT ABOUT THE DMV???" Go somewhere else.
Perhaps I'm uniquely able to read and understand simple instructions, or maybe I've never asked the DMV to do anything especially complicated, but I've never had the DMV fail to do what I came there to have it do for me. The worst I've gotten from a DMV was having to wait for literally an entire day when I made the mistake of going to the San Francisco DMV to get something done, rather than doing the smart thing and going to an office in one of the nearby towns. It's... very stupid that there's a single DMV office for a city of -last I checked- nearly a million people.
The problem is the wealthy people can still buy and own the land without being residents. These billionaires "moved" to Austin or Florida or wherever, but they still own the same multi-million dollar mansions in the bay area or LA or wherever. They just spend less time in them.
The Chinese model fixes this problem, albeit with a heavy hand. The state's power can never be subordinated, billionaires are checked by the state and strict capital controls stop them from having a backup bunker of gold bars outside China. I think they also limit dual citizenship to some extent. Heavy handed though it may be, for 99% of Americans you would have 0 negative impact, but it would align incentives better. With a cooperative tax policy between states there would be less of a race to the bottom and tax-integrity could be maintained. A home would count as a residence regardless of whether you "reside" there. Maybe then we would promote both nationalism and state/community integration. Having to bear the full brunt of state residency tax ramifications could enforce less empty homes and more investment in states they reside.
I understand why LVT is compelling. Wealthy people can subordinate or borrow state capacity and monopoly on violence, while driving legislation. There needs to be some check on power.
In your example, you are 100% correct. It doesn't stop at Austin; we have a transnational class of people who no longer care about the nation itself.
I don't think that makes sense. The wealth tax, as written affects a pretty small percentage of "rich people". Most "rich people" will not pay a wealth tax.
So sure, let's say for the sake of your argument that everyone who would be subject to the wealth tax moves away. That won't move the needle when it comes to housing affordability in California.
So, ok, change the wealth tax so it applies to a lot more people. Ok, so maybe more people leave. Do you really think driving people with money out of your state will actually be good for you and the state? That's just not how economics works.
> Do you really think driving people with money out of your state will actually be good for you and the state?
If your state is selling 500sqft condos for $3,000 a month, then yes, it probably would increase the average quality-of-life for that state's residents.
The billionaire tax is an experiment, they did put the bar pretty high to measure how many families will relocate (that's super easy to track); once that's measured, it's easy to build a model to adjust this threshold to whatever is advantageous for the state and keep things in balance this way, where the outflow is carefully measured and weighted against the tax threshold. The "hard part" was just getting this to pass the vote; then they can adjust this threshold anytime as voters have already approved it. What isn't measured is that billionaires create jobs "around them"; and, implicitly, jobs will be created somewhere else; unfortunately this model will not measure that.
I’m not convinced billionaires “create jobs” in any meaningful numbers.
Sure, the companies that made them wealthy do, but the billionaires themselves? Doubt.
So if the only consequence of this is that the billionaires flee to Texas, with its regressive taxes, and take the wealth inequality and corruption that goes with them… I’m not seeing that as a bad thing.
Depends on the billionaire. If it's someone with a large chunk of a large company, each billion dollars represents hundreds of skilled people employed to do something.
If a state is hostile, then why not move that activity? And that's before the direct lobbying at a federal level.
I think the point of the article is correct; the issue with CA is everyone wants to live there, including rich people. If we try and tax them then they'll leave just long enough to not pay state income tax, if we tax property values then the state actually gets the tax and doesn't miss out on job creation or future revenue.
Red states have implemented low income tax with heavy property taxes (think Texas) with great results. and although I'm sure California would just manage to mess it up it's a great idea.
I would not frame Texas as having great results. If anything places should get as little like Texas as they possibly can. I mean they send you to jail for an abortion or a gram of weed. It's living under Shari-yall law.
What would happen if a state just let its government fail? Close all the offices, fire all the the people who spend the day thinking about money,laws, email, and other ways to justify their jobs? Just pay the police from local tax. Oh wait, local taxes already pay for the police. We have too many layers of government. Garbage collection, fire departments, public works - all are locally administered. Why do we need a state layer?
The government is simply the gang that won (vs the other gangs).
If the government fails, then you briefly get anarchy and violence until people organize into groups and use more violence to quash the anarchists. This repeats until there is only one group remaining, and that group is the government going forward.
Most land I bet is leveraged (hence the high price!) and taxing it will put pressure on home owners and investors. It is great for the truely rich who have a $50m mansion because it is chump change and will pay $375k which is approx zero but for someone with a typical house $1m it is $7500 which is less money for food and other household expenses and they may be paying a big mortgage already and not rich in the true sense.
Taxation ain't simple. There are always second order effects.
I am not against land tax but using it as a kneejerk levy could have unintended consequences.
Instead taper onto a reasonable land tax. Just raise taxes if you need more money in a fair and progressive way.
Of all the places you can avoid flight from to avoid tax California must be the easiest.
Since so much of land value is in downtowns, in a theoretical shift to land value tax, most of the increased land value revenue would come from vacant and underdeveloped parcels downtown. The median tax burden on single or multi family homes would actually be reduced. An example is this model of Spokane: https://landeconomics.org/reports/spokane-report#:~:text=sin...
And a lot of the time, it’s those truly rich people who own those vacant/underdeveloped parcels in downtowns.
I agree the proposed wealth tax is a bad idea, but raising property taxes is probably not viable. They are incredibly unfavorable to voters. No one who owns a home wants to pay rent, that's why you buy in the first place.
Personally, this is why I am fine with higher income or sales taxes.
Not even the poor. Really everyone working. I would much rather sleep all day and live off of a pile of money than to show up somewhere and do something for money. That's the tax -- 35% of your waking hours are now at the service of someone else. And yet, they charge income tax on that. Stay home and live off a stash of money in your mattress, 0% tax, 0 obligations. Wake up and commute to work, 35% of your week gone, 35% of your "income" gone.
I am not even that mad that I personally have to pay taxes. I enjoy funding government programs! I think I owe society something! But it sure doesn't make sense that already being rich makes you immune to giving back to the society that made you that way.
The numbers on wealth distribution are shocking, to say the least. I think wealth taxes without loopholes are a really good idea in the current circumstances, infact I believe it may not go far enough. And I think there has to be a global concerted effort to tax wealth.
The working class are starting to choke and drown in financial stress, and this will only get worse. Capital naturally accretes and we've never had this level of capital concentration in human history.
> No one who owns a home wants to pay rent, that's why you buy in the first place.
If this is actually a common attitude, people are... ridiculous. Real property is a limited resource, and allowing people to own property comes with strings attached. This is a pretty normal thing in very many places.
But I do agree that raising property taxes in CA in particular is a politically toxic topic.
They just want continually delivered services from the city funded by taking out increasing amounts of debt or selling off new land in a ponzi scheme to fund existing obligations.
Sales Taxes are the worst ones. Burden on seller, burden on buyer, regressive. Income is more fair but easy to mask-out for the wealthy. Property is meh, Wealth tax is the best one. Assuming all were well designed.
Sales tax and the gasoline tax are use taxes. They are about as fair (democratic) as you’re gonna get because it’s based upon use most the other taxes whether they’re high or low, you can’t escape from particularly if you are the average person in the middle, and once again, if you benefit from capital gains, that is a huge life-changing benefit, which most working people don’t have. Vote yes. on proposition 40 if you are in California the less than .001 and even the 1% will easily survive.
Georgism aside, the theory that very rich individuals will move if targeted for taxation tends to be _mostly_ false, when it's actually tried (though it's true for companies to a large extent).
If this were to go ahead, how many people would actually move? "I'm going to uproot my life to avoid paying an amount that's kinda immaterial to me" would be mildly weird.
I am less worried about the one time influx of tax revenue than I am about this state’s wanton inability to balance a budget or show a modicum of fiscal restraint.
I think the author may be right about multiple points but I think it doesn't matter? This is one of those, don't let the perfect be the enemy of the good situations. A state-level, one-time wealth tax _is_ something that billionaires can run away from. And this law seeking to apply to people who lived in the state _before its passing_ seems structurally sketchy. This article has some fair concerns.
But we have a one-time billionaire's tax proposal on the upcoming ballot, and we don't have an LVT proposal on the ballot. Saying that the Billionaire's tax will be less effective than promoters say maybe true -- but we're definitely going to get exactly $0 from a statewide LVT for 2026. If the Center for Land Economics gets an LVT on the ballot in a future year, I would strongly consider voting for it -- but that's not on its own a reason to not do the Billionaire Tax this year.
What _would_ be a convincing piece of info, and which no one knows, is what the long-term impacts of a one-time wealth tax are. E.g. Zuckerberg is moving his residence to FL but Meta isn't going to stop employing Californians. And if the state is _credible_ in saying it's a one-time tax, will the billionaires who fled come back after it's done?
From what I can tell the residency change for a billionaire is about how often you fly to your various homes. Zuckerberg I think hasn't gotten rid of his Palo Alto or Lake Tahoe property, he just added a FL house and will have a cap on how many days per year he's in CA right? This isn't like a normal person with 1 house relocating.
"None of this is really about billionaires; California reaches for exotic taxes because its normal one has been broken since 1978."
The author then goes on to talk about CA's property taxes ... but LAND HAS NOTHING WHATSOEVER TO DO WITH THE BILLIONAIRE'S FORTUNES!!! Zuckerberg did make his money trading property, he made it through companies.
Nothing about California's property tax decisions have anything to do with 99.9% of Zuck's (and others') wealth not being taxed!
> Nothing about California's property tax decisions have anything to do with 99.9% of Zuck's (and others') wealth not being taxed!
That may be true, but you appear to have missed the part of the sentence you quoted that came after the semicolon:
California reaches for exotic taxes because its normal one has been broken since 1978.
Property taxes make up a large portion of many states' tax income. 1978's Proposition 13 made it so that California is -more or less- unable to tax the actual value of any property in the state. Wealthy people who've held on to property for decades get to borrow against the "market value" of that property, but the value of the property used to calculate the tax owed to the state only increases at a maximum of something like 2% per year. This means that you'll see long-term landlords (and holding companies) getting the financial benefits of a -say- multi-million dollar property, but the state only gets the tax of -say- a multi-deca-thousand dollar property.
Because of Proposition 13, property tax increases in California will affect an extremely tiny slice of landowners, [0] so it must turn to other mechanisms when it needs more tax revenue.
In regards to private "wealth creation", it turns out that money is fungible and you absolutely can built a bunch of wealth off of a mortgage if the "market" value of that property has increased by a huge amount, but the costs of holding that property haven't increased much at all.
[0] This doesn't contradict what I've said, I've just left out some details. A quick summary:
Ignoring a few exceptions, when a property changes ownership its property tax is adjusted to be based on the current "market" rate. When nontrivial improvements are made to a property, the property tax is adjusted to account for the "market" value of only those improvements. [1] Some "clever" people have been known to get around the "property changes hands" trigger by making the property be owned by a company and distributing private shares in that company. Want out? Get rid of all of your shares. Want in? Get shares from someone who already has them, or maybe convince those who are in to make more for you. The property is still owned by the company, so its tax is not adjusted.
[1] It's important to note that repairs are not improvements. It's also important to note that the government can choose to ignore all of these rate-reset rules whenever it wants, as it did when all those extremely wealthy people in LA got their houses burned down in that big wildfire that hit LA.
So what? The goal is to fund the government. You may want to stick it to Zuck and other billionaires (and I admit, there's appeal to that), but if fixing our broken property tax system will fund the government (without causing mass displacement as people's property taxes go up), then we should do that. It's a fix to a structural problem, and a fix that will be durable and be reliable in the future.
Taxing billionaires is not a durable fix to budget deficits. The article very clearly explains why this is the case.
If the tax is calculated based on residency at the time it was earned or granted rather than when it vested or was sold then it doesn’t matter if they leave.
I don't live in California but the article mentioned Proposition 13 which capped property tax rates and the reassessment is only when the property changes ownership?
Is that right?
That seems unfair to people who recently moved compared to the people that stay in their house for decades.
Reading more it looks like California created alternative types of property taxes like Mello-Roos.
In my state we used to have property tax values reassessed every 8 years, then they changed it to every 4 years. But my bill goes up every year. I started off paying about $2000 25 years ago and now it is about $5000 but my property value has also increased about 3X
It seems like if you just taxed an ordinary house at a percentage and you taxed a billionaire's huge house at the same percentage that you would get more money from the billionaire without needing to create special laws and special taxes.
Yup, Prop 13 is a mess and is a big part of why housing in CA is broken. But it's politically toxic to even mention substantial reform, let alone abolishing it or even just phasing it out over time.
The article contains significant inaccuracies. Individuals in the lower and middle economic strata need not advocate for the interests of billionaires or those with assets exceeding $100 million; these individuals have already benefited disproportionately.
Over the past 50 to 60 years, wealth concentration in many Western nations—coupled with the relocation of jobs to East Asia—has primarily favored the upper class rather than the middle class. Similarly on a different battlefield, Brexit has not served the majority of the United Kingdom’s working class population the average citizen has experienced a decline in wealth. In Great Britain, most residents did not benefit from North Sea oil revenues, which were largely directed toward affluent groups—a contrast to Norway’s more unselfish. forward thinking approach of establishing a sovereign wealth fund which benefit it all to the consternation of the wealthy well connected conservative class within Norway.
Remarkably, adherence to sound financial principles—living within one’s means, settling obligations, and saving—can enhance long-term economic stability across all income levels and even at the governmental level.
Much like Proposition 13, voting in favor of Proposition 40 is a straightforward choice. Historically and currently, western political leaders have failed to act in the best interest of the majority usually, they have to be dragged along kicking, and scratching.
It shall be interesting will the middle and lower end carry water for the wealthy again and vote against their interests to save the lucky 214 billionaires in California, that’s right you heard it right, 214 out of 40 million people…
The billionaires won’t be going anywhere. There’s a reason why the West Coast, California, and Oregon are what they are, when compared to the rest of the United States outside the Northeast, climate, higher education, better business opportunities, better political climate for the population, particularly if you look a little different or have a different religion in comparison to a large part of the United States, particularly after 1945.
Brexit is such an odd case, that it seems not worth comparing.
It's so tied into British classicism, and the generally pathetic nature of the middle class English, that trying to extend the results outside of the UK produces absurd ideas.
Essentially the British people took a (not particularly economically motivated) deal to reduce migration, at the cost of economic connection to the EU.
This upset the UK political class greatly, so much of the following policy was about punishing the population, rather than long term economics.
> The land value tax can’t be dodged by leaving nor can it be passed on to renters
Of course you can. You just charge more. Yeah the market dynamics can put a cap on it but the Bay Area mints millionaires like there’s no tomorrow. They can pay.
The effectiveness of other taxes aside, the argument that billionaires will leave if taxed at a higher rate isn't compelling.
Billionaires are not struggling to meet their expenses. If you raise their taxes, they aren't suddenly unable to afford things. They don't need to change their behavior just to get by. A carbon tax forces average people to drive less, but doesn't affect billionaires at all.
