Awesome, so what you're saying is that lower taxes will cure MS, retardation, Lou Garig's, diabettes, AIDS and all the other diseases/disorders. WOW, that's brilliant. No, the Liberatarian model says a great big FnCK YOU to those in need, but it does in a nicely apathetic way by ignoring they exist. Most services cut, social security, medicare, etc. Yep, those Libertarians/Tea Partiers are sociopaths, they just aren't aware of it. Of course they grow a conscience when they are in need, just like my good ole dad, now he'a a Howard Dean liberal from being a Reaganite when we was young and well. IOW's, yes, we throw granny out. BTW, show me the correlation between taxation and spending. Oh, you can't. These are processes done in seperate legislative sessions in virtually all cases and have no direct impact on the other. In fact, spending, whetehr deficit or otehrwise, creates more tax revenue regardless of the tax brakets. But we ideologically hate the idea thinking people in distress will actually get cared for, we call it stealing; all the while the top 20% own 93% of all cash and we're just alright with that. Nice platform you have, sir. Please, quit being coy, spell those out. Are we talking social security, medicare, access for state's poor people? Please, illustrate all the programs that no one needs per you. Should be taxed is subjective, I'm asking you to independently support what should be taxed and by how much. Since income tax accconts for the lion's share of receipts, lets cover that. Show me the good years. The 40's, 50's and 60's, yes? The bad years the late 20's to early 30's, yes? The 80's when the debt ran thru the roof, yes? These bad years were preceeded by massive tax cuts where they were cut down to almost 1/3 of their original amount. Then look at the 90's, GHWB raised them a tiny 3%, then Clinton 9% for a 12% increase which helped Clinton experience the best times we've ever had. The computer age assisted as well, but teh tax increases really made it happen. Then GWB cut them by 5% and there we were, again. Point is, our best years were mired with high taxes, our worst years were preceeded by massive tax cuts; show me otherwise. Can we just ignore 100 years of history? I agree. So then land will be taxed at 100% of teh property value per year or we kick millions of seniors out into the streets under your plan. This is why radicals never make it in politics. David Duke and all the radical like that never make it anywhere.
Speaking of retardation, those are medical problems, not social problems. Move along, that is not the libertarian model I'm looking for. I am merely willing to know that SS gives a lot of money to people who neither need nor deserve it, and Medicare gives a lot of treatment to people who neither need nor benefit by it. No, we encourage granny to seek accommodation most appropriate to her needs and means by not subsidizing her use of inappropriate accommodation. HUH? Tax revenue and spending are very strongly correlated. Obviously. You have obviously never participated in a budget process. But not regardless of the spending. I call it stealing that they are in distress in the first place because our system violates their rights without just compensation. You are makin' $#!+ up about what I plainly wrote. Most poverty relief programs will not be needed if people are not poor. Medicare can be cut if medical care is no longer so expensive, and providers are not subject to perverse incentives that reward performance of unnecessary procedures. Etc. No, it isn't. It's a matter of economic fact. Publicly created value. We would do best to UNDERSTAND that history. You do not. The RATE of taxation was not the point. The EFFECT of the rates on the TYPE of income taxed was the point. No, everyone would have free access to sufficient land to live on. You are just makin' $#!+ up about what my plan is.
40 acres and a mule? How would that happen? Would it be because all the old widows would be tossed onto the streets because they do not have enough pension income to pay the property tax?
No; but it's well to remember that emancipated slaves did not get the mule, let alone the 40 acres. Everyone would have an equal individual exemption, like the income tax exemption, but for the land tax. Tenants would transfer their exemptions to their landlords in place of equivalent rent. No; you are just spewing silly, dishonest garbage. Look at the effects of CA's Proposition 13 if you want to see how apologists for landowner privilege protect all the old widows from Satan's property taxes. Ooops. Instead of a handful of seniors having juicy, tax-free capital gains from the community shoveled into their pockets to finance acquisition of accommodation more appropriate to their needs and means, hundreds of thousands of Californians really have lost their homes, been financially ruined -- conspicuously unlike the unfortunate seniors who were alleged (but never documented) to be "taxed out of their homes" by the massive gifts of land value from the community, of which they were unwilling, in their limitless greed, to repay even a small fraction.
