Base taxes on net worth only.

I think the point is being missed here. When tax is framed as a punishment or deterrent to something then income tax punishes and deters production(because we are so used to it we don't notice it as a difference to anything else), sales tax punishes commerce,etc. Net worth tax does not deter investment because investments are safer and more predictable in a less speculative environment. Particularly when the part that matters most is most stable. If taxes are re-framed as a means to "collectively" perform in ways that individuals cannot, then the formation of those structures that a free market system and a democracy require to exist, are paid for "collectively". They are not seen as "taxes" i.e. something extracted, but as a cooperative investment based on a constitution. The question then becomes; Is this done with a tax code that pushes all wealth to those with a head start until a top heavy system creates a boom bust unstable economy or a tax code that facilitates a level playing field that happens to be based on the only requisite principle for it's existence? Keeping it simple reduces graft. Trust is always the issue when groups of people "cooperate". So, reducing artificially inflated prices and speculation will facilitate that trust.

 

Would you tax the net of one's assets and one's debts?

 

Best post in this thread.

 

well I would hardly call property tax costs being passed on to low income people a moot point... in some states people are paying near zero for property taxes currently, so this would increase housing costs to the people who can afford it the least, and they as we all know, pay almost no taxes the way it is already, in fact most receive a gain in income as a result of the current tax code... now we could argue all the other day to day taxes like sales tax they can't escape... but many might pay less as a result of the current tax system than they would if based purely on property taxes where rent absorbs that cost...

in some states like mine we pay almost 3% property tax bills... and this is just to the local and state government taxes... now with your plan, suddenly this would jump to over 7% property taxes in my state... now like you said, we could argue the money I don't pay in property taxes, would be offset and equalized with the reduction of other taxes in my life, and that somehow as a greater use of resources my costs would go down... which I will acknowledge, in my situation would almost be a wash... since I am able to pass along increases to tenants in most cases, thereby shielding myself... in fact you could almost argue I charge too little for rent if the market can sustain an increase like that already, but I'm factoring in nobody would be able to escape the cost renting anywhere else as a practical matter...

but in the end, it still hurts the poor the most, since they for the most part don't pay taxes to begin with... now I think thats unfair myself, but I've also seen how many of them live, they really can't afford taxes, but now they would be paying them with no chance to end up with a net gain come tax time... because like you said, we'd eliminate all other taxes, and as a result eliminate most of the IRS as well as all the insanely nutty tax code which would give them any extra benefits right? so how would we target things the way we do today, with no tax code to give a benefit to someone... or would you say well, okay lets not eliminate the IRS and start once again adding in little slice after little slice of tax code to target certain people or industries...

see thats the problem... an all or nothing approach can cause problems as well once we're not able to target things... but hey I'm all for eliminating the vast majority of the IRS, I hate them so much, but there are some necessary evils that come out of that like being able to help speed up progress in certain areas... and believe me, I hate the idea poor people get a free ride in many things, but some day that could be me... would I want to now pay taxes where before I had not, when every penny really does mean more to me...

in a previous message about fixed incomes, you said we could just pass laws with a 2/3rd vote to add in nuggets like say the first $200,000 of property can be excluded, but many seniors home value exceeds that as their entire retirement nest egg... you said they wouldn't be forced to sell if we made it 200k, but either way that could still force many to sell their property, so lets make it 300k, then 400k... but then we end up with a society where only the wealthy and corporations pay taxes... thats not fair either so lets move it back down to 300k then 200k then 100k... and now people are forced to sell their homes they've lived in for 40 years, and wanted to die in, hopefully 20 years from now, but they can't because we're taking the taxes now when in many states they had almost no property taxes and depended on that to live... and since they don't have vast incomes to offset the increase in property taxes, its a net loss for them, so they must sell and move in with the kids because their fixed incomes aren't that large... and this is assuming people even have homes to sell... many do not... its even worse for them... because their tax money essentially goes to people like me, the landlord, who raised rents to cover it... so once again the poor get wacked with it???

look I'm not trying to say there isn't some wonderful things about a property tax only system... I love the "fairness" it represents, but at the same time it also dings the poor who can't absorb that cost compared to the current system... I suppose since I objected to retirees you'll suggest, well lets have another 2/3rd vote to allow anyone with a certain income to receive an annual refund to cover part of their rent now... and another 2/3rd vote to cover this, or that, and the other... but then we're slowly going back to what we hate about the old tax code... (albeit I WILL acknowledge even with things like that it would be much less complex and costly to comply with, however slowly we'd leak back to some complexities and fraud like we do have now, but I WILL acknowledge, in theory it should be less)

