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Why not just go the whole hog and tax all property.

eg you buy a laptop, you have to pay the government a tax each year to keep it.

Why just apply it to houses? May as well just prohibit people from owning property.

Personally, I think such taxes are a massive disincentive for people to do well. As soon as you have enough money to buy a house, you are penalised for it.

Luckily in the UK, we don't have property tax, although we do have other taxes just as disgusting and unfair - stamp duty, inheritance tax, council tax.

This is the law in Utah and was applied to all businesses up until a few years ago. I don't think they ever tried to property tax the personal possessions of individuals, though that was the law.

You were required to declare your chairs and desks and tables, calculators, paper and pens, books, bicycles, cameras and computers, and everything and look up its market value and then pay the usual tax just as if it were real estate. You were required to do it every single year. And it's still the law for property above an exempt amount, but no longer applies to every paperclip like it used to.

That law is crazy, of course. Real estate is a big expensive immovable item that creates limits on the level of corruption and record keeping headaches so it's the best target for property taxation. Maybe really big vehicles like cars and airplanes and boats could be targets, too, if they have a home base, but even then you can see problems.

And finally, Henry George [0] points out that the ideal property tax to promote investment, limit corruption and cheating, allow fair administration, limit any kind of dead-weight loss [1], and generate reasonable revenue would be a tax on land value only. Buildings, improvements, vehicles, and personal property should be exempt and only the land's location, area, and fixed geology/hydrology/soil conditions should matter.

[0] http://en.wikipedia.org/wiki/Georgism [1] http://en.wikipedia.org/wiki/Excess_burden_of_taxation

Property taxes add liquidity to the market, and lower prices on everyone, as the cost to own real estate is not zero. Negative side effects that areas with no property taxes include

* blind investments into endless real estate development projects that have no tenants or structural quality (China, Dubai)

* extremely high prices for anyone entering the real estate market (old European monarchies, where a family might have owned the same real estate for centuries)

* lack of funds for upkeeping and maintaining what's considered a shared property (facades, sidewalks) while maintaining fancy interiors (Eastern Europe)

Property tax is primarily a disincentive to buy lots of land you can't do anything with and sit on it (metaphorically). That's a good thing- it means the incentives will push land into the hands of people who are actually going to do something with it (making it worth paying the property tax)

>Property tax is primarily a disincentive to buy lots of land you can't do anything with and sit on it...

No. Property tax is primarily a means for localities to raise revenue. If what you were saying were true, then developed land, including primary residences, would have no associated property taxes. It'd be exempt.

Regardless of the intent, property taxes do serve both purposes. Developed land must provide a return above and beyond the property tax rate in order to be profitable. That includes primary residences, where the return is... not easy to measure in dollars.

Absolutely. If we had reasonable property taxes in CA, we wouldn't have a housing shortage, and middle-class people would be able to live in SF again. But try explaining this to the average voter...

By reasonable you mean the same taxes for the same value, ie the opposite of Prop 13, right?


In effect we do have a property tax on laptops, but for convenience you pay it up front (VAT @ 20% of the value). It pays for all the same things such as helping the police to defend your laptop from being stolen, and paying for the ports and roads along which your laptop was imported (as well as the national debt which was increased when you imported it).

Council tax is the UK property tax. It's a very low-rated and regressive tax, but it's a property tax.

Good luck getting any value from the UK police of your laptop is stolen.

In Massachusetts they do:

"All personal property situated in the commonwealth is subject to tax, unless specifically exempt by law"


True. When I lived there in the 80s, I remember getting fairly hefty annual bills for excise tax on my car. I don't know if they still do that or what classes of property were routinely taxed at the time.

Do you think income tax has proven a big disincentive for people to go out and work?

(To ancitipate an obvious rebuttal: yes, I will admit that inheritance tax has probably put people off the idea of dying.)

Higher rate income tax certainly does. Tax bands certainly provide a big disincentive for bothering to get a better job/raise.

Inheritance tax is very unfair. If you are rich enough, you'll plan around it and avoid it. But if you're not rich enough, your kids will not only lose their parents, they'll be sent a bill from the government. Which at best is a tad insensitive.

Add to that the fact that the thresholds for inheritance tax haven't been raised properly, so that someone with a 1 bedroom apartment in London will be subject to inheritance tax, it all seems pretty unfair, and perverse for the government to effectively profit from peoples death.

>Tax bands certainly provide a big disincentive for bothering to get a better job/raise.

You know that your entire income isn't taxed at the highest bracket's rate, right? So, for example, the highest bracket is 39.6% for income above $400k. If you make $410k, $10k is taxed at 39.6%, and the rest of your income is taxed at a lower rate.

You know that the effective tax rate still raises?