So, this massive transfer of wealth through tax exemptions from tenants to landlords is somehow helpful to what end? It would certainly help out the landlords but I see little to no benefit for tenants and the chances that landlords would lower rents because of it is just wishful dreaming. Not many are foreclosed on for failure to pay property tax if they are poor or elderly. In fact most states give homeowners with limited incomes a property tax exemption or rebate or something. . You keep talking about the elderly selling their homes to What do you mean by that? Are you a principal in retiree community development or something? Many elderly people have no desire or need to move anywhere and a large number of elderly stay in their homes until they die. I see nothing wrong with that but it seems to be somehow against your ideas. If you want to see the real results of Prop 13 you can look at public education which went from No1 to No 48 in the years since Prop 13 passed.
Nothing is transferred from tenants to landlords but the land tax exemption. Tenants pay less rent, and landowners pass on the exemptions to the public treasury in lieu of equivalent cash land tax payments. It's a wash for the landlord, who is only in the business of providing improvements, maintenance, etc. to tenants on what is effectively public land. They would have no choice. The land tax makes it impossible for them to make any money unless they fill their buildings. To do that, they have to stick to the market rent, no more. It is a matter of indifference to them whether they get cash or an equivalent abatement of their property taxes. Believe me, I have thought this through very thoroughly. Right. The shrieking of the Prop 13 campaign about poor widows being thrown into the gutter was never anything but flat-out lies. I mean the elderly generally want to live in quieter areas where they have access to shopping, leisure activities, medical facilities, etc. They don't need to be in high-priced areas with a lot of economic activity and job opportunities just because that's where they happen to have lived before they retired. No -- but it's a business with some growth opportunities coming. If they want to and can afford to compensate the community of those whose rights they are violating, fine. But in most cases it would be better all around if they experienced accurate incentives to be less extravagant in their occupation of valuable land they are not using productively. Prop 13 has been disastrous for California in every way. My point was that it was promoted as allowing people to keep their homes in the face of rising property taxes (which were never that high in the first place), and it has in fact resulted in 100 times as many people losing their homes as ever would have cashed out under the former CA property tax regime.
The bulk of the expense of any property is in the improvements, not in the dirt under them. An average house in the US is worth about $200,000 - the value of the lot under it is around $30,000. So although your plan exempts the value of the land, it does nothing about the improvements - so basically rents would be at least 80% of what they are now. As for having to keep their buildings full to make money, that is how it is now. A property costs the landowner money unless he finds some way to make it productive.
No, that's objectively false. Land value accounts for about 2/3 of all real estate value. No, that's just a bald falsehood. Median house value is around $170K, and land value about $100K of that. Improvements are a little higher right now because there is so much new housing stock. No, the average would be about half, with net rents in older, fully depreciated buildings much lower than that. No, it isn't, as proved by the sky-high rents in many cities. No, it doesn't. He can just wait for the land value to rise. As long as publicly created land value is not recovered for public purposes and benefit, land value increase has to outstrip the property taxes in the long run. That's why investors hoard vacant land.
I take it you've never actually bought bare land or built a house or even read a break-down appraisal of a house. The house I currently live in - Total appraised value: $230,000 Property value: $37,000 I'd love to see the "average" house you could build for $70,000. You may be able to build a simple 600 square foot home, but if you want a decent-sized house you will be paying quite a bit more. It costs $125 per square foot for a very simple construction plan. If you want any finishes better than contractor-grade, or any specialized construction requirements, you will pay a lot more, sometimes over $300 per square foot. A landowner can wait for value to rise, but he is spending money every year until then. If he bought after 2002, he will have to wait decades to see even a dime of profit. Until then his land is costing him money. The increased value is worth nothing until it is actually sold. Before the housing boom, the growth in value of land was only slightly higher than the rate of inflation in the US. An investor would earn far more profit investing in bonds than in property during that time. That is even more true of anyone who bought their property between 2002 and 2008 and still has it. The property they have is now worth less than it was when they bought it, especially in inflation-adjusted prices. That investment was a losing proposal - unless they had an improved property and are leveraging it through production or rent.