P.S. why do you keep saying a 2/3rd vote, you want to make this part of the constitution, or you want to adjust the constitution so everything takes a 2/3 vote... doing either could make for other big problems... how about we also include a balanced budget amendment, which once again, solved a problem but creates others in certain times of crisis in the country... nothing is a simple solution... everything is insanely complex when you apply real life circumstances... its hard to pick who gets hurt and whats really fair, and how fair should we be when others get hurt...

 

So when you say, "Well then, I say we keep it simple then, and only factor in real property, financial assets, and debt," what debt are you talking about? Can you provide a concrete example of a taxpayer's debt that would be taxed?

 

I know I'm arguing your position in other messages... but in your response to this guy... I think you could have summed it up a little easier for him to understand...

cite that the current tax code system gives people a "standard deduction" for those who choose not to itemize on their returns... and in your argument people could either itemize everything or accept a standard deduction created by politicians who probably make that number up too and it doesn't reflect the average american, so some gain from it for no reason, while others who would lose, choose to itemize generally... so this new system you propose could pick an arbitrary number where some people will choose simplicity since they gain benefits, and others who would lose will once again, itemize to gain the most benefit... either way calculating net worth is insanely impossible since its so open to fraud and deceit since it requires the wealthy we want to ding, to be honest, and they won't...

a property tax only solution is more possible in theory than a self-report net worth calculation...

but just thought I'd add in that nugget of data above for your argument with the other guy... I guess instead of calling it s standard deduction, we'd call it a standard net worth... who knows, even that idea sounds nutty to me as well... but the idea of keeping track of every item I own and its depreciated value, thats mind boggling once you obtain actual assets... heck if this is purely net worth, we'd have to go right down to that used pair of jeans, and that half empty pack of cigarettes someone has, since they all have a net worth...

 

and would this debt an individual has, count as a net worth to the other entity... like if I take a loan from a bank for $250,000 will that count as debt to me, and a net worth to the bank, despite the fact I could file bankruptcy and make that debt disappear, while they can't make that net worth disappear for all the years they were force to pay net worth taxes on it now... or would loans be one of the (sounds like a long growing list) of exceptions we don't count?

what if I borrow $15,000 from someone who is not a business, and don't pay interest, will I have to count that as my net worth, and will they be able to count that as a net loss for them until I repay? or will they still have to count that as net worth while I owe them the money and might not repay it, and while I get dinged as a net worth for being able to use that money borrowed from them?

all sorts of crazy fun questions that will lead to more and more exceptions and more and more complexity... just as evil and dumb as the current tax code...

I think the only way to bypass many issues is a property tax only and not a net worth...

P.S> or what about the most fun net worth argument... if I receive a christmas gift, will someone have to supply me with the receipt of cost of said gift, since I now have to calculate my net worth... so now every gift I receive I will know how cheap the other person is or not! lol

 

That's not net worth, people would simply put the money into assets that aren't being valued. There is no national property tax system for the federal government to establish that value and states could pull all kinds of tricks. And again property values vary WIDELY all across this country there is not an equalizing mechanism. My house is valued at about $150,000 here, same house in California could be valued three times that amount. A much smaller condo in Manhattan 5 times that much.

And what about when I retire, the federal government is just going to take about 10% of my retirement savings every year?

 

So I can self-insure my home and declare it has zero value and avoid the tax. I can insure my home at a WIDE variety of levels and coverages, the insurance policy doesn't set the value, that is done at the time of the loss.

 

The fact is, you already know that land value taxes cannot be passed to tenants, so why act like you don't?

If you could pass the cost of the land tax to tenants you wouldn't be opposed to the tax. The fact is, you hate the idea of taxes on land because you already know that they can't be passed to ANYONE else. The higher the land value tax is levied, the less profit the landowner gets, you know this. If the land value tax is levied high enough then the landowner gets no profits, you know this, also. But since the landowner is basically a parasite, and doesn't provide anything, taxing land at its full rental value (leaving the landowner with no possible profit) doesn't reduce the supply of land; which means that the prices tenants pay stays the same; and that is why land value taxation is the most desirable tax, economically.