Billionaires live where they want to because they can afford to. They're not going to let themselves be chased from jurisdiction to jurisdiction because of numbers that have zero impact on their daily lives. That's what happens to poor people. If California raises taxes on billionaires, very few will actually leave. They're where they want to be and they can afford to stay there. What's the point of having a really big number in your bank account if you have to move to the middle of nowhere in Alabama to keep it from falling just a little?
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Edit: Yes, some billionaires have changed their tax residency, but not necessarily their physical location. They likely still own properties in California and can likely be found on them rather a lot. This is evasion, in spirit if not law. Taxing land is just one way to make them pay. Others should be pursued as well. The argument that we shouldn't tax billionaires because billionaires are good at not paying taxes is complete hogwash.
It may not be logical, but money effectively turns into a scoreboard at a certain point. The ultra-wealthy care whether they show up to the yacht club in a 100m or 150m yacht.
That individuals won’t optimize their wealth beyond $100m, $1b, or really any number just doesn’t square with observable behavior.
Starting a business self-selects for people that desire money (over other benefits).
The purpose of a business is money (otherwise you start a hobby or charity or something non-businessey).
Being very successful at business is a selection bias for people that are highly competitive at chasing money.
There's a bunch of traits in very wealthy self-made people due to the filter they have run through.
Tax too much, and we kill the golden geese of the economy. Examples abound around the world of crappy economies that can't afford good socialist stuff because they've demotivated the rain makers.
If you are rich, you want to be in places where you can enjoy and show off and well be rich. Living in some third world or second world hell hole or some deep red state with no mountains or beaches where you can’t drive and enjoy your fancy car just would not be fun it’s basically the reason why you wouldn’t want to be rich from America and live in Mexico or further south.
Not to mention your businesses need to be in relatively affluent areas where most people can afford your products and from an educational standpoint, most of the better schools are on the west coast or are in the upper east coast.
Worry. about the other 99% maybe more precise, the other lower 90% of American Society.
The article claims that 6 individually named billionaires already left (presumably recently), and another is likely to leave if he loses his court challenge.
This is a strange argument coming from the side of the argument that usually talks about billionaires being greedy and doing anything to make the numbers go up even though they can't feel the difference.
They can certainly afford it but they obviously like their money to stay theirs and like getting more of it, not less.
> the argument that billionaires will leave if taxed at a higher rate isn't compelling
I agree with this. California’s climate and culture will keep many a billionaire within tax nexus reach of the state. Of course, this isn’t a strategy every locale can pursue, but I don’t see a reason for California not to exploit its advantages.
But I think the purpose of a wealth tax is precisely to get rid of greedy billionaires.
So if they vote with their feet and leave, then that's an even better outcome. Now they can't manipulate the government anymore. They can go manipulate and continue extracting wealth from some other place.
Yeah because they got billions by extracting it like mosquitos. It came mostly from your billions I assume. Without that it would have been all yours. Clearly you have zero concept of how an economy works.
You know the extraction is more like 10000-to-1 than 1-to-1.
But in essence I do believe that I (and thousands of others) could have had at least $100k more net worth if they hadn't monopolized all user-acquisition channels and if they hadn't helped bring about the many laws and regulations which made this possible.
I have no ill feelings towards them but I just don't want them in my state competing against me for limited resources using money which they acquired through an unjust scheme which I was coercively made a part of but which I never agreed to and have been protesting for almost a decade (on deaf ears).
It's not personal or even saying anything negative about their character or abilities. From my perspective it's just pure self-preservation. They either need to contribute more tax to make up for the injustice or they leave.
When they sell their assets, it makes those assets more affordable for the rest of us. So any forced sale is good for society. I don't see any issues with it. We were/are forced to prop up their stocks through government contracts, grants and regulatory monopolies... So they should contribute something on their end too.
And I don't care about the "jobs they create" - They created jobs for my competitors to get easy money in cushy jobs. I want those jobs gone too! I don't want FAANG employees bidding up house prices in my area.
I only want to compete against people who are playing by the same rules as me! I don't want to compete against people who can rewrite the rulebook as we go, to suit them.
Well Mamdani's pied-a-tierre tax was specifically a real estate tax, levied on the real estate of people who don't have residency in the city. It's a marginal tax in the grand scheme of things, but unlike the billionaire wealth tax, it actually works, because the real estate can't move. And the owners can't just threaten to leave because they've already left, that's why the tax hits them.
Not sure if anyone could get such a policy change made given that California politics is now just "Whatever the California Democratic Party Wants" and they are very rigid in the ideas they accept.
But I think the proposal being discussed is 1000% more consistent with the principles of a free, non-communist society than the crazy "wealth tax," which sets the precedent that if the government thinks you have "too much" stuff, they can just declare that to be so, and come and take it. Given that the people in charge of drawing the line between "so rich that we need to take your stuff" and "not that rich" will be the same people who have blown up the state budget, I don't see why anyone would trust them.
(No, I'm not Zuck's sock puppet account -- I expect it won't be my turn for "wealth" confiscation for at least 5 years, worst case.)
You’re just carrying water for him. Zuckerberg is a winner. Zuckerberg and the other 214 billionaires in California will be fine you don’t have to suck up to them they’ll be ok a billion times over.
wealth taxes are from the old roman republic. the wealthy showed off their worth to each other by how much they could pay in taxes.
its not particularly crazy and is far older than communism or socialism which have the much more straightforward setup of seizing the means of production rather than taxing it.
however, it didnt stop the ultrawealthy from seizing power for themselves
As a rather economic left European person I think this:
Last week California certified a Billionaire Wealth Tax for the November ballot: a 5 percent one-time levy on the state’s billionaires, paid out over five years, to raise about $20 billion a year for health care, food aid, and schools after federal cuts
Is just flat out crazy.
To pretend that politicians who are in a perpetual political battle for short-term survival will somehow use this weapon of mass financing responsibly and only once it comically absurd.
1. If wealth was only motivated by taxes and was going to leave, it would've left already. Fact is, billionaires don't want to live in Tennessee;
2. Nobody is doing the right thing to tackle any of this, including California.
The article mentions California has land and that's the key point. Unfortunately, California homeowners have been coopted into voting against their own interests to raise property values. If the house you bought in SF in 1975 for $80,000 is now worth $3M, you still only own 1 housing unit's worth of wealth. And that housing cost is an input into everything you need to buy because all the workers required for those things have to be paid high enough to pay those exorbitant rents.
Let me repeat that: high housing costs are an input into everything that you buy.
So what needs to happen? We need to stop treating housing as a speculative asset. It's simply stealing from the next generation. Worse, it's diverting investment capital from productive output because land has become the asset with the best tax treatment, highest returns and most government protections. So what does this look like?
1. Some form of land value tax. The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable;
2. Punitively tax land hoarding including second homes. We could give discounted rates to primary residences of state residents. Nobody else should get a discount. This would mean repealing Prop 13 and that's never going to happen. As an example of this, I'll bring up Prop 19. In CA you can inherit a preferential property tax rate. Prop 19 proposed to limit this to only one property could inherit this preferential rate and it barely passed (51% IIRC). Do we think that 49% of California voters have multiple properties that have property tax rates set 40+ years ago? Of course they don't. It's an example of how people vote against their own interests;
3. Part of what sold Prop 13 originally was the idea of pushing seniors out of their homes with property taxes. Well, that gave Disneyland a tax rate that was set in the 1960s. California should do what Texas does: you can defer your property taxes until you die if you're a senior but there's no capped property tax rates like incumbent SF residents have and no inherited preferential property tax rates;
4. Wind back the preferential collateralization of property for mortgage debt over time. Residential property lending now dominates bank lending and earnings. It's significantly harder to get finance for any form of productive output;
5. Wind back over time preferential tax treatment for home ownership.
Do I think any of this will happen? No.
Oh, one of the worst things to do is transaction taxes, often called stamp duty. This is where you pay a percentage of the value on purchase. This really hurts mobility. I guess it's fine if it's only on the luxury end of the market (CA's is at $5M+?) but it's not a good idea regardless.
The other part of this is to provide social housing like Vienna. The government should be a significant supplier of affordable quality housing.
> We need to stop treating housing as a speculative asset.
This kind of assumes the only reason a house appreciates in value is because people are "treating it as an asset" rather than "the house I bought 30 years ago in the middle of nowhere is now smack dab in the middle of a very desirable area." At that point it's simple supply and demand, not some homeowner being greedy.
> The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable
This makes the fatal assumption that just because a house is worth dramatically more than what you paid for it many years ago that your income must have risen just as dramatically. "Oh well, too bad, sell your house and deal with it." Maybe people kind of like living where they've put down roots and don't want to be punished for something outside of their control? Any proposal that boils down to "pay more or fuck off" is not going to go over very well.
> We need to stop treating housing as a speculative asset.
Something I've been yelling from the rooftops.
Housing can either be affordable, or it can be an investment that's bought, rented, and sold for the sole purpose of profit. It's not possible for it to be both.
People expect their house to appreciate faster than inflation, but all that does is rob the next generation of home ownership.
California is full of people who do not understand how investment works and want it gone. This is progress missing from progressive. It is the social missing from socialist. Ists and ivs with nothing, merely a pack of stupid ideas. The residual is reality: no-teeth, drug-induced stupor sleeping in street squalor and their rent-seeking enablers cozying up to the tax authorities.
California already has a property tax, about half of which is based on the land value, and the other half on the structure on the land. So this is not some brilliant idea, just a renaming of what we already have.
If the author is suggesting to repeal Prop 13, that is also not a new idea, and has been discussed for decades. Good luck.
Which economic system are you critiquing? I would tend to agree, since I think wealth taxes amount to a breaking of the 8th and 10th commandments. But I also think some would argue that the consumerism (envy) that often drives capitalism is a form of covetousness. I think the counter argument is that capitalism does not require consumerism, and that consumerism (envy) can appear in any economic system.
not good believer in christ would ever participate, when jesus made it clear you are supposed to freely give away everything you own to the poorest among us
I think the idea is that if the market demand is such that it allows them to raise rents, they'd already have done it, whether or not expenses justify it.
Did tariffs raise prices? Or did prices stay the same because "if the market demand is such that it allows them to raise [prices], they'd already have done it"?
Yeah, that's unlikely. There are certain classes of renters it can't be passed on to during their rental term, but I'm guessing it can and likely would in general.
People can also sell their land/homes and move. It's less liquid than other assets, but less doesn't mean people won't sell/leave.
In Massachusetts it’s legal to pass on real property tax increases during the term of a residential lease, provided the lease contains specific clauses. (Most leases do, as a result.) And most commercial leases are triple-net, meaning the tenant is also on the hook for increases.
I would be surprised if most land consumption taxes (whether structured as property or land) would not get directly passed through to the beneficial consumers of that land quite quickly, or for their privilege to consume that land to be terminated/non-renewed at the expiration.
Feel free to look up the percentage of the CA tax base by 50th, 90th, 95th, 99th and 99.9th percentiles. The myth that billionaires don’t pay their fair share is just that - a myth. A lot of lower income people don’t pay any tax at all and have their state services entirely subsidized by the rest, the vast majority of which is paid by the richest 5%. Every time I see a call to tax the billionaires I know I’m hearing from a fool too partisan to look at really simple to understand numbers.
The land value tax is a good idea, but the pure conceptualization that die-hard Georgists have, in which it's a flat tax, doesn't seem in the same line as the billionaire tax. What'd like is just a (drastically) revised version of Prop 13 in which those protections apply only to the first $N of property value. We can effectively tax the real estate of billionaires without having to tax everyone else. I would like to see taxes on luxury properties approach 100% of the property value, to make it extremely painful for anyone to own such properties, and encourage them to be split up among smaller owners.
I hope we agree that we need more taxes, it doesn't matter if they are taxes on billionaires, taxes on property, taxes on sales, taxes on crypto, or taxes on the poor. Without taxes we can't have a civilized society.
The number of different taxes is constantly increasing, obfuscating the total tax burden, and making democratic accountability almost impossible. Additionally, tax collections are already at a historical high, while government deficits world-wide are also at record levels, with services on the decline, and no realistic prospect of balancing budgets. This is true for most western countries.
Given the current situation, I do not agree that "we need more taxes", but would welcome your clarifying exactly what you mean.
For a long time I agreed with you, but seeing how the tax money is spent I cannot agree any longer. In most cases government is no longer even spending the money itself, instead it is giving the money to NGOs.
I would much rather see people keep more of their dollars and use them to 'vote' for the products and services that benefit them most, via their purchases.
Taxes aren’t 0 right now, nor particularly close for anyone being taxed. Your statement supports taxes as a concept at all, but what’s the specific argument that they must be more than they are today?
I think we should start with changing taxes on corporations/companies, specifically being able to indefinitely write off expenses against income regardless of size/etc...
Most companies take profit eventually, but if it's possible for a company to decide to never take profit and grow/acquire perpetually without paying any taxes on gross income, that's a problem.
That'd be like individuals being able to deduct living expenses and having uncapped pre-tax 401k contributions.
The ratio of the economy that gets collected as taxes has only gone up over time. Do you have an idea for how much should be collected as some ideal ratio? At what point do the effects of taxation become counterproductive?
Well, the general economic consensus is that for income taxes, the revenue-maximizing peak of the Laffer curve is around 65-70% [1]. Revenue maximization isn't necessarily the right primary goal, though.
Same back at you. Clearly you think they’re too high. So what is the correct ratio?
The straightforward answer is there is no correct ratio. The best tax regime is the one that allows for sufficient funding of necessary and desired services and long-term economic investment while also balancing wealth creation with wealth inequality. That number isn’t fixed and it’s clear that it shouldn’t be evenly borne by the population as a whole.
If the government keeps doing this, land owners will blow their wealth on the only things that government can't easily tax: blow and hookers.
But leave it to the ineptitude of California liberal politicians to always find a way to steal from the citizens that have the ability to produce and save, in order to transfer the wealth to illegals, politicians friends, druggies, and foreign powers.
“ Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Travis Kalanick, and Steven Spielberg, worth roughly $540 billion combined — had already moved their tax residency out of state before the measure”
Imagine being worth billions USD and rather than being a part of the solution to support the state that helped build your wealth, you spend your money to just get around paying your small share.
It is trivial for the wealthy to buy another house elsewhere and “move” their primary residence.
The greatest feat that Mao achieved was to take the land that had been tightly gripped by generations upon generations of owners and to shake up the distribution of it so that the land could produce again. People naturally want to work the land, but you end up with suboptimal inertia because owners just end up letting it sit fallow if it doesn't immediately return. It's how you turn a billion serfs into a billion entrepreneurs.
We're already way past the point where a creative cocktail of 10 different progressive taxation schemes could feasibly fix the root of the problem, and you feel this especially if you were born after the year 2000. You're more likely to see results if you pick up a red scarf than if you pass a higher wealth tax, sales tax, land tax, consumption tax, estate tax...
The famine is unrelated to the land distribution but also the farm land distribution didn't last. They changed course and put the land into collectives and it is still in collectives today so the famine cannot be blamed on collectives.