<yawn> Allow me to inform your ignorance: I don't know where you live, but if your house burned down, would the lot only be worth $37K? I doubt it, as that is a fraction of the US average, and even if your house is new, it is very unusual for a builder to spend more than five times land value on improvements. <sigh> $70K is not the average construction cost, it's the average current depreciated value of improvements. The median owner-occupied dwelling in the USA is 32 years old, and has thus typically lost half or more of its value to depreciation. Many houses a little older than that were built cheaply and are teardowns, and have effectively no improvement value. Because depreciation is exponential, it is certain that average improvement value is less than half of average new construction cost. "How much does it cost to build a house? The true direct cost of building a new house is usually a closely guarded secret.But, you should be able to build anywhere in the USA (March 2010) for $80.00 to $110 per square foot (or more) for labor & materials." http://www.byoh.com/costestimating.htm Only on taxes, which are usually a small fraction of average land appreciation. True, you can't expect quick profits if you buy in a bubble. No, it's worth what it is worth. The owner can borrow against it, use it, or whatever else he wants to do. To claim that only cash has value is just silliness. Wrong. It outstripped growth in GDP, which is inflation plus population growth plus increase in real standard of living. That is a bald falsehood. It is bond yields that have barely paced inflation. Right, buying in a bubble means you are overpaying. But if you can wait until the peak of the next bubble, you can get out unscathed.
As far as valuations of underlying land goes, that is pretty arbitrary and often low balled by tax authorities to favor politically powerful holders of nearby tracts of undeveloped land. Insurers, real estate agents, etc, they all take their clues from the tax assessors. The price of land is directly correlated to the builders spending on new construction. There is only one way for a builder to make a profit on expensive land in a desirable location and that is to create nice streets and build expensive homes on them. More desirable streets have things like paved sidewalks, cement or granite curbs, fancy streetlights, a gate with a guardhouse and underground utilities to hide the wires. This is not cheap and can be up to 20% of the cost of development for each lot. The lots also have to be doubled or tripled in size to be attractive so there are fewer homes to make a profit on. The only way to do that is to build bigger with a finer finish if the builder is to make any profit at all. This is why there are so many high finish 4,000 sq ft and larger homes being built. There is little depreciation in the housing stock because most houses in the US are in a semi-continuous state of improvement. For example the average kitchen gets remodeled every eight years, the bathroom every ten. Very few houses go more than a decade without a remodel. The National Kitchen and Bath Association has the stats. Where I live there is a huge stock of houses hundreds of years old, they have not depreciated in value, in fact it is the opposite. A typical 300 year old house around here sold for around $20-30,000 in the 1960s, about twice the value of the underlying land. Those homes sell for over $1million now, comparable tiny lots go for between a third and half of that. If you want a low bidder job on your cookie cutter generic house you can get it built for that but not many people are interested in building a generic low quality house. Building a $100,000 1600 square foot house on a $100,000 lot is not a sane financial decision. The house will add nothing to the value of the property since any prospective buyer would want to tear it down to build a 3-4,000 sq ft house like the rest of the neighborhood. Unfortunately, housing bubbles are very not regular occurrences so many people will probably be dead before they can "get out unscathed" unless there is a serious bout of inflation sometime soon.
Market value is not arbitrary, but it is true that assessments in many jurisdictions grossly undervalue land as a favor to local business, which can then write off more depreciation of improvements. There can also be other motives, as you mentioned. There is a relationship, yes, because land value is based on the most productive permitted use, and that usually requires improvements commensurate with revenue generating capacity. But it's like a car: eventually the fixing up gets so expensive it's cheaper just to junk it and buy a new one. More than half of all houses in the USA depreciate to near zero and are demolished or permanently abandoned before they are 70 years old. That implies an average depreciation rate of around 5%. Shoddily built houses can become teardowns in half that time, for a depreciation rate of 8% or even more. Only the best quality houses will depreciate at less than 2%/yr, and only the best of those will survive to achieve antiquity value. Very few houses are old enough to have antiquity value, and those that do generally only survived because they were of high quality from the start. Actually they are quite regular, you can count on 15-20 years between peaks.
Most tear downs are caused by increased underlying land value. It is not that the house depreciates intrinsically as much as that the value of the underlying land increases to the point where larger houses are needed to justify the expense of buying the property. I think I should explain, where I live there are not just a few scattered old houses that survived the ravages of time but an entire town, over 600 tightly packed houses from before the revolution of 1776. Not many of these were well built or high quality but they are now due to hundreds of years of accumulated improvements. There are more than a few other towns around here that are much the same. They are very desirable places to live because the town was not built on a grid with minimum lot sizes and setbacks and zoning rules. It is very goofy, like a cartoon with old houses leaning on each other and winding streets of variable width laid out by wandering cows and drunken fisherman. One thing people really like a lot is that once you get home from work you do not need your car, everything is within pleasant walking distance and there is lots of parks and stuff and some beaches and great views of the water from lots of places. The last couple of peaks in housing were caused by one time mistakes in the regulation of the banking and finance industry. The latest one was caused by allowing the entry of unregulated players into the home mortgage industry and the one before that was caused by the deregulation of the Savings and Loan banks in the 1980s, these mistakes are unlikely to be repeated. I may be wrong, if the Republicans gain both houses of Congress and the President there will be an unprecedented wave of financially irresponsible legislation which could create a new home buying frenzy. The only problem with that is that there is a six year surplus of single family homes on the market already from the last one. They will need to double down on their irresponsible deregulation.