For simplicity sake, consider that first 100K are taxed at 10% and next 100K at 20%. If you made 100K your effective tax had been 10% i.e. you owed 10K to the government, however if you made 200K, even though the first 100K is still taxed at the same rate, your effective rate is 15% because you now owe 30K out of 200K.

Yes I do know that. It's still a big disincentive to bother earning more money.

Why bother trying harder if the government will take half of anything extra you make?

The question is a fair one, and the answer for the majority of people seems to be: because you get to keep the other half.

Well, that is a little consolation for you, true, the government lets you keep a little bit to keep you from rebelling and keep you placid.

However, I feel that I'm already paying the government FAR more money than I should be, so I'm simply not bothered about trying to make them more money.

Your position is not unreasonable, nor inexplicable, just unusual. For the majority of people, income tax seems to be an annoyance rather than an active disincentive to work.

I understand greed, and as much as I loathe it, I also understand the mindset that looks at money as a score, but I've never understood this mindset that is unable to recognize the "score" is not absolute, and taxation does not have a 1:1 impact. Progressive taxation renders the scale non-linear.

Given a hypothetical luxury good with a price of $500,000 under a current taxation regime, which do you think is more likely in a regime with, say, 50% higher taxes: That the luxury good ceases to be produced, or that its price is lowered to the point where a similar number of people as before could afford it?

I don't look at money as a score. I look at my salary as the value of my labor. I sell my labor to maximize the value of my effort. I.e. I am looking to maximize my compensation and minimize my effort. It's pretty much how everything on the market works.

To answer your second question is impossible - we don't know the shape of supply and demand curves nor do we know the initial rate of taxes. E.g. if the original taxes had been 1% then it's just going to bump the price a little bit. If the original taxes had been 50% then it ceased to be produced.

But if you want to know the general relation of taxes and supply and demand consider how things are going to progress as you keep raising taxes. Do you seriously believe prices are going to fall as the taxes raise?

I think if you cut everyone's income of fiat currency by half, the effect is not that everyone is 50% poorer. I think if you cut everyone's disposable income of fiat currency by half, the effect is not that they can afford 50% fewer luxury goods. And I don't think any of the uber-wealthy sit around and think "You know, I was going to make an extra billion in the market, but since I'd have to give up 20% to capital gains, I'll just stick all my money in a non-interest-bearing account instead.".

JFYI - if you take every US billionaire's (all 400+ of them) money (about 1.9T) and split it among everyone in the US (300M) you get about 6300 dollars per person. It's not a lot of money. Might pay your rent and utilities for a year. And then it's gone. It's not their income, it's their whole net worth. So I'd stop fantasizing about money of uber-rich. There is not that much and it does not matter.

What matters is the people who are actually paying the bulk taxes and making investments.

I'm not "fantasizing" about anything. I'm familiar with those numbers, thank you. They change nothing. Nothing I've said even depends on or has any direct relation to them.

Inheritance taxes aren't an issue if the estate is valued - this is after all expenses, debts, etc. have been taken care of- at less than $5.25 million.

Numbers vary, but it's definitely fewer than 5% and possibly fewer than 1% of households that need to do anything at all to avoid the estate tax. And these are people who have benefited immensely from services provided by the government (if only the services that keeps people from stealing their wealth!) and are really doing quite alright; adjusting the tax code to make them do even better seems unfair.

Secondly I have never heard of anyone who didn't want to make more money because of their tax bracket. I do not believe this phenomenon exists, and even if it did, it wouldn't strike me as all that much of a problem in a population with unemployment as high as our own.

In the UK, inheritance tax starts at around £325k - which is basically a little bit above the average house price.


You can get around it by 'gifting' things to your kids, as long as you then don't die for 7 years after etc etc.

On your last point, it certainly does exist. What I think happens is people like me don't bother trying so hard, because I'll be damned if I'm going to give the government more money. However, people who are already making much more than me, just hire a good accountant to 'make the problem go away' - eg register offshore companies etc etc

Are you seriously saying, that when the UK government had a higher tax rate of 97% in the 60s/70s, you would have been more than happy to do that extra overtime work, and would have gladly received your 3%??? Crazy

Anything over 49% is slavery, and will end up crippling the country rather than raising more tax revenue. Which is why it was absolutely right and proper that the current government reduced the top rate from 50% to 45%.

They already do tax it for businesses in various jurisdictions, e.g. in Florida (see "tangible personal property").

Many counties in Texas do tax business property. I know I have to pay business property taxes every year to my county.

Here, generally, personal income taxes are replaced with property, sales, and business (franchise) taxes. You pay taxes, as a person, on your vehicle, real property, and per taxable transaction. But, you do not pay it on your income.

In the UK you don't have property tax, and this gives rise to the concept of leasehold land. Instead of paying rent to the government you end up with people paying rent to a private company. Instead of getting better local infrastructure as a result of your rent, you enrich the family that purchased your land over 200 years ago.

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