My understanding is the famine was essentially the middle managers of these collectives over stating yields and being too afraid to admit their lies. To maintain the lie, they shipped off food while the farmers starved.
Famine along the yellow river and yangtze river has been happening for thousands of years across all dynasties, its specifically what land distribution was meant to fix, and since 1960s there hasn't been a famine since. My parents and grandparents lived through it and left cities to work in countryside fields during the cultural revolution. You tell me how the famine fits in and I'll let you know if you're accurate or not.
those who advocate for land value tax are usually advocating for single/minimal types of taxes (and, in fact, against sales and income taxes) rather than a cocktail of them. "Single Tax" predominantly refers to a single land value tax. https://en.wikipedia.org/wiki/Single_tax
My point is that a single land value tax would have the same effect as piecemeal improvements to current tax portfolio - none of it would fix the inertia already priced and baked into the system.
> A revolution is not a dinner party, or writing an essay, or painting a picture, or doing embroidery; it cannot be so refined, so leisurely and gentle, so temperate, kind, courteous, restrained and magnanimous."
> To put it bluntly, it is necessary to create terror for a while in every rural area."
Let's not glamourize the Mao's land reforms. It required the killing of 1-2 million people. Even then, the collectivization was a massive failure - not only did the peasantry not get to enjoy the benefits of land reform, a further 15 million people would die from the resulting famine.
The deep irony is that Taiwan was actually able to do the same reform but with much better outcomes, with much less loss of life or political violence.
Taiwan did not have anywhere near the land distribution occur under CKS/CCK, nor the same veracity of landlord clique ownership. And, you're further wrong in that a big part of white terror was specifically due to 外省人 owners of factories and farms, from land stolen from the aborigines. The white terror wasn't by any means less violent and senseless than cultural revolution.
Land, as apposed to the property on it, is raw nature. If we view raw nature as a common inheritance of mankind, then paying a tax on land is how the exclusionary use of it, balances with the common interest in it.
Economist Henry George in the 1800's, pointed out that taxing land, but not the property on it, incentivizes efficient use of land, because holding land for its passive (parasitic) return even when underused, becomes unprofitable when the land is taxed in proportion to the value it can enable.
And in turn, only taxing land, not property, incentivizes increased development, as higher property investment amortizes land tax against higher returns.
Greater investment in housing being just one way land tax, without property tax, incentives greater productive use.
So many things align for higher growth in ways that more evenly benefit everyone. But our relationship with land is over-complicated, and that is both the reason for change, but the reason change is so hard.
Small attempts have failed, but then, for the rich who can hold land and reap growth in value that outpaces the taxes they pay on it, that remains another inefficient/negative-externality, that pays off for them.
The hard part is that we've structured life such that you are on a fixed income at the end of your life in no position really to deal with inflation. At least when you are still working, in theory at least your wages will go up with inflation. This is really why prop 13 happened to pass at all: the idea of being displaced at the end of your life out of the home you already paid off due to market forces you aren't even a participant in is actually widely unpopular even if it makes better economic sense.
> the idea of being displaced at the end of your life out of the home
I would argue that this is unpopular not only amongst retirees but everyone. And it would have tons of negative side effects.
Why would I fix up my house to look nice, if I’ll be displaced? Why would I invest in my child’s local school system, if we could be displaced? Why would I do any community outreach or support, or get involved in local politics? How can banks underwrite loans if the affordability can fluctuate wildly? Look at the life of people who live in mobile homes and trailer parks - they essentially rent the land, and it’s oppressive because they can’t afford to move (actually moving or repurposing land is hard) but their cost to stay is unpredictable.
The only people this is appealing for are people who fancy themselves analytically minded economists with no interest in the practical humanity of the people living there and renters hoping to finally do the displacing for their own affordability.
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For what it's worth, the way Israel deals with this is that property tax is levied on the property resident, not the property owner. In other words, when you rent a house, the person who is legally responsible for paying the tax is the renter.
This makes it exceedingly easy to ensure that old people are not affected by property taxes: if you are elderly resident, you simply get a discount. If you are an elderly landlord who owns multiple properties, your younger tenants don't get a property tax discount, and you pay income taxes (not discounted for age) on the rental income. If you are elderly and want to downsize, your property tax discount follows you into the smaller apartment.
The system has its challenges, but it is far superior to Prop 13 and achieves the same goal.
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> fixed income at the end of your life in no position really to deal with inflation.
This might be true if you have everything in cash in a safe at your house and plan on taking out fixed amounts for the rest of your life, I guess, but who are those people?
Most people are on social security, which is inflation adjusted.
Others with more wealth have retirement savings, which are likely mostly in bonds and stocks, which weather inflation not too shabbily. Interest rates go up, and banks start actually yielding interest!
Prop 13 passed mostly as a populist revolt against taxes, but in reality it does a lot more for people in their prime of earning and a toooon more for commercial property tax cuts than it does for retirees.
Every other state has better tax deferral mechanisms, and given the tiny fraction of Prop 14 effect that goes to retirees, I don't really buy this back formation of what was going on. If people really voted for such a lie, it wouldn't be the first time with propositions but from the media I've seen from the time I really don't think people were that duped and probably knew the broad effects of Prop 13.
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Retirees are not on fixed income and haven't been for decades. Social Security gets adjusted for inflation. 401ks grow. https://www.slowboring.com/p/seniors-arent-living-on-fixed-i...
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The key bit is that California is relatively unique here. There are a few other states that have Prop-13-like laws, but California's is the most restrictive and incumbent-homeowner-friendly. All those other states (and the ones with nothing similar) seem to get along just fine.
Of course, the solution to increased demand (driving increases in property market value) is to build more housing. Without Prop 13, a big chunk of the NIMBYs who are currently against more housing would likely change their tune if they had to choose between no new housing or much higher property taxes.
I think it would be reasonable and productive to phase out Prop 13 over time, rather than immediately getting rid of it. We could structure it so a property doesn't lose Prop 13 protection until the next time it's sold (and then it never has that protection again). We could completely remove the inheritance loophole (which was tightened up in 2020 but still exists). We could even set a date, say, 10 or 15 years in the future, when re-assessments at market value will start for everyone, regardless of whether or not they've sold. We could also phase in higher allowed assessment percentage increases over time (right now it's capped at 2% per year, but we could, say, add 0.5% to that figure every year for some number of years).
Hell, we could even leave Prop 13 in place as it is today, and just bump up the assessment increase cap to 5% or 10% or something like that. (Texas, for reference, has their own 10% yearly cap on assessment increases.)
There are so many ways to solve this, but all of them are politically unpopular. (Hell, we couldn't even reform Prop 13 as it applies to commercial properties.) As a homeowner in California, I get it, but I still support Prop 13 reform and eventual Prop 13 abolishment.
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This is a solved problem in other jurisdictions. Effectively you can just allow seniors to defer their property taxes at low interest rates and it becomes a liability on the house when it is transferred on death.
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Just allow natural persons to defer these taxes until after death. Then when the house goes for sale you just subtract the taxes from the inheritance.
> the idea of being displaced at the end of your life out of the home you already paid off due to market forces you aren't even a participant in is actually widely unpopular even if it makes better economic sense.
Once you are old enough it makes a whole lot more sense to move to places designed to care for the elderly. Living alone in a huge house isn't good for your mental health and it isn't for your physical health, either, once you no longer have the energy to maintain it.
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Empirically, according to Doucet, a land value tax would only raise average tax rates if you're living on a parking lot, or vacant lot. Aging homeowners would mostly see a slight decline in their property taxes ( California excluded ).
The single biggest problem is that Prop-13 applies to commercial properties too.
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You handle that the same way income taxes do: the first X amount is exempt, like a standard deduction, applied to the land under someone's primary residence. Pair it with a rolling multi-year average for assessment so value spikes phase in gradually instead of hitting all at once. Keeps the incentive against passive land-holding everywhere else intact, without the blanket caps that also protect speculators. Instead of using one tool to fix it all, you use multiple tools that work together to make efficient systems
I think the marketing of prop 13 was old people getting kicked out of their houses.
But I think the majority of the tax avoidance goes to not-old-people, like immortal corporations that can own the land forever.
EDIT: random link - it seems like residential owners don't benefit anywhere NEAR as much as commercial, rental and industrial entitites.
https://youngamericans.berkeley.edu/wp-content/uploads/2023/...
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> being displaced at the end of your life out of the home you already paid off due to market forces you aren't even a participant in is actually widely unpopular even if it makes better economic sense
Whether it makes economic sense or not, it is extremely inhumane and that matters (or should matter) far more.
This idea that it is ok to kick out (via taxes) someone who spent 40 or 50 years contributing to society just so someone else can make more profit on their home is very sad.
Washington has a much lower property tax rate for a primary residence owned by a person over 65 years old.
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Elderly retired people living in large houses close to where the work is has caused massive social, economic, political, and cultural harm. Young people can no longer afford to buy homes close to work, so they're forced to commute long distances. Their taxes then go in part to pay for the elderly person who lives in a million dollar house with multiple rooms, who receives many tax breaks. The young person cannot afford to start a family, cannot afford to buy a home, loses a lot of time each day on commuting, spends a fortune on commuting, has less time for family, and causes enormous inefficiencies in the job market. This is nothing short of a concerted redistribution of wealth from the young to the old. It's a travesty which the elderly today would not have accepted.
I do not feel sorry for the elderly person sitting on a large and expensive property who demands to spend their final decades squatting on land which could house a family and allow parents to get to work within a reasonable amount of time. They have options the young person does not. They can get a reverse mortgage, for example. They get social security, and draw down on whatever pensions and investments they've accrued over their lives. Their costs are much lower - they don't have children to support. Or they can move, and I'm sorry, but it's not impossible for a retired person to move. Millions of them do it every year all over the country. Often to really nice elderly communities full of activities and specialised care.
I say all of this as someone who leans more libertarian than collectivist. Society is interconnected and interdependent. We cannot function if he keep young people under our boots. Asking the elderly to move is a *very* small price to pay if we expect the young to shoulder the enormous tax and debt burdens said elderly have imposed upon them.
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tl;dr: retirement benefits and children
Why should the typical old person or couple have a large home all to themselves?
I think (in a semi ideal world) individuals and couples should be entitled to small apartments or tiny houses, which would be cheap enough for an old person on retirement benefits. An average American home is for a family: as the parents age, some of their kids start financing the home, while other kids may move living spaces, or everyone splits up and the house goes to a new family (presumably a couple moving from a small apartment).
displaced because the land has become so valuable you can no longer pay the tax on it and have to sell for a massive profit?
boo hoo? My generation has never even had access to affordable housing. Sorry you have to take your millions and live on a smaller property for your last few years.
A land tax means that you don't own property but rent it.
This is bringing us back to the dark ages in terms of land rights.
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The first time I heard about a Land Value Tax it sounded great. You can then go read where it's been tried and find that it's extremely hard to implement.
As just one example, if I place becomes popular then suddenly the taxes rise and people have to move out. Lots of people hate that idea and so vote it away. And then LVT no longer works.
This is what already happens. While not via taxes, the COL already rises with how nice a place becomes.
Do the taxes rise because an increase in rate or the underlying value. If it is the value then cry me a river.
I am a friendly guy and good neighbour. People want to be near me. The value of land in my area rises.
Now I have to pay for my own kindness.
lmao economists, really
> Economist Henry George in the 1800's, pointed out that taxing land, but not the property on it, incentivizes efficient use of land, because holding land for its passive (parasitic) return even when underused, becomes unprofitable when the land is taxed in proportion to the value it can enable.
That sounds like a terrible idea to me. Efficiency isn't everything. Small stripes owned by many people or by many smaller companies it's less efficient than one hedgefond owning everything and yet it has disadvantages.
A forest is much less efficient than a mall and yet, the forest might still be more important.
There's also no way for a government to effectively determine the potential value of land. Asking them to do it means inviting disaster and corruption.
This is a good example of a very common problem: data isn't objective, it needs to be interpreted. Metrics will give you information, but they aren't the full story. That's why Goodhart's Law is so prolific. You can't just look at data and act on it without context. It depends what your actual goals are. And a huge part of that is that we have to consider how much we value things, especially things that haven't already been assigned monetary value. Sure, we can assign monetary value to things like a forest (economists do this), but it would also be wildly inappropriate to just accept those estimates as cold hard facts void of interpretation too. What's the saying? Reality has a surprising amount of resolution.
In a weird twist of irony our efforts to be lazy end up costing us a lot of work. But that's also because there's two types of lazy: short term and overall work. We used to say we want to hire programmers that are lazy because they'll find the most efficient way to do something. But now we don't revere that kind of lazy, we like the kind of lazy that procrastinates. Do the quick cheap thing now, telling ourselves that we'll make it better in the future, knowing that's a lie. That pattern isn't unique to programming, it's just marshmallows.
In WA state (maybe others too?), the county assess my land value and the building value separately on my property taxes.
Point being: the government has been assessing land value for a long long time
https://en.wikipedia.org/wiki/Land_value_tax_in_the_United_S...
The main problem with this view is that land value is laggard to the economy. You will end up taxing people more than what the land is actually worth during downturns, instigating a vicious feedback loop to cause further problems. The logical path is to tax money where there is money - income.
What gives the taxman a right to the fruits of a persons labor? There is of course no other argument for this than "or we kill you". Tax on income is another form of slavery and serfdom. Especially when you consider that a large proportion of slaves through history were free to roam and had to find their own source of income to pay a weekly or monthly fee to their owner.
All other forms of taxation at least have arguments to ethically justify them, including land taxation.
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Georgists think that my taxes should go up if someone builds Disneyland near my land.
Yeah, because the value of your land just went up and you didn't do anything to make that happen. Only right that excess value goes back to society and reduces the tax burden of the working class.
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Makes sense to me.
If you don't want to pay the taxes, thanks to Disneyland you can now sell your land for a nice fat gain, buy cheaper land elsewhere, and pocket the difference. And whoever bought your land will likely use it for the social good (maybe build a hotel or something).
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Obviously. If you live in a single family home next door to Disneyland you’re ducking over all the people who want to stay in a hotel there. You should have to pay for that privilege.
>If we view raw nature as a common inheritance of mankind, then paying a tax on land is how the exclusionary use of it
This will have some of the unfortunate effect of collectivism. We don't want the govt to tax you into poverty.
A simpler overall approach (I've left out the nuances) would be to have an equal amount of land per person completely tax free. Individuals can then rent out their land for others to use as needed. Forests/rivers/conservation lands etc. can be seen as truly a common inheritance of mankind and should generally have the least of commercial activity.
p.s - a govt will never agree to such an arrangement because it will not favor them.
I'm curious as to how you think we should divide up who gets what plots, can you explain how that works?
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Raise X in land tax and then you spend it evenly amongst the population. Anyone using less than their fair share gets a bonus, anyone uses more has to pay.
If you just allow using X value, but tax free, then those who use less don’t get rewarded.
Effectively one non transferable share, one per citizen, with proceeds as a dividend.