Of course. That doesn't change the fact that the market has decided the house has no value. The plural of "anecdote" is not "data." The mistakes will be different, but the result will be the same. See the recent economic history book, "This Time Is Different." The time is different, but the laws of economics are the same.
Well good luck with that thinking because if the next commodity bubble is in anything but housing home prices will likely decline further and even more housing will join the already swamped market pushing price recovery further and further over the horizon. True, the economics are the same and that means you should get out of a bad situation as soon as possible, take your loses and rebuild your wealth. It is an article of religious faith to think that a home that lost 40% of its value will recover it in any reasonable time period without huge lost opportunity costs that more than offset any imagined gains.
Population growth already exceeds construction, so the inventory is being taken up. It's not religious faith. It's economic law. Land rent is almost guaranteed to grow faster than GDP. With the amount of high-powered money that has been dumped into the system, significant further land price deflation is unlikely.
No, new household formation is what creates demand for more housing not population growth. This has shrunk 50-75% from the historical average in the last two years so demand for new housing is still slightly below the very low rate of new housing construction. There is of course vast differences in the housing market from place to place but there are still some 6-7million houses in excess inventory that the anemic demand of today will also need to absorb before prices recover. Unlikely? Much of the new money has gone directly overseas, consumer credit is still very tight, the savings rate is rising, the foreclosure market has not cleared, there is a 6-7million excess housing inventory, over 40% of home mortgages are underwater and banks are beginning to lower the principle on these loans, there is little sign of core inflation rising, and the Fed will likely raise interest rates in the fall. Every one of these indicators is negative for a housing price recovery anytime soon.
They are closely related, obviously, and people/household tends to change very slowly. Household formation was robust during the housing boom as people left their parents to buy and get in on the boom (suckers), and strong illegal immigration fueled even more household formation. But illegal immigration has fallen off a cliff since the global financial crisis, and lot of the people who left home and bought their own places are now, of course, going through "reverse household formation" as they lose their over-mortgaged homes and have to move back into their moms' basements. So the current low rate of household formation is a cyclical change, not a long-term trend, and there will be a catch-up phase not very far down the road. Not really. Banks writing down principal indicates they don't want to foreclose, so that's going to tighten market inventory. "Core" inflation is nothing but a propaganda number, and most people are figuring out that inflation is actually much higher: they can see the prices of food and energy rising, and they know they are paying more to live. But most importantly, the Fed and the Obama administration's financial gurus -- Bernanke, Geithner, Paulson, and the other usual suspects -- have shown they will do almost anything to prop up real estate prices.
So, essentially you are saying that household formation was as oversubscribed as housing construction but the data does not agree. During the housing boom new household formation was only slightly higher than the historical average of the past 40 years. The recent retraction is likely to be reversed whenever the job growth returns but there is not much indication of that so it could be four or five years before new household formation returns to historical levels. Given the long term stagnation of the median wage it is impossible to figure out how people will ever be able to afford houses at the old peak prices. Well that's just it, many banks are not in any sort of position to write down principals. Only the very largest have the financial reserves to do so and them doing so will only force the smaller banks into failure. There is a good reason for trying to hold off a wholesale real estate collapse. Housing drives 40% of the economy.
You should pay taxes based on how much wealth you have. The 1% with more than 38% of the wealth should pay more than 38% of the taxes and you go from there.
The basic idea behind the fair tax is not a bad one, but the way the fair tax proponents have been pushing it is not fair and likely would not remain revenue neutral if applied. One reason is that though it claims to put a tax on all goods and services, it does not truly tax all services, and as for the ones it does, who is to determine the percentage of the true value of that service to be taxed? Personally, I would go with Lulz's selfish communist idea. -Meta