 

So your idea is to raise land taxes so that costs will be so high that people won't be able to rent to tenants?

What do you plan on doing with all those new homeless that can no longer afford to even rent a place to live?

 

what law in america prevents land value taxes from being passed to tenants... its not illegal where I live, I pass those taxes along to them... for the commercial tenants they get a very detailed itemized listing of their rent in the contracts which actually shows the tax bill in detail, residential customers do not get that, its just a monthly lump sum they see...

I don't understand why you're arguing the taxes aren't passed on to the tenants... clearly its not illegal, and clearly I am doing it...

and just because I can pass them on, doesn't mean I support that as the best means of taxation, simply because it works out in my benefit... the problem I have is thinking of elderly tenants I have, who are taxed currently on their income... since they have such little income, they pay almost no taxes, its just reality, they are poor... now if you pass a 4% tax on to me, I pass it on to them... so that would RAISE their monthly cost of living, with the way they live currently... all the other taxes accounted for, do not add up to 4% of their income currently... so it would HARM the elderly in this case, and generally all poor people who absorb the cost passed on to them...

why do you think changing the tax system doesn't increase the burden? I know all the goobly guck you keep repeating over and over again, but do the math... I don't get pegged with more costs, the tenants do, I pass all the costs on to them... so it doesn't bother me one bit if they went up dramatically or not nationwide... it wouldn't impact me... it WOULD negatively impact the example I provided... because of their income levels... they're just poor old people who can't work anymore, they don't buy new goods or services, they simply pay rent, electric, and occasionally walk across the street to he store and buy food using their assistance cards... they don't consume anything else that would generate revenue because they currently can't afford to... in fact I haven't raised their rent in 5 years because I am fully aware of how little income they have, its like my one charity case, if I kept up pace with them as the other tenants, they'd have left already... the $120 more they'd be paying in rent monthly (after 5 years of no increases) would crush them... little alone if I added another 4% on top of that...

why do you call the landowner a parasite... I own a building, I rent it out, other people can afford it, and find benefit in it... if I was a parasite I would be providing no benefit to them, but I do... a clean safe place to live... thats not a parasite... just because you dislike land owners is no reason to think they are parasites...

here lets do this...

I have one multi-tenant residential property (12 units)... roughly valued at $670,000... roughly $130,000 of that is the value of the land ($540,000 for the building)... what rent should I charge... then, what rent should I charge when you add 4% to that tax bill? explain and show me how costs will not go up as you keep saying...

don't forget to include all the related costs with renting places, maintaining them, and repairing all the things broken... as well as court costs from dealing with renters... and include a profit for me every month... currently I have an 11% margin on an annual basis for that property... which is pretty good actually... rents in the area keep going up and I keep lagging behind the other landlords so I keep a steady flow of applicants while they try to maximize monthly profits with higher turnover... I choose to save money with lower rents and long-term clients who don't destroy my place...

 

Yes, when the land becomes more desirable the tenants or potential tenant will offer more for its use, but that has nothing to do with tax burdens. The burden of the land value tax can't be passed to the tenants. If the tenants are willing to pay $1000 monthly rent for a parcel of land and the land value tax is $1000 per month on that parcel, then the landowner gets no profit (which is economically ideal), and if he loses the tenants he is still stuck with the bill. The land value tax cannot be passed to tenants or consumers as higher prices, it cannot be passed to producers as lower wages, the entire burden is shouldered by the landowner AT THE TIME THE TAX IS LEVIED. After the land value tax is levied at the full rental value of the land (forcing land prices to $0), then it becomes burdenless on all economic activities.

 

you say its economically ideal for the land owner to get no profit... but the land owner (me being the owner of the multi-unit dwelling) is making it more affordable to the land renter by sharing the costs among multiple parties... rather than a single party absorbing the entire cost... because that individual may not be able to afford the land, and by renting it, they can share the cost among multiple people...

is it economically ideal for people NOT to be able to rent land? what about a company that wants a store front, is it economically ideal or even possible for them to buy the entire building when starting a business? so renting the use of land is ideal... what about someone who needs a new living situation, is it economically ideal for them to wait until they can afford to purchase the entire price of the land? or is renting the land ideal until they can afford to?

please show me the math on how you arrive that property will become $0 because all you're spouting is a hypothetical dream world utopia... show me the real world application of it working and driving prices down to zero... because in order to tax the land, the land must have value, so if it has no value, how can you tax it?

your speculating that all land will all be equally priced the same at some point, and that we achieve some magical 100% efficiency in which we extract every last ounce of value from land... but thats not how land is... yes its a fixed supply I don't know why you keep making that a point when it doesn't change anything... if someone wants a parcel of land, they will pay more for that parcel of land than another... and as a result they will pay more taxes... but in your scenario all land should cost the same and whittle down to nothing in cost? show me the math... come on stop spouting all the junk you read from some paper and show the real applications...