> p.s - a govt will never agree to such an arrangement because it will not favor them.
IDK, governments tend to align with what results in the most economic activity being created / moved into their country ("growth"). If you were able to convince that overall economic growth would be multiple times higher over a few decades with the system, it might just become appealing.
A problem I see with implementation in the US, though, is that local municipalities are who tax land and property value, so entire rural counties and cities would have their funding stunted. And asking the government to buy into that while subsidizing low-growth areas for a long time (decades / forever, if a rural area never develops) is a really hard sell.
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> A simpler overall approach (I've left out the nuances) would be to have an equal amount of land per person completely tax free
I like the thought, but the challenge in most places is that the poor are already paying massive "negative tax" in the form of various social subsidies.
So if you add tax exemptions on top of it, it becomes increasingly impractical to raise enough taxes.
And no, it can't be done simply by taxing the rich more. That should be done too, in my view! But the math is simply such that we need a pretty broad tax base to support our spending.
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> This will have some of the unfortunate effect of collectivism. We don't want the govt to tax you into poverty.
Weird framing. In any case, this would lead to less taxes for most folks, at least compared to property taxes.
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So a data center pays the same taxes as a homeowner, foot for foot? It seems unfair at first, but then it occurs to me that data centers would not be so desirable if they were not paying higher taxes. If land value tax helped to pop the data center bubble it would make the more off-putting aspects (organic farming is a less efficient use of land than factory farms) more palatable. Why not have a hybrid approach, where the local community can decide to apply different types of tax systems to different types of land and land uses?
Seems backward, especially for California.
A hedge fund or a lawyer office with with a huge income but a a small office pays some tax. A sandwich shop close to them which barely had ends meet pays the same amount of tax.
I believe we should tax hedge funds much more than sandwich shops.
Is this a collective push right now for LVT ? I got an e-mail this morning from Astral Codex Ten on the same topic - seems like a campaign is a foot.
Twice in one day for a topic as not specific as this seems intentional.
I wouldn't say it's coordinated. This is an old article, published in June. A lot of people came to the land economics blog from the ACX article that ran today, someone likely saw this one and then posted it to HN.
ACX has been on the Georgist tip for awhile.
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wonderful -- now take the modern case where the most fertile land, covered with farming, is converted to cement and home sales due to 100x immediate cash returns. The price? pavement is forever
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I would challenge you to point out exactly where in OP's comment that he advocates abolishing all taxes except land taxes. I see only a comparison to taxing land vs property.
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Why care about wealth disparity at all as long as everyone is better off? If I offered you to double your real wealth but also Bezo's real wealth, would you reject that offer just because wealth disparity went up?
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I like Georgism, but I don't think it should be limited to just LVT. I think ownership of all natural resources (especially scarce ones) should be taxed at an aggressively progressive rate. Own one oil well? Cool. Own enough oil wells to supply the entirety of the Allied Forces throughout the duration of the European Theater in World War 2? Meh.
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GP doesn't appear to be advocating for abolishing all tax. The thrust of it seems to be to abolish property tax and replace with a land value tax. There's no mention of abolishing income, capital gains, sales, use, etc. taxes.
Maybe don't attack a straw man you've stood up yourself?
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I think land value tax is good.
That doesn't mean LVT is a panacea.
I think that's a bit of a strawman and a false dichotomy.
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why not?
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Using up land is an externality, and thus should be taxed accordingly.
I don't understand your use of externality here. How is it imposing costs on others?
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> The land value tax can’t be dodged by leaving nor can it be passed on to renters.
In what sense can't it be passed to renters? Esp if all landlords in the market were faced with a new land tax that they had not previously planned for, why would it not be passed on?
Rent is a function of supply and demand, not a landlord's costs, otherwise we would expect changes in e.g. mortgage interest costs to be passed on to, but in practice we don't see this effect. We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
Taxes can be passed on when the tax induces a change in supply. Conventional property taxes are partially passed through because the component of the tax that falls on the building. Tax buildings, get less buildings.
Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
Landlord costs affect supply in the long term, so you will see changes, just not necessarily immediately over a one year period, but definitely over a 5-10 year period.
> We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages. When landlords' costs drop, do they drop the rent in response?
If costs are uniform for each landlord (they have to pay for), it limits the amount of money they can invest in new capacity, and you will see the effects over a decade. If one landlord has cost advantage over another, then they will of course probably just take the extra money as extra profit.
> Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
They provide friction with what can be done with the land, because the cost of owning the land has to be paid. If it is just a land tax, however, you can game it by building as much as possible on it so the landowners who can't build as much as you can subsidize your usage (long term, you either have to build as much as you can on your land, or sell the land to someone who can).
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> Taxes on land do not affect the supply of the land, this implies they are not passed on and the research literature largely agrees with this.
Taxes may not affect the amount of land that physically exists, but they absolutely can and do affect the amount of land available for rent as opposed to other income-generating use cases.
On top of that, a tax that applies equivalently to all of the land available to the rental market in a given area will simply push prices upwards across the board, which is likely to just be absorbed by renters given the usually low price elasticity of demand for housing.
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> We also don't see landlords who own their properties outright (and thus don't have mortgage interest costs) charging lower rents than landlords in the neighborhood with identical properties who have mortgages.
Why would they as long as they find a renter? The market always charges the marginal cost.
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A transaction can occur if the price is >= the seller's cost, and <= the value to the buyer. If it's at the minimum, the seller must pass on the tax or not trade, at the maximum (down to the max minus the tax) , the seller can't pass on (all of) the tax and still trade. We observe that landlords make profit, so we are not at the minimum. Are we at the maximum?
I think there are cases where we are in between for significant periods of time. Consider a positive shock to wages. Can landlords put up prices overnight? I don't think so, unless the landlords all co-ordinate to do so, prices will be sticky as there are always some properties in the market, so it's difficult to be the first to increase rent. Unlike a purchase, a landlord who waits for a buyer at the right price is forgoing income during the void. So the market price can be a Schelling Point.
A tax increase, however, happens at the same time to all landlords. All of them would prefer to pass it on, and they know that so they can assume all other landlords will try to pass it on. If the rent is currently below the maximum possible, they will succeed.
How long it takes prices to adjust I don't know. It is an empirical question, but I don't know what data would answer it. But it seems like it took decades for landlords to capture the two-income surplus after it became common for women to have a career.
> Rent is a function of supply and demand, not a landlord's costs,
Do you really believe that landlords will subsidize tenants for a long time?
More to the point, if landlords are losing money, why would anyone build rental housing? Instead, why wouldn't they take housing off the market?
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> otherwise we would expect changes in e.g. mortgage interest costs to be passed on
These aren't a universal cost. When rates change, some landlords' costs go up. But some don't. That lets the latter set the marginal price.
If everyone's costs go up the same amount, it's collusion without communication. In an inelastic market like San Francisco's, you'd expect prices to rise.
> Rent is a function of supply and demand, not a landlord's costs
Only in one direction. If that rent, based on supply and demand, does not cover all of the owner's costs (+profit) then that rental property simply disappears off the market. No owner is going to rent out at a loss, so either the renter is paying for all expenses (+profit), or they get kicked out.
If I own £100K worth of land, and the government announces a 1% annual land tax, it's likely the value of my land will fall by about ~25-33% overnight.
If you think that's morally unobjectionable, fine, but I'd love to know what happens when all the landowners who own rural land that doesn't have a profitable development path attached to it can't pay their tax bills. Have the state seize it all?
Or do they just claim it's of negligible value and avoid the tax?
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I do acknowledge that rent is a function of supply and demand in the big picture, at least. I don't think the whole foundation of economics is wrong.
Demand for apartments will be constant. Supply of apartments will be constant.
But I think what's going on here is that we are way off the equilibrium point. The supply of good places to rent is far outpaced by demand for them, at most price points, and especially so where all the value is (on the coast). So, this means if you're a landlord and you know you'll owe another $1200 tax to Sacramento this year, you should be very confident that if you raise rent by $100 a month, even if an individual tenant would rather move than pay it, someone who can afford $100 more exists and will almost certainly fill that vacancy promptly. It may represent a slight step down in what their buying power would buy. Like, they may have rented a $3000 apartment before, and they'll now rent what used to be a $2900 apartment from you for $3000.
> we would expect changes in e.g. mortgage interest costs to be passed on to
This absolutely happens in the UK where variable interest rates affect more people.
> When landlords' costs drop, do they drop the rent in response?
The price of everything is pretty much a ratchet. They never go down again absent some kind of competitive pressure.
> Rent is a function of supply and demand, not a landlord's costs
Of course it does. The landlord's costs factor into the supply made available by landlords.
> When landlords' costs drop, do they drop the rent in response?
Competition says they do.
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Landlord costs impact supply.
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Most mortgages are fixed interest. So it makes since that today's rate change doesn't impact a renter cost in the near future. Probably not until the next time the property is sold.
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> Rent is a function of supply and demand
Is there really a market dynamic in rent pricing anymore? I thought that algorithmic collusion had eliminated the need for landlords to compete on price.
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> Rent is a function of supply and demand, not a landlord's costs
And one of the functions of supply is cost.
Profitability of renting effects supply. Reducing the profitability of renting reduces supply which, as you noted, increases price.
Landlord costs drives supply at a given price point so your initial premise is flawed.
This is a prime example of short term thinking, often espoused by politicians.
That cost will, of course, be passed on to renters unless the rental prices cannot be raised at all.
If they can't be raised, and the costs end up being ruinous to the landlords, they will find other solutions like mass arson. That isn't hyperbole; this was a serious problem in the 1970s: https://en.wikipedia.org/wiki/1970s_South_Bronx_building_fir...
That was obviously not acceptable... but it was predictable.
All legal proposals should be viewed like a chess move. Presume others will respond, and make sure you're ok with that response. In a sense that's also the point of the original article too, a law was passed without adequqtely thinking through what would happen.
That’s one of the ideas of LVT actually: building apartments in land doesn’t increase tax burden, burning the apartments doesn’t lower it
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Feel free to quote in the article what supports your summary given the article doesn't actually talk about that
In fact it mentions insurance fraud as the cause...
Additionally it certainly wasn't increasing cost but reduced income which is a very different issue
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If landlords can already raise the price of rent, why haven’t they?
>If they can't be raised, and the costs end up being ruinous to the landlords, they will find other solutions like mass arson
Landlords who have their entitlements to land rents or other natural resource rents they've captured ripped away from them would almost assuredly endorse the use of violence.
Land redistribution (of which this is a form) from the landed rentiers to the landless has historically resulted in brutal violence in order to protect their privileged claim on non-human created wealth.
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> they will find other solutions like mass arson.
Or the more likely option is they will no longer do investment properties as the return it too low vs the risk.
Arson would be irrelevant for land taxes.
It is quite disingenuous to attribute the South Bronx fires as a result of landlords unable to raise rental prices. I mean that is technically true, but your comment makes it sound like it was a result of a particular legal proposal. It was not. It was a period of urban decay in NYC and many cities in the United States. It was the continuation of white flight into suburbs that started in earlier decades. It was a large demographic change with complex causes.
Rents are already as high as renters can bear. If a tax is introduced, you'd expect landlord competition to drive down the landlord margins, not increase rents.
And if margins are decreased, then... (what happens to new supply?)
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I don't think this is why it won't get passed on. In theory the lowest income could leave the state and higher income renters would come in.
But in reality a land value tax incentivizes higher density housing. A single house and an apartment complex pay the exact same amount of tax, while the apartment building can split it up over many occupants. Land value taxes are a very natural hands off way of encouraging the right use of land, empty lots and car parks become unaffordable in highly desirable areas while apartments become relatively very cheap.
In theory the land value tax could be set so the overall taxation is the same as before, but but the distribution is such that the people with massive blocks of land in highly desirable areas foot most of the bill. This would over time make housing cheaper over time as more housing is built to reduce the tax burden.
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youd think that, but you can fit another 10 people into that studio apartment
the rent is already priced to the maximum of purchasing power of the local renters ability.
if landlords were able to raise rent, they would have done that already as its pure profit for them. The fact that they can't, means they will have to eat any marginal tax imposed on them
The author makes the comment about the land value tax not being able to be passed on to renters in the context of comparing it to a property tax.
If I’m understanding the argument you’re making here correctly, wouldn’t what you’re saying be equally true for a property tax?
I’m not saying you’re wrong, but I don’t think the author would agree with your point since I don’t see how your argument could be true for a land tax, but not for a property tax.
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> The fact that they can't, means they will have to eat any marginal tax imposed on them
My company rents a space in a commercial lot, and the contract states the property tax is split among the tenants. It's separate from the rent.
Apparently this is common in commercial settings. I wouldn't be surprised to see this start happening for consumers.
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Landlords are competing with each other, and renters can take their next best alternative. If everything gets strictly more expensive, the next best alternative is not necessarily any cheaper...
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Sounds like the debate from 2 years ago whether the importer or exporter pays for tarrifs
My understanding is that LVT would be lower than current property taxes, so it should be viewed as a tax cut for landlords not an increase.
This is the problem with governments who think they can synthesize value. They think all businesses can too.
If these communists succeed, they will use the very fact that a landlord cannot synthesize money to prove the landlord passed the cost to the tenant and seize the land.
The author probably has a very superficial understanding of economics. It's economics 101, like VAT, the cost will be passed to BOTH the renter and the landlord. The portion of each is dependent on market dynamics and hard to calculate.
>In the instance of perfect elasticity of the demand or perfect inelasticity of the supply, the price will remain the same and the entire tax burden is on producers. An example of perfect inelastic supply curve is unimproved land (the supply of improved land is elastic because more or less could be created by investment in improvements) or crude oil. Thus, the whole tax burden is on landowners and owners of the oil.
https://en.wikipedia.org/wiki/Tax_incidence
It's literally econ 101 that says landowners will bear the burden of a land value tax.
Supply of land is perfectly inelastic and land value tax is not a marginal cost of production so does not change MR=MC.
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LVT is incoherent, it pretty much only benefits people who are cash rich and land poor. Which is why it gets so much oxygen from tech elites with lots of cash and an inability to buy a house somewhere like mill valley, or wherever.
Essentially taken to the logical conclusion, there will be people competing for more cash to pay their increasing taxes on the same land, it doesn't fundamentally solve the problem. It's such a joke.
It completely solves the problem. I recommend you read “progress and poverty” to get a better understanding of it.
You don’t seem to understand how it works or what it does.
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The idea is that valuable land will be utilized better.
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Wealth taxes are a symptom of a broken tax system. If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
> If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system
This is to once again mistake net worth for money. Net worth is not real. It is not a good measure of the money someone may be able to realise. They do not have hundreds of billions. There is nothing to tax until they sell some shares.
It's strange that people always make this argument for wealth taxes, but you rarely hear it about property taxes. If "net worth is not real" neither is equity in real estate.
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The actual mistake is pretending like they can't leverage those shares to access fiat, for example securities-backed loans. The proceeds aren't taxable income, the bank gets its interest, and the latter is typically substantially cheaper than realizing the shares and paying capital gains tax. Meanwhile, they keep the assets, which on average continue appreciating.
