Taxes, Home Ownership & Government
Standard wisdom says if you want less of something, tax it. There's another part of the tax equation that's standardly overlooked. Real estate is the one class of assets which we're taxed on merely for holding. Keep a closet full of gold bars, no tax (not unless and until you go to sell them at a profit) - not on the gold bars. But there's a yearly tax on the closet, if it's part of a building you own! Government has every incentive to encourage wealth to be put into real estate instead of other asset classes, because government collects a yearly tax just on the part of your total assets which is real estate.
The real estate bubble, thus, was in reality (whether or not planned as such) a way for governments to increase total tax revenue, even while making a big show of "cutting taxes."
This also suggests that what we want more of, we should encourage government to tax. If the tax potential is large enough, government will damn sure figure out a way to see that we get more of whatever the taxes are on. Those who want more religion, for example, should encourage government to tax it.
The real estate bubble, thus, was in reality (whether or not planned as such) a way for governments to increase total tax revenue, even while making a big show of "cutting taxes."
This also suggests that what we want more of, we should encourage government to tax. If the tax potential is large enough, government will damn sure figure out a way to see that we get more of whatever the taxes are on. Those who want more religion, for example, should encourage government to tax it.
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I liked your title and my first thought was the mortgage interest deduction - I happen to think that this may have been a major factor in the bubble.
Also wanted to point out that not all real property is taxed, and I could be wrong but in order to tax a property a local gov't would need to be incorporated.
This might be unique but there are many places in Alaska that are not taxed because they aren't within the boundaries of a taxing authority.
That said, I don't feel my property taxes are merely a fee to maintain ownership - but to maintain and build the infrastructure that serves my property.
Property taxes by-and-large finance infrastructure improvement which of course is continuous - once people get some improvement they want more and more and mentally disconnect it from their tax bill.
I'm always amazed at the Tea Partiers gathering place of choice - public parks, sidewalks etc. if their demand for such infrastructure wasn't so insatiable perhaps their taxes would go down?
"Those who want more religion, for example, should encourage government to tax it."
If there was a tax on public Jesus-talk I don't think we'd be facing such deficits =-)
July 9, 2009 7:39 PM | Reply | Permalink