 

Stop. I am advocating specifically for a land value tax and you keep bringing up improvements. I don't care about your improvements and I don't want to tax them.

The taxes on improvement can be passed in part or in whole to tenants and I have never denied this fact. Since you cannot mentally separate the economic roles of the land owner and the capital owner, let's just do a scenario without improvements (capital), so we can isolate this argument only to land value and associated taxes.

Imagine you have 1000 acres of prairie grass, just as mother nature provided it. A rancher is willing to pay a maximum of $6 per acre annually to run his cattle on this land, so the maximum rent the landowner can get is $6,000 annually for this parcel of land. If land value taxes are zero the landowner can keep the entire $6,000 in annual rent, which is his profit (even though he has provided nothing, the land being freely provided by nature). If you capitalize this income potential at 5% the exchange value of the land is $120,000. So, in the absence of a land value tax the landowner in this scenario would expect to be able to sell his land for $120,000. If, on the other hand, the land value tax on this parcel is $6,000 annually then the landowner can receive no net income. Everything the land user (the rancher) is willing to pay, is taken by taxes, leaving the landowner with no profit. If the landowner tries to increase the rent he gets no tenants and has to pay the tax out of pocket. If the maximum rent income on the land is $6,000 and the taxes are also $6,000 then the capitalized value of the land to potential buyers is $0.

Someone is still willing to pay $6,000 annually, and the taxes are $6,000 annually, but there is no profit to the landowner, and that is why the land price falls to $0.

As you can see in this capital (improvement) free example, the land value tax cannot be passed to the tenant. In all likelihood, in this example, the landowner would gladly sell the land to the tenant for $0 and the tenant would take over paying the taxes.

Finally, as you can see in this example, the entire burden is shouldered by the landowner, as his $120,000 of land exchange value was reduced to $0. While the cost of the land to the tenant remained the same. The reason land value taxation is ideal is because the land is still being used and the heavy taxation has not reduced production. Land value taxes are the only taxes that do not reduce production and that is why I advocate for them as a replacement for other taxes.

 

I love how you refuse to answer any questions and scenarios I propose using your logic, but magically whip out examples that "prove" your concept, except it doesn't really since you can't apply that to my scenario based in reality... you can only answer with hypotheticals...

now lets use your example since you reject answering any of my questions and data... who knows maybe you'll reject this too now...

lets take this land you claim "rancher A" is willing to pay $6000 to rent annually for his cattle... and the land just so happens to be assessed with a $6000 tax... what happens when "rancher B" comes along and says, I am willing to pay $7000 to rent annually for his cattle... are you saying the land will magically be reassessed to $7000 simply because thats what someone else was willing to rent it for? or do we magically now have an instance where someone is making money renting land...

or does supply and demand not work in your hypothetical scenario... since that would mean its wrong... I mean you keep saying land is a fixed supply so magically somehow that changes the whole concept, as if thats the lynch pin holding the argument together...

will you constantly reassess land value, based upon what people are willing to rent it for? so its not worth owning land because they are forcing you to give up any value you get from your land?

P.S. fun fact, its estimated roughly 15 trillion in land value currently held in america by citizens and corporations... we would need a 25% land tax to cover the federal budget, how much more would we need to cover state budgets as well... so once land is taxed at oh I dunno 40% we can finally enjoy that sqft we can afford?