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They play a clever little game where they borrow against those shares to live on. Since there’s no realized gain, there’s no income (and the interest is deductible against any incidental gains that might happen along the line). Then when they die, the sale of shares to pay off the loan is a non-taxable event and the estate value is reduced so the heirs won’t pay as much (or any) estate tax.
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That’s just a decision we made about what is taxable.
Purely an accounting artifact. We can pass a wealth tax tomorrow and it’ll suddenly be taxable.
Net worth is real money, and is usually a very accurate measure of what people can realize. There are a few outliers who own so much that they’d move the market if they sold it all. Selling 2% to cover taxes? Not going to move the market very much.
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Another thing with taxing unrealized gains is that no one in the government is willing to return any money if the unrealized losses happened. Somehow it's all hunky-dory when someone loses 1M in stock value, but as soon as someone's stock went up 1M they all want to tax it right away.
> There is nothing to tax until they sell some shares.
This is a very strange claim when we have property taxes. Shares are property so they can be taxed just like houses and land.
Try this - go to a bank and say “I’d like to borrow money using my 401k/Roth IRA as collateral. If I fall behind in payments you can liquidate the entire thing, including penalties, and make yourself whole.”
You’d think they’d jump over each other to lend money against such a stable, secure asset right?
Except they’ll say “sorry, this isn’t allowed. IRS treats borrowing against an untaxed retirement account as an early withdrawal, even if the asset itself stays untouched.”
Turns out the government fully understands the concepts of stocks, gains, unrealized net worth and more, and has laws on the books to make sure you are being taxed appropriately for them.
Meanwhile billionaires have convinced you – through their machinery of media, influencers, politicians and more – that this exact same reasoning absolutely cannot be applied to their own wealth. Because it’s “paper money”. It doesn’t exist. There’s nothing to tax. Just cannot be done, or it’ll bend the laws of spacetime.
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You are ignoring the most common approach, borrow against the asset. In that case the sufficient assets turn into essentially unlimited untaxed cashflow. Especially with how the market has been lately, the gains erase any burden of the loan. Sounds like a broken tax system to me.
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> Net worth is not real.
Well then why are people able to borrow against it and then also deduct taxes on the interest on that borrowed amount?
Also I pay property taxes. Somehow the worth of the property goes up every year and gets gets taxed accordingly. Then why can’t wealth get the same treatment?
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Yeah, it's all illiquid illusory non-wealth when they have to pay taxes, but when they want to buy a newspaper or social network they suddenly have 40 billion in hand.
Forced liquidation hurts more than the sticker price, but with billionaire taxes, that's a feature, not a bug. They make the most sense as a check on concentrated power rather than a revenue driver.
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I’d be willing to take some of the “not real” money.
There is absolutely no reason that unrealised gains cannot be taxed (and some tax systems do indeed tax them in various ways).
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> There is nothing to tax until they sell some shares.
That's tautological. I mean, it's true under current federal tax law. It's obviously not true under new California law, which is what the article is about.
Clearly the government can tax non-cash assets, and they do all the time. People act like "wealth taxes" are some moral horror or logical impossibility, while tossing their mortgage statement into a big file and pretending to ignore the property tax line on the escrow account.
Are there practical problems like "wealth has feet"? Sure. Taxation is hard and all systems can be gamed. But let's not pretend that there's a greater principle at work here.
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that net worth is still power, which is even more valuable than money.
if you are claiming the high net worth, almost certainly you have raised significant actual money on things you own. a wealth tax means that if you dont actually think your business is worth a billion, you cant raise money as if it was.
thays a net good thing.
if peter theil is lying about being rich and he only has a couple hundred thousand bucks to his name, the publiv overall deserves to know, and it should cost him quite a lot to raise or borrow money.
these people are commiting fraud and should be forced into texas prisons without AC because theyre lying to banks about the value of their assets, and the bankers too beed to go to those same prisons because theyre defrauding their depositors.
this is only a good thing for routing how whos lying about their worth
> There is nothing to tax until they sell some shares.
Why can't they pay tax in shares?* If net worth isn't real it shouldn't really matter...right?
*Please no pedantry about how the IRS doesn't currently accept shares as payment for taxes. If laws can be written to add wealth taxes on stocks and bonds, they can easily have a clause to allow payment in kind. Address the question I'm actually asking.
I hate this argument.
Would you rather have 1M dollars in cash or 10B in stock that you can't sell?
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> Net worth is not real.
Good way to find out it this is the case: take it away. Not real, right? Why would they mind?
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Nah, just make them pay taxes when it's valued as collateral and it's over a certain amount. Anyone saying you can't do that is lying to you.
I dont know why it's so complicated to just say "Money is Money when it's Liquid, tax it then". Any loans on wealth should be taxed..nationwide.
But even in California's case this doesn't feel like anything anybody would object to. Given how much California Billionaires liquidate using loans on their wealth, I bet, they could do a middle class tax cut too to offset it a little bit too.
I am little baffled as to why the politicos haven't latched on to this whole-heartedly. You can still proudly say you're taxing Billionaire wealth. Because you are! Just more sensibly.
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Simply let them pay the tax with shares. Problem solved!
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Absolutely ridiculous statement, it's not an accurate measure but it's definitely a good measure of money.
If you have 100B to your name even if it's post IPO stock in a possibly ponzi company that's your current wealth and you can easily convert a staggering portion of it into material realized wealth depending on several factors.
If I use cash to buy 1B dollars in Microsoft shares today, am I not worth a Billion dollars...?
The value may not be exactly convertible agreed so let's just force everyone to book all gains every year, and force sell a net percent of your share.
Not 100B$ of share, but 2% of 100 Million units of stock that you own. Why does this not work?
If I take 2% of your shares why can't it work the same way? I can then pick and sell it over the next year or two however I see fit, in case of govt they can slowly sell back this share to not affect the prices too much.
I am baffled by the fact that we have a tractible quantity and people call it hard to use to measure money.
Paintings, Jewels, etc. are what's truly the hard part of the wealth equation not the stocks, which is over 99% of what a wealthy billionaire owns.
I am not even considering pro or against taxes on billions people make but it's ridiculous to say stocks aren't money? Then what is money really... Currency is also traded, it's value can also go up or down....
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>Net worth is not real.
You wont mind if we tax it then will you?
You do, of course.
p.s. liquidity != wealth. try not to confuse them.
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I would care more about the broken tax system if the politicians didn't waste our tax money. Stop the fraud and the corruption and the incompetence and then let's talk about increasing taxes.
$24 B unaccounted for and lost that was supposed to be for homelessness. $12 B already spent on high speed rail and they want $120 B more. $50 B in EDD unemployment fraud during the pandemic.
This is just in California in the last year or two.
How much more fraud and corruption and incompetence is there that we just don't know about?
There is no way I will agree to any increase in taxes just to see it wasted and going to corruption and political buddies on every side of the aisle.
You could quite literally introduce a wealth tax and then set the (additionally) taxed money on fire; and it would improve living standards.
The point is to lower the economic power of single individuals that compete against the entire rest of the nation.
>Stop the fraud and the corruption and the incompetence and then let's talk about increasing taxes.
Zero taxes is the only right answer. Any talk of taxation means that you have already given in to being exploited, because it's a slippery slope. Let's be realistic - corruption will never end. The only way to reduce it is to starve the beast.
Larry Page owns about 5% of Alphabet, which is worth $4T, so he has $200B give or take. Which part of that do you think reflects a "broken tax system"? Companies should get kneecapped if their market cap gets too high? Founders shouldn't be allowed to keep even a single digit percent of the company?
The broken part is that there is third world-level poverty on the streets outside Google’s offices, working class people cannot afford to live in the Bay Area, and a fifth of California lives in poverty.
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> Companies should get kneecapped if their market cap gets too high?
Yes. They should be broken up because competition is good for consumers and society. If we had functional anti-trust enforcement Google would not have a near-monopoly on search ads where they own both the ad inventory and the marketplace where you have to buy those placements.
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Yes. No one person should have assets worth as much as the GDP of Qatar.
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If you taxed him half of that wealth he'd still have single digit percentage of the company.
The broken tax system is that I get taxed about 50% on my marginal income dollar --- the system doesn't wait for me to spend it first --- but when his stock portfolio appreciates by a dollar, he's not taxed! Not until he sells in order to spend. Why are we taxing labor so much more than capital?
And no, I don't think that inventing pagerank really entitles two people to $200B. Although in their case I don't think they've done as much harm with it as some other billionaires.
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The part where he has access to essentially unlimited untaxed cashflow by borrowing against that asset. Especially with how the market has been lately, the gains erase any burden of the loan. Something has be done about this, at least. Otherwise broken sounds about right.
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whats its mean to be kneecapped?
like, if a company's market cap gets too big, the law should stop applying to them? they should be allowed to start their own militaries and enforce martial law a la east india company?
how does a founder keep a single digit of their company after theyve been dead for a thousand years?
These arent nearly as absolute as you are making them to be.
a founder can keep their percent by paying their taxes with other money they have, or by decreasing the worth of their company. theyre a founder, they have control. Maybe founders wont be so keen to enshittify their products if theres a downside to continued growth forever. considering google dropped "dont be evil" in exchange for making larry page's 1% grow for the sake of growing, how's society at large benefiting from continuing to subsidize it?
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Yes perhaps there should be wealth caps. Did Larry Page really do 5% of all that labor that made google as big as it is? And should a single company get so big and have so much power? Yes, I get that they took risks and invested early, and we shouldn't take away that type of incentive, but perhaps it should have caps, or an S curve tax schedule.
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This fundamentally misunderstands how this paper wealth actually works.
> If you let someone get to hundreds of billions in net worth
"Let someone"? I guess the right to pursue one's happiness is not all that self-evident after all. One should first ask permission, and, if we are in a good mood, we might "let them" pursue their happiness.
> One should first ask permission, and, if we are in a good mood, we might "let them" pursue their happiness.
yes... this is called the law...
Lots of peoples "pursuit of happiness" is hindered by the law because we've deemed it not good for society.
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Norway, Spain, and Switzerland have wealth (net worth) taxes. Why don't we see the same outrage from rich people living there? Also, most billionaires get rich with equity in a business that they built. How else can we tax that net worth?
Not only that but they are actively moving into these countries, because, like everybody, they like a functioning government that provides infrastructure, housing and health care for their citizens. This makes for much more livable cities and a happy society.
Actually, in Norway there is some outrage. Many people with (a lot of) money move to Switzerland. There is also the issue that startups are being taxed on "paper money" — the value of the firm on paper based on expected future income — even though they have not yet started earning money.
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We're in a situation where it's already "too late". We can't go back 100 years. How do you propose we fix it, assuming time machines won't get invented soon?
They can move to Afghanistan. I'm not sure the wealth leaving the state, or the country, is such a bad thing.
Meanwhile, when you're in an "already too late" situation, it's already too late. You still have to deal with it.
Additionally, the state gets to tax you on what they say you’re worth based on the markets. That’s a pretty weird way to assign dollar value to someone instead of, say, looking at how many dollars they have.
While stock markets provide useful liquidity for investors entering and exiting positions, they are also rampant with finbro kids doing nothing more than jumped-up gambling. We don’t know which market trades fall into the serious wheels-of-capitalism bucket, and which are gambling, because we don’t have to know. The real world works in dollars so, to date, the state taxes people on the realized capital gain in dollars.
If a bunch of kids are selling handfuls of leaves to each other for a nickel each is the state now valuing my unkempt forest at $99bn? The state is welcome to pull up a chair and watch me try to sell 5 kilotons of leaves to every kindergarten playground in the country. If I succeed then it will take its cut of the capital gain. If I fail, it will not.
When the state starts looking inside the market black box and guesses, based on little Johnny and Becky’s recent playground trades, that I might be able to get at least $300 a tonne for my damp, rotting leaves, then the state is doing something at best weird and at worst unfair, and states doing unfair things is really bad.
Fix the system properly: when you inherit stock, you inherit the cost basis as well. Rinsing off capital gains liabilities through “buy/borrow/die” is the real villain here.
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> it’s already too late.
Absolutely not. 100% you can take it.
If the $100B+ was created through ownership of a company and is unrealized wealth, how would you have taxed it if not through a wealth tax? Nobody is getting to $100B by way of income.
If you let someone get to hundreds of billions in net worth and then realize they haven’t been appropriately paying back into the system, it’s already too late. Like the article says they can simply say “no” in a variety of ways, from fighting in court to simply leaving.
It's only too late if you're timid and wimpy.
And care about the rule of law. You cannot pass retroactive laws, you cannot pass laws that target individual people. If you pass a general law (which could very well have reasonable objections), people have to have a chance to leave.
"I'm passing this law that is effective the exact millisecond I sign it, tough shit if you don't like it" is tyranny and despotism. But based on your comment I think you know that.
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Or if people can easily move. Or if you want the next generation of startups to operate in your state.
the FTB is anything but timid and wimpy
if the voters and legislature have the “bravery” to pass the wealth tax law, it will be aggressively enforced by the FTB
the second-order effects, whatever they may be, would be clearly visible within a couple years.
Property tax increases are hamstrung by Prop 13 and until that’s repealed, will continue to be.
And while the wealthy always threaten to leave when faced with higher taxes, the fact is that they never seem to actually do so.
The site is based around georgism whose fundamental premise is that taxing land is the universal solution (much like for republicans cutting taxes is their solution to everything: economy going great? We should cut taxes. Economy going poorly? Cut taxes. Deficit too high? Cut taxes.) I don’t put much stock in analysis by single-solution thinkers.
They're hamstrung by property tax increases being massively politically unpopular. Prop 13 only bans taxes on the value of land, there's nothing stopping politicians from approximating LVT by an "urban acreage tax" based off plot size in cities other than the fact that it'd get them all voted out.
do they believe its a universal solution? or one tax among many that triggers a certain asset, land, to be used more efficiently?
> And while the wealthy always threaten to leave when faced with higher taxes, the fact is that they never seem to actually do so.
Around 2T worth of wealthy individuals left california when the wealth tax propositon was started.
Even the conservative states who supposedly stand for the individual can’t get anything like proposition 13 passed through their state legislature and it’s been over 48 years.
Isn’t California one of the richest states in the richest nation? Does that government really need more revenue?
> Does that government really need more revenue?
That's not accounting for the Cali govt being also one of the best in the world at wasting money.
The only need another $100B and another 20 years and they WILL build the High Speed Rail!
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Whats wild is the commercial side didn’t get closed. I understand the argument for individuals or households (I don’t love it - I’m on the wrong side of it, but at least it’s somewhat defensible), but if you’re running a business and your income isn’t keeping up with inflation, that’s called failing.
And it will never be repealed.
Old voters like the house they brought 20 years ago for 100k being worth 1.5 million today. They also like not paying taxes on that 1.4m in wealth accumulation.
Is it not that the gains are unrealized? If they sold the house they would pay capital gains tax?
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I think not wanting to pay some yearly tax on that $1.4 million because the government pretends that the same as having $1.4M cash in the bank, or making $1.4M in a year, is fine.
Not wanting to pay the property taxes associated with a $1.5M home is the problem.
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what reasonable persons wants to pay taxes? Just because you like to pay extra doesn't me we should.
I mean, I do too. Mine just happens to have been bought before the last inflationary cycle.
It drives me crazy that California voters will wave through every single regressive sales tax hike that is placed in front of them, yet they will crawl through broken glass to vote against a property tax hike on corporations.
Please don't post snarky dismissals like this on HN. The guidelines make it clear we're trying for something better here. https://news.ycombinator.com/newsguidelines.html
Mate have you seen how much slop makes it to the front page?
Snark is one of the last ways to deal with the death of the internet.
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If the SEIU healthcare workers union is going to amend the state constitution, they should chip away at Proposition 13 instead of amending the constitution to make a bad tax that encourages capital flight.
But neglects to consider why it won a majority of votes. Why did it? And how does Prop 13 relate to the more recent Prop 19, which substantially weakened it?
But let's be clear: Prop 13 is bad and is holding down property taxes on both commercial and residential land.
> News at 9.
The idiom is "film at 11."
California is already collecting way more taxes than needed, perhaps the state needs to learn how to better manage existing taxes
Why would someone spend their time online advocating for themselves to pay a higher percentage of their wealth to taxes than people who make more than them?
Because anyone with a brain knows that a wealth tax wont just target the super wealthy for very long.
Same shit happened when income taxes were first introduced.
The ONLY thing that works is making sure a tax never hits the books in the first place.
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This is the reason I would leave if I was a billionaire. Living in California I never felt like my tax dollars got me anything more than they got me in other states and if the city/country/state got even more I knew it would go to some sort of tomfoolery like a high speed rail that doesn’t actually get built or a $1m bathroom.
The Noe valley bathroom was enough of an anomaly that it made the news. Do you have actual evidence that California taxes are not well spent?
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If you are a billionaire or 100 millionaire, you probably got rich in California, Washington, or Oregon, or probably in the northeast of America in the last 50-60 years, if prop 40 passes, it will have the same effect as prop 13, a positive effect long-term that is, if you manage your finances, most of the states in the Union you are out of luck. why is that?
As someone who lives in California. Goodbye please move to one of those red states. Florida? This percenter will stay in California, and if I had to, the only other two places I would go would be Washington or Oregon, and if the United States was still on good terms with Canada, British Columbia which doesn’t look too bad, but I’m staying on the west coast of North America.
214 out of 40 million people, there is no need to carry water or suck up to them.
I don’t have experience elsewhere but in Santa Clara county, the county assessor calculates a very much incorrect split between land value and value of the improvements (buildings) when they assess the property tax. Sometimes they just divide the total value by two and call it value of the land; in other cases the value seems to match reality more, and the value of improvements match the actual cash value (but not replacement cost) from insurance companies.
How would a land value tax accurately compute the land value?
Not all assessors do this accurately, especially in California, but there are many that do. This article includes a section on land valuation which summarizes and links out to various other articles about various approaches
https://www.astralcodexten.com/p/does-georgism-work-five-yea...
> In its ideal form, this tax would capture and redistribute the annual rental value of land; that is, the recurring value of the land excluding the value of any buildings or other improvements on top of it.
> but you see the same basic patterns everywhere. Land in the city center is worth much, much more than outlying areas.
The calculation of the "unimproved value" always perplexed me.. it seems like you're not taxed for the things you build on your land, but instead for the things other people built around your land. After all, why would property in a city be valuable if not for all the high rises, subways, and office buildings?
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There is a very weird but real phenomenon where it costs more to build/remodel in an upscale part of town. Roof repair: same roof, same company, two jobs 10 miles apart with wildly different invoices.
https://www.openavmkit.com
I don't think this assessment is connected with reality. Land on its own isn't valuable, its the labour and investment people put in while on the land that produces taxable value. Just because the land can't leave doesn't mean the value of the land stays. As long as the government spends more than it can collect, simply charging more people to operate will cause regular people to leave. The higher you tax above the laffer optimal you are just destroying value. My opinion.
> laffer optimal
"optimal" is an annoying term here.
That point is the maximum taxation burden possible, but it shouldn't be a target.
"optimal" might actually be a much smaller number, where prosperity what is maximized.
> [C]ritics estimate the lost revenue would have to be made up by roughly doubling the state sales tax
It is possible to just ... stop spending ...
If you have specific suggestions for what spending to cut, by all means...
California spends an insane amount on combating homelessness with nothing to show for it. This is a difficult problem to solve for sure; I'm not an expert in this field and would be speaking out of turn were I to suggest preferable alternatives. Suffice it to say that billions of dollars are being flushed down the toilet doing whatever is being done right now.
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High speed rail.
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Spot on. Seen too many colleagues pack up for lower tax states, taking their equity and talent with them.
Anecdotal, of course. Which states they going to? Do they compare to CA?
Idaho. No. Idaho has almost the worst per-capita GDP in the country but California dollars go a long way there, although not as far as they used to. Californians also like to use the phrase “don’t Califonicate Idaho”, because high wages there would ruin their lifestyle, which is paid for by their California dollars.
Prop 13 should only cover primary residences. No vacation homes, no investment homes, no apartment complexes, no Airbnbs, no commercial properties, no offices. This single change would fix the majority of the state's tax shortfall. Going on about billionaires and not fixing this obvious loophole should tell you that people in charge aren't actually interested in solving the problem, just using populism to get votes.
I was talking to a friend about the billionaire's tax and this issue came up. Here's how I see it: either individually wealthy people stay here, and we take their money to build state capacity to even out the distortions created by their wealth, or, they leave, and the distortions fix themselves.
The easiest one to point to is property prices. Wealthy people buy land, and drive up the price of land and rent for everyone else. If a lot of people suddenly make a lot of money in San Francisco, in general, for me and most of the people I know, there's no "rising tide" that lifts our boats. Our income remains the same, but our rent goes up, and maybe our lives don't make sense anymore, and we have to move.
But if there's a wealth tax, and it encourages rich people to leave the state? Awesome. Go drive up rents in Texas or Montana or somewhere else. Or pay the tax, and then the state can use that money to build affordable housing.
Before you say anything: I lived through the 90s, and you can't trick me with "WOW YOU THINK THE GOVERNMENT CAN DO THINGS? WHAT ABOUT THE DMV???" Go somewhere else.
> "...WHAT ABOUT THE DMV???"
And I'd ask them: "What about the DMV?".
Perhaps I'm uniquely able to read and understand simple instructions, or maybe I've never asked the DMV to do anything especially complicated, but I've never had the DMV fail to do what I came there to have it do for me. The worst I've gotten from a DMV was having to wait for literally an entire day when I made the mistake of going to the San Francisco DMV to get something done, rather than doing the smart thing and going to an office in one of the nearby towns. It's... very stupid that there's a single DMV office for a city of -last I checked- nearly a million people.
> or, they leave, and the distortions fix themselves.
It's always funny how often people ignore this. 99% of the problem would go away if the outliers moved away.
The problem is the wealthy people can still buy and own the land without being residents. These billionaires "moved" to Austin or Florida or wherever, but they still own the same multi-million dollar mansions in the bay area or LA or wherever. They just spend less time in them.
The Chinese model fixes this problem, albeit with a heavy hand. The state's power can never be subordinated, billionaires are checked by the state and strict capital controls stop them from having a backup bunker of gold bars outside China. I think they also limit dual citizenship to some extent. Heavy handed though it may be, for 99% of Americans you would have 0 negative impact, but it would align incentives better. With a cooperative tax policy between states there would be less of a race to the bottom and tax-integrity could be maintained. A home would count as a residence regardless of whether you "reside" there. Maybe then we would promote both nationalism and state/community integration. Having to bear the full brunt of state residency tax ramifications could enforce less empty homes and more investment in states they reside.
I understand why LVT is compelling. Wealthy people can subordinate or borrow state capacity and monopoly on violence, while driving legislation. There needs to be some check on power.
In your example, you are 100% correct. It doesn't stop at Austin; we have a transnational class of people who no longer care about the nation itself.
I don't think that makes sense. The wealth tax, as written affects a pretty small percentage of "rich people". Most "rich people" will not pay a wealth tax.
So sure, let's say for the sake of your argument that everyone who would be subject to the wealth tax moves away. That won't move the needle when it comes to housing affordability in California.
So, ok, change the wealth tax so it applies to a lot more people. Ok, so maybe more people leave. Do you really think driving people with money out of your state will actually be good for you and the state? That's just not how economics works.
> Do you really think driving people with money out of your state will actually be good for you and the state?
If your state is selling 500sqft condos for $3,000 a month, then yes, it probably would increase the average quality-of-life for that state's residents.
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The billionaire tax is an experiment, they did put the bar pretty high to measure how many families will relocate (that's super easy to track); once that's measured, it's easy to build a model to adjust this threshold to whatever is advantageous for the state and keep things in balance this way, where the outflow is carefully measured and weighted against the tax threshold. The "hard part" was just getting this to pass the vote; then they can adjust this threshold anytime as voters have already approved it. What isn't measured is that billionaires create jobs "around them"; and, implicitly, jobs will be created somewhere else; unfortunately this model will not measure that.
I’m not convinced billionaires “create jobs” in any meaningful numbers.
Sure, the companies that made them wealthy do, but the billionaires themselves? Doubt.
So if the only consequence of this is that the billionaires flee to Texas, with its regressive taxes, and take the wealth inequality and corruption that goes with them… I’m not seeing that as a bad thing.
Depends on the billionaire. If it's someone with a large chunk of a large company, each billion dollars represents hundreds of skilled people employed to do something. If a state is hostile, then why not move that activity? And that's before the direct lobbying at a federal level.
They are neither competent enough nor incentivized to perform this optimization for the benefit of the state.
I think the point of the article is correct; the issue with CA is everyone wants to live there, including rich people. If we try and tax them then they'll leave just long enough to not pay state income tax, if we tax property values then the state actually gets the tax and doesn't miss out on job creation or future revenue.
Red states have implemented low income tax with heavy property taxes (think Texas) with great results. and although I'm sure California would just manage to mess it up it's a great idea.
I would not frame Texas as having great results. If anything places should get as little like Texas as they possibly can. I mean they send you to jail for an abortion or a gram of weed. It's living under Shari-yall law.
The tax system in Texas is a better system. Sure, Texas has lots of problems. That doesn't mean there is nothing to learn from Texas.
I live in Texas. I don't like the restrictive laws. Texas could learn a lot for California, just not in the areas of taxation
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> Shari-yall
Made me laugh while drinking; messy, but worth it for the smiles I'll have every time I remember it! Outstanding job, internet stranger.
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What would happen if a state just let its government fail? Close all the offices, fire all the the people who spend the day thinking about money,laws, email, and other ways to justify their jobs? Just pay the police from local tax. Oh wait, local taxes already pay for the police. We have too many layers of government. Garbage collection, fire departments, public works - all are locally administered. Why do we need a state layer?
The government is simply the gang that won (vs the other gangs).
If the government fails, then you briefly get anarchy and violence until people organize into groups and use more violence to quash the anarchists. This repeats until there is only one group remaining, and that group is the government going forward.
Most land I bet is leveraged (hence the high price!) and taxing it will put pressure on home owners and investors. It is great for the truely rich who have a $50m mansion because it is chump change and will pay $375k which is approx zero but for someone with a typical house $1m it is $7500 which is less money for food and other household expenses and they may be paying a big mortgage already and not rich in the true sense.
Taxation ain't simple. There are always second order effects.
I am not against land tax but using it as a kneejerk levy could have unintended consequences.
Instead taper onto a reasonable land tax. Just raise taxes if you need more money in a fair and progressive way.
Of all the places you can avoid flight from to avoid tax California must be the easiest.
Since so much of land value is in downtowns, in a theoretical shift to land value tax, most of the increased land value revenue would come from vacant and underdeveloped parcels downtown. The median tax burden on single or multi family homes would actually be reduced. An example is this model of Spokane: https://landeconomics.org/reports/spokane-report#:~:text=sin...
And a lot of the time, it’s those truly rich people who own those vacant/underdeveloped parcels in downtowns.
I agree the proposed wealth tax is a bad idea, but raising property taxes is probably not viable. They are incredibly unfavorable to voters. No one who owns a home wants to pay rent, that's why you buy in the first place.
Personally, this is why I am fine with higher income or sales taxes.
"Personally, this is why I am fine with higher income or sales taxes."
Indeed, the working poor need to pay more in taxes.
Not even the poor. Really everyone working. I would much rather sleep all day and live off of a pile of money than to show up somewhere and do something for money. That's the tax -- 35% of your waking hours are now at the service of someone else. And yet, they charge income tax on that. Stay home and live off a stash of money in your mattress, 0% tax, 0 obligations. Wake up and commute to work, 35% of your week gone, 35% of your "income" gone.
I am not even that mad that I personally have to pay taxes. I enjoy funding government programs! I think I owe society something! But it sure doesn't make sense that already being rich makes you immune to giving back to the society that made you that way.
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The numbers on wealth distribution are shocking, to say the least. I think wealth taxes without loopholes are a really good idea in the current circumstances, infact I believe it may not go far enough. And I think there has to be a global concerted effort to tax wealth.
The working class are starting to choke and drown in financial stress, and this will only get worse. Capital naturally accretes and we've never had this level of capital concentration in human history.
> No one who owns a home wants to pay rent, that's why you buy in the first place.
If this is actually a common attitude, people are... ridiculous. Real property is a limited resource, and allowing people to own property comes with strings attached. This is a pretty normal thing in very many places.
But I do agree that raising property taxes in CA in particular is a politically toxic topic.
> No one who owns a home wants to pay rent
They just want continually delivered services from the city funded by taking out increasing amounts of debt or selling off new land in a ponzi scheme to fund existing obligations.
And higher taxes on capital gains & dividends.
Sales Taxes are the worst ones. Burden on seller, burden on buyer, regressive. Income is more fair but easy to mask-out for the wealthy. Property is meh, Wealth tax is the best one. Assuming all were well designed.
Sales tax and the gasoline tax are use taxes. They are about as fair (democratic) as you’re gonna get because it’s based upon use most the other taxes whether they’re high or low, you can’t escape from particularly if you are the average person in the middle, and once again, if you benefit from capital gains, that is a huge life-changing benefit, which most working people don’t have. Vote yes. on proposition 40 if you are in California the less than .001 and even the 1% will easily survive.
Property is literally a wealth tax on an asset that can’t move away
why is it a burden when they are already collecting sales tax? They just change one number but nothing else changes.
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Georgism aside, the theory that very rich individuals will move if targeted for taxation tends to be _mostly_ false, when it's actually tried (though it's true for companies to a large extent).
If this were to go ahead, how many people would actually move? "I'm going to uproot my life to avoid paying an amount that's kinda immaterial to me" would be mildly weird.
The amount here is not immaterial. Which is why this tax won’t be like other taxes predicted to cause individuals to move.
If you're a billionaire, it's going to have precisely no impact on your lifestyle. It's a non-issue.