 

I agree that renting, particularly low income renting would need adjustment. But we really don't yet know enough about the specifics of that to write it off, out of hand. There are many ways the current system compensates for it's own complexity with more complexity. Also lower income new home ownership would have to be addressed in terms of how it may affect the economy. My thought process goes to making these decisions after open public debate and analysis, rather than crony capitalistic practices. Keeping it simple. Concern that a majority may take advantage of the wealthiest with a flat no deductions or exemptions starting place is very unlikely given the number of incidences something like that has occurred historically in comparison to the embezzlement of resources by the wealthy. I suspect when popular control of policy is dominant the graft and inflation reduction may allow the tax to be reduced by as much as twenty five percent to make ends meet.And, yes a new untried tax code may have a learning curve that is bumpy at first but with the minds and computer modeling available today the only real obstacle is the people who are getting the most free resources and opportunities in our current system.

 

hey read those messages from geofree above, you were sure right about that... lol...

he wants me to believe a tax based purely on land value alone, not including improvements... would magically cover all the taxes and equalize everything... so with current land in america held by corporations and private citizens, currently worth an estimated 15 trillion, we would need a 25% tax on land value just to cover the federal budget... I would love to see how the average american could afford to pay that on the cost of their lots... the average lot around me sells for 100k roughly today... add in state and local taxes, you might have to charge folks 40% for their lots annually... imagine paying 40k annually just to have property... boy thats sure going to equalize society lol... only the rich will own land and our rents will be outrageous...

http://www.slate.com/blogs/moneybox/2013/12/20/value_of_all_land_in_the_united_states.html

thats the link that demonstrates how they came up with the $15 trillion of land value... excluded improvements... breaks it down pretty good...

 

As with our current system, the devil is in the details. Actually, this tax code would more than like create an incentive for more black marketing, but if all sales are required to be recorded (which we know the will not) the complexities will not be in understanding a complex tax code but investigating evasive non disclosure. Dinging the wealthy is not a goal as such, as much as requiring them to pay for the protections and access to resources proportionate to the assets protected. This would be framed by them as a ding compared to the resources they currently suck out of the middle class, but deleting the fundamental principles of what is required and it's context has worked in their favor for a long time. As far as having certain items or categories of items exempt such as cloths(up to a certain amount) or food items, are all things worth consideration. The major point being, as long as the idea seems "strange" it is evident that "permission" to research the possibilities openly and objectively have been lacking in this culture.

 

These are good points, and identifying and defining those things that constitute taxable net worth is certainly where the discussion needs to be early on in consideration of this possibility keeping in mind that simplicity and equability will facilitate the acceptance of this more stable choice. Christmas and birthdays would not necessarily affect the net worth of those who received gifts from Dollar Tree unless they received the Dollar Tree it'self.

 

Value would be based on what comparable properties have sold for in like areas and guidelines for this would be set by the statutes. Improvements would alter the value requiring reassessment. Keeping better documentation of taxable property would be required but would work in your favor as much as against. Not just land value goes into net worth. All assets. If you have gold to protect, the courts system, police, etc. protect that as well and the middle class should not be embezzled or punished for their production efforts to pay for that infrastructure. Real numbers plugged into this equation would show that the taxes would be much lower than most anyone has imagined because of the distortion in values created by the current system.

 

I understand your concept of total net worth... his concept is different and seems to be land value alone, no improvements... both have major flaws, both have nice sounding concepts, but I don't see either being practical in todays world... more like a smushing of the two concepts together... land and building improvements on that land... that would give the most broad reach with the least amount of fraud possible... but to account for every asset, heck I could save myself tons of money by hiding a lot... but if you based it purely on my land and buildings on them, even an auditor from the outside is going to be able to take a good stab at fair value... like you said, based on sales in the area and similar property...

but please don't assume the distortion is that great that everyone walks away a winner... there will be lots of losers... like the people who currently have no net worth, and actually receive extra money... under your concept they wouldn't be entitled to any extra money come tax time... and the usual issues mentioned about retirees being forced to sell their asset to pay the taxes... despite the suggested 200k allowance to prevent this, it wouldn't cover all, many would still get sacked as the value exceeds that... anyhow... there will still be winners and losers, and it won't be the rich who loses and it won't be the poor who wins... like the current system, it'll be screwed with by politicians who want to get elected and make promises and push ideology on us...

- - - Updated - - -

a pack of cigarettes has net worth... a dollar gift has net worth... under your concept they'd all have to be accounted for right down to the partial cigarette... or else we're not REALLY trying to get a true net worth... in which case more fraud will sink into that style of self-reported system... and we'd never be able to hire enough auditors to go through peoples homes... because if you did, I'd load my trucks and relocate things until you left... lol... do you have any solutions for that problem?