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If price was the driver they’d all live in Oklahoma.
See also this recent post on the practicalities and rationales of a Land Value Text: https://www.astralcodexten.com/p/does-georgism-work-five-yea...
I am less worried about the one time influx of tax revenue than I am about this state’s wanton inability to balance a budget or show a modicum of fiscal restraint.
I think the author may be right about multiple points but I think it doesn't matter? This is one of those, don't let the perfect be the enemy of the good situations. A state-level, one-time wealth tax _is_ something that billionaires can run away from. And this law seeking to apply to people who lived in the state _before its passing_ seems structurally sketchy. This article has some fair concerns.
But we have a one-time billionaire's tax proposal on the upcoming ballot, and we don't have an LVT proposal on the ballot. Saying that the Billionaire's tax will be less effective than promoters say maybe true -- but we're definitely going to get exactly $0 from a statewide LVT for 2026. If the Center for Land Economics gets an LVT on the ballot in a future year, I would strongly consider voting for it -- but that's not on its own a reason to not do the Billionaire Tax this year.
What _would_ be a convincing piece of info, and which no one knows, is what the long-term impacts of a one-time wealth tax are. E.g. Zuckerberg is moving his residence to FL but Meta isn't going to stop employing Californians. And if the state is _credible_ in saying it's a one-time tax, will the billionaires who fled come back after it's done?
No, once you've spent the time and hassle to immigrate, moving back is unlikely.
From what I can tell the residency change for a billionaire is about how often you fly to your various homes. Zuckerberg I think hasn't gotten rid of his Palo Alto or Lake Tahoe property, he just added a FL house and will have a cap on how many days per year he's in CA right? This isn't like a normal person with 1 house relocating.
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"None of this is really about billionaires; California reaches for exotic taxes because its normal one has been broken since 1978."
The author then goes on to talk about CA's property taxes ... but LAND HAS NOTHING WHATSOEVER TO DO WITH THE BILLIONAIRE'S FORTUNES!!! Zuckerberg did make his money trading property, he made it through companies.
Nothing about California's property tax decisions have anything to do with 99.9% of Zuck's (and others') wealth not being taxed!
> Nothing about California's property tax decisions have anything to do with 99.9% of Zuck's (and others') wealth not being taxed!
That may be true, but you appear to have missed the part of the sentence you quoted that came after the semicolon:
Property taxes make up a large portion of many states' tax income. 1978's Proposition 13 made it so that California is -more or less- unable to tax the actual value of any property in the state. Wealthy people who've held on to property for decades get to borrow against the "market value" of that property, but the value of the property used to calculate the tax owed to the state only increases at a maximum of something like 2% per year. This means that you'll see long-term landlords (and holding companies) getting the financial benefits of a -say- multi-million dollar property, but the state only gets the tax of -say- a multi-deca-thousand dollar property.
Because of Proposition 13, property tax increases in California will affect an extremely tiny slice of landowners, [0] so it must turn to other mechanisms when it needs more tax revenue.
In regards to private "wealth creation", it turns out that money is fungible and you absolutely can built a bunch of wealth off of a mortgage if the "market" value of that property has increased by a huge amount, but the costs of holding that property haven't increased much at all.
[0] This doesn't contradict what I've said, I've just left out some details. A quick summary:
Ignoring a few exceptions, when a property changes ownership its property tax is adjusted to be based on the current "market" rate. When nontrivial improvements are made to a property, the property tax is adjusted to account for the "market" value of only those improvements. [1] Some "clever" people have been known to get around the "property changes hands" trigger by making the property be owned by a company and distributing private shares in that company. Want out? Get rid of all of your shares. Want in? Get shares from someone who already has them, or maybe convince those who are in to make more for you. The property is still owned by the company, so its tax is not adjusted.
[1] It's important to note that repairs are not improvements. It's also important to note that the government can choose to ignore all of these rate-reset rules whenever it wants, as it did when all those extremely wealthy people in LA got their houses burned down in that big wildfire that hit LA.
So what? The goal is to fund the government. You may want to stick it to Zuck and other billionaires (and I admit, there's appeal to that), but if fixing our broken property tax system will fund the government (without causing mass displacement as people's property taxes go up), then we should do that. It's a fix to a structural problem, and a fix that will be durable and be reliable in the future.
Taxing billionaires is not a durable fix to budget deficits. The article very clearly explains why this is the case.
If the tax is calculated based on residency at the time it was earned or granted rather than when it vested or was sold then it doesn’t matter if they leave.
Has there been a good study that firmly demonstrates that tax rates are the primary motivation that rich people have to live in one place or another?
So they're dealing with the problem the rest of the country has been dealing with since everyone started wanting to move to California?
I don't live in California but the article mentioned Proposition 13 which capped property tax rates and the reassessment is only when the property changes ownership?
Is that right?
That seems unfair to people who recently moved compared to the people that stay in their house for decades.
Reading more it looks like California created alternative types of property taxes like Mello-Roos.
In my state we used to have property tax values reassessed every 8 years, then they changed it to every 4 years. But my bill goes up every year. I started off paying about $2000 25 years ago and now it is about $5000 but my property value has also increased about 3X
It seems like if you just taxed an ordinary house at a percentage and you taxed a billionaire's huge house at the same percentage that you would get more money from the billionaire without needing to create special laws and special taxes.
Yup, Prop 13 is a mess and is a big part of why housing in CA is broken. But it's politically toxic to even mention substantial reform, let alone abolishing it or even just phasing it out over time.
If you are retired and did manage to buy a house and are not rich, proposition 13 is the only thing keeping you in your house.
The article contains significant inaccuracies. Individuals in the lower and middle economic strata need not advocate for the interests of billionaires or those with assets exceeding $100 million; these individuals have already benefited disproportionately.
Over the past 50 to 60 years, wealth concentration in many Western nations—coupled with the relocation of jobs to East Asia—has primarily favored the upper class rather than the middle class. Similarly on a different battlefield, Brexit has not served the majority of the United Kingdom’s working class population the average citizen has experienced a decline in wealth. In Great Britain, most residents did not benefit from North Sea oil revenues, which were largely directed toward affluent groups—a contrast to Norway’s more unselfish. forward thinking approach of establishing a sovereign wealth fund which benefit it all to the consternation of the wealthy well connected conservative class within Norway.
Remarkably, adherence to sound financial principles—living within one’s means, settling obligations, and saving—can enhance long-term economic stability across all income levels and even at the governmental level.
Much like Proposition 13, voting in favor of Proposition 40 is a straightforward choice. Historically and currently, western political leaders have failed to act in the best interest of the majority usually, they have to be dragged along kicking, and scratching.
It shall be interesting will the middle and lower end carry water for the wealthy again and vote against their interests to save the lucky 214 billionaires in California, that’s right you heard it right, 214 out of 40 million people…
The billionaires won’t be going anywhere. There’s a reason why the West Coast, California, and Oregon are what they are, when compared to the rest of the United States outside the Northeast, climate, higher education, better business opportunities, better political climate for the population, particularly if you look a little different or have a different religion in comparison to a large part of the United States, particularly after 1945.
Brexit is such an odd case, that it seems not worth comparing.
It's so tied into British classicism, and the generally pathetic nature of the middle class English, that trying to extend the results outside of the UK produces absurd ideas.
Essentially the British people took a (not particularly economically motivated) deal to reduce migration, at the cost of economic connection to the EU.
This upset the UK political class greatly, so much of the following policy was about punishing the population, rather than long term economics.
"I'm livin' to keep warm, you livin' to pay rent [...] Bitch, I made my moves with shackled feet"
- some Kendrick guy
Narrator: Kendrick’s feet were never shackled.
https://www.pangram.com/history/afa0fd9b-eeae-49d0-932a-24b8...
This is mostly slop. Don’t waste your time.
> The land value tax can’t be dodged by leaving nor can it be passed on to renters
Of course you can. You just charge more. Yeah the market dynamics can put a cap on it but the Bay Area mints millionaires like there’s no tomorrow. They can pay.
The effectiveness of other taxes aside, the argument that billionaires will leave if taxed at a higher rate isn't compelling.
Billionaires are not struggling to meet their expenses. If you raise their taxes, they aren't suddenly unable to afford things. They don't need to change their behavior just to get by. A carbon tax forces average people to drive less, but doesn't affect billionaires at all.
Billionaires live where they want to because they can afford to. They're not going to let themselves be chased from jurisdiction to jurisdiction because of numbers that have zero impact on their daily lives. That's what happens to poor people. If California raises taxes on billionaires, very few will actually leave. They're where they want to be and they can afford to stay there. What's the point of having a really big number in your bank account if you have to move to the middle of nowhere in Alabama to keep it from falling just a little?
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Edit: Yes, some billionaires have changed their tax residency, but not necessarily their physical location. They likely still own properties in California and can likely be found on them rather a lot. This is evasion, in spirit if not law. Taxing land is just one way to make them pay. Others should be pursued as well. The argument that we shouldn't tax billionaires because billionaires are good at not paying taxes is complete hogwash.
The article quite literally states the opposite, showing that almost half of the taxable base left because of the Jan 1, 2026 cutoff.
It may not be logical, but money effectively turns into a scoreboard at a certain point. The ultra-wealthy care whether they show up to the yacht club in a 100m or 150m yacht.
That individuals won’t optimize their wealth beyond $100m, $1b, or really any number just doesn’t square with observable behavior.
Starting a business self-selects for people that desire money (over other benefits).
The purpose of a business is money (otherwise you start a hobby or charity or something non-businessey).
Being very successful at business is a selection bias for people that are highly competitive at chasing money.
There's a bunch of traits in very wealthy self-made people due to the filter they have run through.
Tax too much, and we kill the golden geese of the economy. Examples abound around the world of crappy economies that can't afford good socialist stuff because they've demotivated the rain makers.
If you are rich, you want to be in places where you can enjoy and show off and well be rich. Living in some third world or second world hell hole or some deep red state with no mountains or beaches where you can’t drive and enjoy your fancy car just would not be fun it’s basically the reason why you wouldn’t want to be rich from America and live in Mexico or further south.
Not to mention your businesses need to be in relatively affluent areas where most people can afford your products and from an educational standpoint, most of the better schools are on the west coast or are in the upper east coast.
Worry. about the other 99% maybe more precise, the other lower 90% of American Society.
The article claims that 6 individually named billionaires already left (presumably recently), and another is likely to leave if he loses his court challenge.
Why move to Alabama, do you know Austin is very good
so what if they do leave?
they're bad for the world around them, and you can add an exit tax if you want to
This is a strange argument coming from the side of the argument that usually talks about billionaires being greedy and doing anything to make the numbers go up even though they can't feel the difference.
They can certainly afford it but they obviously like their money to stay theirs and like getting more of it, not less.
A dozen billionaires already left California.
> the argument that billionaires will leave if taxed at a higher rate isn't compelling
I agree with this. California’s climate and culture will keep many a billionaire within tax nexus reach of the state. Of course, this isn’t a strategy every locale can pursue, but I don’t see a reason for California not to exploit its advantages.
But I think the purpose of a wealth tax is precisely to get rid of greedy billionaires.
So if they vote with their feet and leave, then that's an even better outcome. Now they can't manipulate the government anymore. They can go manipulate and continue extracting wealth from some other place.
Yeah, kind of a win-win in my mind too.
Let's hope other states follow suit and they keep on truckin'.
Truckin straight to the trash heap where you can sort recycled cans by hand for a living. What an abysmal vision.
Yeah because they got billions by extracting it like mosquitos. It came mostly from your billions I assume. Without that it would have been all yours. Clearly you have zero concept of how an economy works.
You know the extraction is more like 10000-to-1 than 1-to-1.
But in essence I do believe that I (and thousands of others) could have had at least $100k more net worth if they hadn't monopolized all user-acquisition channels and if they hadn't helped bring about the many laws and regulations which made this possible.
I have no ill feelings towards them but I just don't want them in my state competing against me for limited resources using money which they acquired through an unjust scheme which I was coercively made a part of but which I never agreed to and have been protesting for almost a decade (on deaf ears).
It's not personal or even saying anything negative about their character or abilities. From my perspective it's just pure self-preservation. They either need to contribute more tax to make up for the injustice or they leave.
When they sell their assets, it makes those assets more affordable for the rest of us. So any forced sale is good for society. I don't see any issues with it. We were/are forced to prop up their stocks through government contracts, grants and regulatory monopolies... So they should contribute something on their end too.
And I don't care about the "jobs they create" - They created jobs for my competitors to get easy money in cushy jobs. I want those jobs gone too! I don't want FAANG employees bidding up house prices in my area.
I only want to compete against people who are playing by the same rules as me! I don't want to compete against people who can rewrite the rulebook as we go, to suit them.
California made its bed with regulation and housing costs. Now the productive folks are just finding better places to build.
How is it that landlords can't pass a land value tax on to renters? The link makes this claim, but I don't understand it.
It's a (real) property tax. Adjusting rent accordingly seems pretty easy. And, as I hope we all know, property tax is inherently regressive.
if its got feet, why all the focus on RTO all over the place?
I think the point is that it's possible to move the assets without moving their owner.
This is an old argument. Remember how all the billionaires were going to flee NYC if/when Mamdani was elected. And... then they didn't.
Well Mamdani's pied-a-tierre tax was specifically a real estate tax, levied on the real estate of people who don't have residency in the city. It's a marginal tax in the grand scheme of things, but unlike the billionaire wealth tax, it actually works, because the real estate can't move. And the owners can't just threaten to leave because they've already left, that's why the tax hits them.
Except that several billionaires have already left California, in anticipation of this law, as the article notes.
He also hasn't really done anything. Mostly because he made a bunch of promises to do things he doesn't have the authority to do.
Not sure if anyone could get such a policy change made given that California politics is now just "Whatever the California Democratic Party Wants" and they are very rigid in the ideas they accept.
But I think the proposal being discussed is 1000% more consistent with the principles of a free, non-communist society than the crazy "wealth tax," which sets the precedent that if the government thinks you have "too much" stuff, they can just declare that to be so, and come and take it. Given that the people in charge of drawing the line between "so rich that we need to take your stuff" and "not that rich" will be the same people who have blown up the state budget, I don't see why anyone would trust them.
(No, I'm not Zuck's sock puppet account -- I expect it won't be my turn for "wealth" confiscation for at least 5 years, worst case.)
You’re just carrying water for him. Zuckerberg is a winner. Zuckerberg and the other 214 billionaires in California will be fine you don’t have to suck up to them they’ll be ok a billion times over.
They won't BE in California to be taxed, which will only accelerate all our turns.
wealth taxes are from the old roman republic. the wealthy showed off their worth to each other by how much they could pay in taxes.
its not particularly crazy and is far older than communism or socialism which have the much more straightforward setup of seizing the means of production rather than taxing it.
however, it didnt stop the ultrawealthy from seizing power for themselves
As a rather economic left European person I think this:
Last week California certified a Billionaire Wealth Tax for the November ballot: a 5 percent one-time levy on the state’s billionaires, paid out over five years, to raise about $20 billion a year for health care, food aid, and schools after federal cuts
Is just flat out crazy.
To pretend that politicians who are in a perpetual political battle for short-term survival will somehow use this weapon of mass financing responsibly and only once it comically absurd.
This will open Pandoras box.
Why not both?
Tax golf courses
Two things:
1. If wealth was only motivated by taxes and was going to leave, it would've left already. Fact is, billionaires don't want to live in Tennessee;
2. Nobody is doing the right thing to tackle any of this, including California.
The article mentions California has land and that's the key point. Unfortunately, California homeowners have been coopted into voting against their own interests to raise property values. If the house you bought in SF in 1975 for $80,000 is now worth $3M, you still only own 1 housing unit's worth of wealth. And that housing cost is an input into everything you need to buy because all the workers required for those things have to be paid high enough to pay those exorbitant rents.
Let me repeat that: high housing costs are an input into everything that you buy.
So what needs to happen? We need to stop treating housing as a speculative asset. It's simply stealing from the next generation. Worse, it's diverting investment capital from productive output because land has become the asset with the best tax treatment, highest returns and most government protections. So what does this look like?
1. Some form of land value tax. The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable;
2. Punitively tax land hoarding including second homes. We could give discounted rates to primary residences of state residents. Nobody else should get a discount. This would mean repealing Prop 13 and that's never going to happen. As an example of this, I'll bring up Prop 19. In CA you can inherit a preferential property tax rate. Prop 19 proposed to limit this to only one property could inherit this preferential rate and it barely passed (51% IIRC). Do we think that 49% of California voters have multiple properties that have property tax rates set 40+ years ago? Of course they don't. It's an example of how people vote against their own interests;
3. Part of what sold Prop 13 originally was the idea of pushing seniors out of their homes with property taxes. Well, that gave Disneyland a tax rate that was set in the 1960s. California should do what Texas does: you can defer your property taxes until you die if you're a senior but there's no capped property tax rates like incumbent SF residents have and no inherited preferential property tax rates;
4. Wind back the preferential collateralization of property for mortgage debt over time. Residential property lending now dominates bank lending and earnings. It's significantly harder to get finance for any form of productive output;
5. Wind back over time preferential tax treatment for home ownership.
Do I think any of this will happen? No.
Oh, one of the worst things to do is transaction taxes, often called stamp duty. This is where you pay a percentage of the value on purchase. This really hurts mobility. I guess it's fine if it's only on the luxury end of the market (CA's is at $5M+?) but it's not a good idea regardless.
The other part of this is to provide social housing like Vienna. The government should be a significant supplier of affordable quality housing.
> We need to stop treating housing as a speculative asset.
This kind of assumes the only reason a house appreciates in value is because people are "treating it as an asset" rather than "the house I bought 30 years ago in the middle of nowhere is now smack dab in the middle of a very desirable area." At that point it's simple supply and demand, not some homeowner being greedy.
> The higher the value goes, the higher the taxes go. You raise the rent and your land value taxes go up because it's more valuable
This makes the fatal assumption that just because a house is worth dramatically more than what you paid for it many years ago that your income must have risen just as dramatically. "Oh well, too bad, sell your house and deal with it." Maybe people kind of like living where they've put down roots and don't want to be punished for something outside of their control? Any proposal that boils down to "pay more or fuck off" is not going to go over very well.
> We need to stop treating housing as a speculative asset.
Something I've been yelling from the rooftops.
Housing can either be affordable, or it can be an investment that's bought, rented, and sold for the sole purpose of profit. It's not possible for it to be both.
People expect their house to appreciate faster than inflation, but all that does is rob the next generation of home ownership.
Many, many years ago multiple generations would live in one home that may have even been built by a generation that is long dead.
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What are the proposals for accomplishing this?
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> voting against their own interests
What you mean is voting against what you think their interests should be.
This phrase is incredibly condescending and undemocratic.
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California is full of people who do not understand how investment works and want it gone. This is progress missing from progressive. It is the social missing from socialist. Ists and ivs with nothing, merely a pack of stupid ideas. The residual is reality: no-teeth, drug-induced stupor sleeping in street squalor and their rent-seeking enablers cozying up to the tax authorities.
>California is full of people who do not understand how investment works and want it gone
You're being too generous. California is full of envious dysgenics who want free stuff and don't care how they get it.
Good plan. Raise property taxes so non-billionaires are forced to sell property to billionaires who have an insane surplus of wealth.
Billionaires aren't going to leave, they're going to acquire more property.
> nor can it be passed on to renters
This is an asinine claim - any cost can be passed along to a willing payer.
Tax - why not both billionaires and land.
This article is nonsense.
California already has a property tax, about half of which is based on the land value, and the other half on the structure on the land. So this is not some brilliant idea, just a renaming of what we already have.
If the author is suggesting to repeal Prop 13, that is also not a new idea, and has been discussed for decades. Good luck.
Coveting is a terrible basis for an economic system.
Yes, agreed. It's expected, that what the peasant's do, envy the rich and have lots of children.
Which economic system are you critiquing? I would tend to agree, since I think wealth taxes amount to a breaking of the 8th and 10th commandments. But I also think some would argue that the consumerism (envy) that often drives capitalism is a form of covetousness. I think the counter argument is that capitalism does not require consumerism, and that consumerism (envy) can appear in any economic system.
capitalism itself is covetousness and greed.
not good believer in christ would ever participate, when jesus made it clear you are supposed to freely give away everything you own to the poorest among us
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You prefer a regressive one?
Don't argue something the GP didn't say.
There are plenty of other taxation schemes that are progressive and more durable and effective than a wealth tax.
The main reason we're here is because talking about reforming Prop 13 is political suicide, even if that's the best way to fix CA's budget.
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>. The land value tax can’t be dodged by leaving nor can it be passed on to renters
ROFL what? I'd bet the author a lot of money that costs WILL roll downhill, the source matters not.
I think the idea is that if the market demand is such that it allows them to raise rents, they'd already have done it, whether or not expenses justify it.
Did tariffs raise prices? Or did prices stay the same because "if the market demand is such that it allows them to raise [prices], they'd already have done it"?
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If they can't raise rents to cover expenses plus "enough profit to make this PITA worth it" then things (slowly over time) grind to a halt.
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Economists for generations have agreed a land value tax is the least prone to this problem. You might want to take it up with Adam Smith.
Yeah, that's unlikely. There are certain classes of renters it can't be passed on to during their rental term, but I'm guessing it can and likely would in general.
People can also sell their land/homes and move. It's less liquid than other assets, but less doesn't mean people won't sell/leave.
In Massachusetts it’s legal to pass on real property tax increases during the term of a residential lease, provided the lease contains specific clauses. (Most leases do, as a result.) And most commercial leases are triple-net, meaning the tenant is also on the hook for increases.
I would be surprised if most land consumption taxes (whether structured as property or land) would not get directly passed through to the beneficial consumers of that land quite quickly, or for their privilege to consume that land to be terminated/non-renewed at the expiration.
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I'm curious what costs you think will roll downhill and why
Feel free to look up the percentage of the CA tax base by 50th, 90th, 95th, 99th and 99.9th percentiles. The myth that billionaires don’t pay their fair share is just that - a myth. A lot of lower income people don’t pay any tax at all and have their state services entirely subsidized by the rest, the vast majority of which is paid by the richest 5%. Every time I see a call to tax the billionaires I know I’m hearing from a fool too partisan to look at really simple to understand numbers.
The land value tax is a good idea, but the pure conceptualization that die-hard Georgists have, in which it's a flat tax, doesn't seem in the same line as the billionaire tax. What'd like is just a (drastically) revised version of Prop 13 in which those protections apply only to the first $N of property value. We can effectively tax the real estate of billionaires without having to tax everyone else. I would like to see taxes on luxury properties approach 100% of the property value, to make it extremely painful for anyone to own such properties, and encourage them to be split up among smaller owners.
billionaires are truly the parasites of this world.
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It's the single taxers again, with a new argument.
I'm not a single taxer.
The article is. It's an argument for the main tax being on real property.[1]
[1] https://en.wikipedia.org/wiki/Single_tax
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just make it federal, bump it to 20%, permanent, each year over shares they own... then they will still pay 20% less than the other 90% of USA
I hope we agree that we need more taxes, it doesn't matter if they are taxes on billionaires, taxes on property, taxes on sales, taxes on crypto, or taxes on the poor. Without taxes we can't have a civilized society.
The number of different taxes is constantly increasing, obfuscating the total tax burden, and making democratic accountability almost impossible. Additionally, tax collections are already at a historical high, while government deficits world-wide are also at record levels, with services on the decline, and no realistic prospect of balancing budgets. This is true for most western countries.
Given the current situation, I do not agree that "we need more taxes", but would welcome your clarifying exactly what you mean.
For a long time I agreed with you, but seeing how the tax money is spent I cannot agree any longer. In most cases government is no longer even spending the money itself, instead it is giving the money to NGOs.
I would much rather see people keep more of their dollars and use them to 'vote' for the products and services that benefit them most, via their purchases.
I’ve long thought if you doubled tax revenue or halved it the public services rendered would be the same. Tax revenue is not the problem.
How much of California's budget is "giving the money to NGOs"?
Congragulations you have just rediscovered conservatism.
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Taxes aren’t 0 right now, nor particularly close for anyone being taxed. Your statement supports taxes as a concept at all, but what’s the specific argument that they must be more than they are today?
No thanks, I pay too much in taxes as it is. California has a spending problem, not a revenue problem.
Spending problem? What spending problem?
https://www.smartcitiesdive.com/news/california-high-speed-r...
I think we should start with changing taxes on corporations/companies, specifically being able to indefinitely write off expenses against income regardless of size/etc...
Most companies take profit eventually, but if it's possible for a company to decide to never take profit and grow/acquire perpetually without paying any taxes on gross income, that's a problem.
That'd be like individuals being able to deduct living expenses and having uncapped pre-tax 401k contributions.
The ratio of the economy that gets collected as taxes has only gone up over time. Do you have an idea for how much should be collected as some ideal ratio? At what point do the effects of taxation become counterproductive?
Well, the general economic consensus is that for income taxes, the revenue-maximizing peak of the Laffer curve is around 65-70% [1]. Revenue maximization isn't necessarily the right primary goal, though.
[1] https://en.wikipedia.org/wiki/Laffer_curve#Income_tax_rate_a...
Same back at you. Clearly you think they’re too high. So what is the correct ratio?
The straightforward answer is there is no correct ratio. The best tax regime is the one that allows for sufficient funding of necessary and desired services and long-term economic investment while also balancing wealth creation with wealth inequality. That number isn’t fixed and it’s clear that it shouldn’t be evenly borne by the population as a whole.
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this is the sadest assertion i've ever seen. if sucking the life out of people is the only way people can remain civilized then we are truely lost.
How else are we going to support public infrastructure and society?
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Assuming we do need more taxes, the manner of taxation absolutely does matter.
haha. did you say taxes on the poor? I'd like to see you implement that.
If the government keeps doing this, land owners will blow their wealth on the only things that government can't easily tax: blow and hookers.
But leave it to the ineptitude of California liberal politicians to always find a way to steal from the citizens that have the ability to produce and save, in order to transfer the wealth to illegals, politicians friends, druggies, and foreign powers.
I ctrl+f search for "gentrification" and nothing pops up. I close the Substack blog and proceed with my day.
why is that?
Because TFA ignored the problem.
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“ Larry Page, Sergey Brin, Peter Thiel, Don Hankey, Travis Kalanick, and Steven Spielberg, worth roughly $540 billion combined — had already moved their tax residency out of state before the measure”
Imagine being worth billions USD and rather than being a part of the solution to support the state that helped build your wealth, you spend your money to just get around paying your small share.
It is trivial for the wealthy to buy another house elsewhere and “move” their primary residence.
More money isn't going to solve our issues. The limiting factor of affordable housing is policy
you spend your money to just get around paying your small share
I wonder how much they spend on lobbying compared to what their tax bill would be.
Comedic article related: https://www.mcsweeneys.net/articles/i-will-pay-any-amount-to...
The greatest feat that Mao achieved was to take the land that had been tightly gripped by generations upon generations of owners and to shake up the distribution of it so that the land could produce again. People naturally want to work the land, but you end up with suboptimal inertia because owners just end up letting it sit fallow if it doesn't immediately return. It's how you turn a billion serfs into a billion entrepreneurs.
We're already way past the point where a creative cocktail of 10 different progressive taxation schemes could feasibly fix the root of the problem, and you feel this especially if you were born after the year 2000. You're more likely to see results if you pick up a red scarf than if you pass a higher wealth tax, sales tax, land tax, consumption tax, estate tax...
> shake up the distribution of it so that the land could produce again... It's how you turn a billion serfs into a billion entrepreneurs.
In your telling, how does the resulting famine that killed of tens of millions fit in?
The famine is unrelated to the land distribution but also the farm land distribution didn't last. They changed course and put the land into collectives and it is still in collectives today so the famine cannot be blamed on collectives.
My understanding is the famine was essentially the middle managers of these collectives over stating yields and being too afraid to admit their lies. To maintain the lie, they shipped off food while the farmers starved.
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Famine along the yellow river and yangtze river has been happening for thousands of years across all dynasties, its specifically what land distribution was meant to fix, and since 1960s there hasn't been a famine since. My parents and grandparents lived through it and left cities to work in countryside fields during the cultural revolution. You tell me how the famine fits in and I'll let you know if you're accurate or not.
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those who advocate for land value tax are usually advocating for single/minimal types of taxes (and, in fact, against sales and income taxes) rather than a cocktail of them. "Single Tax" predominantly refers to a single land value tax. https://en.wikipedia.org/wiki/Single_tax
My point is that a single land value tax would have the same effect as piecemeal improvements to current tax portfolio - none of it would fix the inertia already priced and baked into the system.
> A revolution is not a dinner party, or writing an essay, or painting a picture, or doing embroidery; it cannot be so refined, so leisurely and gentle, so temperate, kind, courteous, restrained and magnanimous."
> To put it bluntly, it is necessary to create terror for a while in every rural area."
Let's not glamourize the Mao's land reforms. It required the killing of 1-2 million people. Even then, the collectivization was a massive failure - not only did the peasantry not get to enjoy the benefits of land reform, a further 15 million people would die from the resulting famine.
The deep irony is that Taiwan was actually able to do the same reform but with much better outcomes, with much less loss of life or political violence.
Taiwan did not have anywhere near the land distribution occur under CKS/CCK, nor the same veracity of landlord clique ownership. And, you're further wrong in that a big part of white terror was specifically due to 外省人 owners of factories and farms, from land stolen from the aborigines. The white terror wasn't by any means less violent and senseless than cultural revolution.
I prefer sun yat sen’s Land reform ideas to mao’s
Solon did this in Athens. The French Revolution did it. They actually maintained it and had historic states with strange liberty.
Mao pretended to do it but then introduced the familiar Stalinist collectivization that had killed everyone in Ukraine - as he knew.
The French Revolution ended up in dictatorships until it got to something that can call itself liberty.