Fair Tax Act

[The Don]

It's funny and sad that people judge an idea on the principle of "change this but leave everything else the same" instead of seeing it as part of a broader policy change.

Well implementing a tax which enables people or corporations to compulsorily purchase your home is quite the glitch.

Yes, implementing a COST scheme in the current system would be devastating, because taxation isn't the core problem when it comes to real estate development in the US.
Japan has figured it out, with rents in Tokyo being more affordable than in most big US cities.

What measures do you propose to mitigate the devastating effects of the tax you're suggesting ?

The fact that it would allow someone (or some corporation) to simply purchase my house without my consent is, IMO, an unacceptable "bug".

But in order to get taxation from real estate, when need a system that can't easily be manipulated.

We have a system of property taxes which isn't easy to manipulate. Properties are placed in tax bands based on their values. If you think your property is in the wrong band you can appeal it. We did so successfully on our flat in Bristol, we were unsuccessful in Don Towers.

If you are worried about low income renters getting evicted, just have the State own those properties, as is usual in many, many places: Singapore, for example, or the city of Vienna.

In many big cities the biggest constraining factor is the size of housing stock. even if every house and flat in London was publicly owned and rented out cheaply, there's still be a significant shortfall leading to homelessness.

In short: don't be so quick to shoot the Messenger for problems that have nothing to do with the message.

The problem is that the side effects of the tax you're proposing are worse than the problem you're trying to solve. The upward pressure on property value assessments as people try to avoid having their houses bought out from under them will make housing less, rather than more, affordable.

 

[The Don]

Yes, but European countries also tax income and wealth too, quite often on a very progresive basis.

IMO that's the right way to go about it. If you spread the tax burden across income, assets and consumption then it's less easy to avoid taxation through tax avoidance measures.

For example, if all a taxes were raised through consumption taxes, those who could would buy assets through offshore entities and then lease the assets in a tax efficient way. The average Joe or Jane couldn't afford to do this and so, once again, the tax burden would shift to the struggling middle.

 

[Random]

IMO that's the right way to go about it. If you spread the tax burden across income, assets and consumption then it's less easy to avoid taxation through tax avoidance measures.

For example, if all a taxes were raised through consumption taxes, those who could would buy assets through offshore entities and then lease the assets in a tax efficient way. The average Joe or Jane couldn't afford to do this and so, once again, the tax burden would shift to the struggling middle.

Actually, incorporating yourself isn't that hard. There's paperwork to be sure, but it's quite doable. It's not worth it for most people who earn a paycheck because current tax law treats that stuff as income anyway, but if we are going to ditch income taxes for a consumption tax, I see a lot of single person corporations forming overnight.

Food, shelter, transportation, clothing, if they are not exempt from the consumption tax they can easily be transformed into "business expenses".

All you really need is an employer who is willing to write checks to "John Smith, LLC", instead of "John Smith". Of course, then people would look at shuffling around business taxes...

 

[TragicMonkey]

Actually, incorporating yourself isn't that hard. There's paperwork to be sure, but it's quite doable. It's not worth it for most people who earn a paycheck because current tax law treats that stuff as income anyway, but if we are going to ditch income taxes for a consumption tax, I see a lot of single person corporations forming overnight.

Food, shelter, transportation, clothing, if they are not exempt from the consumption tax they can easily be transformed into "business expenses".

I work from my home, I guess that means my house and everything in it and all the utilities are business expenses. *sips business tea while sitting in business chair and browsing business internet while streaming business Disney+*

 

[Random]

I work from my home, I guess that means my house and everything in it and all the utilities are business expenses. *sips business tea while sitting in business chair and browsing business internet while streaming business Disney+*

Providing free beverages to your employee might be fine. Office chair is probably fine as well. You might need internet to do business (pretty hard to avoid in this day and age) so that would be fine.

Trying to explain how Disney+ is a business expense might be more problematic.

 

[The Great Zaganza]

...

The problem is that the side effects of the tax you're proposing are worse than the problem you're trying to solve. The upward pressure on property value assessments as people try to avoid having their houses bought out from under them will make housing less, rather than more, affordable.

what is the problem of the rich overpaying for real estate when there are firm rent control and eviction protections in place?
after all, the goal is for everyone to have affordable housing, and for those of low to medium income, owning property usually binds to more assets than is desirable.
Being bought out of your house at an overpriced rate (without the possibility of the new owner to quickly evict you or force you to pay overpriced rent) sounds like a sweet deal to me.

 

[lobosrul5]

doesn't matter - it's the purchase being taxed, not the entity buying it.
If a corporate entity wants to offset the tax it paid for a private plane, it would have to write off other assets.

But yeah, this is not the best way to tax the rich, as it would be IMMENSLY profitable to find ways around it.


a better idea would probably be the Common Ownership Self-Assessed Tax (COST): the principle being that there is a fixed tax rate for real estate by type and grade, but each owner can assess by themselves how much the object is worth. This could drastically reduce your tax burden, but the flipside is that you HAVE TO SELL AT THAT PRICE if someone offers to buy.
This would make it almost impossible to cheat on your taxes, as any deliberate undervaluation would mean you lose your property.

This would be awful for me. Right now my home can rent out for approximately double my mortgage payment (this is because I refinanced at an insanely low rate, but did not take cash out). So, a business, might see it as a great investment opportunity and snatch it up at appraised cost.

So whats the issue, they offer me fair market price and I get that money... because to buy an equivalent home right now, I'd have to finance at a far higher rate. And of course theres moving costs. And then I'd have to overvalue my next home or risk it being bought up too! Your system would vastly lower the amount of people in the US being homeowners, and increase renters.

Or I could overvalue it by 30 or 40% and pay lots of extra property taxes

ETA: and I could afford to do that. Lots of people, especially older homeowners couldn't. They literally could not afford to pay an extra 2 or 3 thousand a year in property taxes to keep their home safe from being bought from underneath them.

ETA2: and this would add to the problem of making it make much more business/profitability sense to buy up property and rent it out, instead of financing new builds... further increasing the percentage of income spend on housing.

 

[The Don]

what is the problem of the rich overpaying for real estate when there are firm rent control and eviction protections in place?
after all, the goal is for everyone to have affordable housing, and for those of low to medium income, owning property usually binds to more assets than is desirable.
Being bought out of your house at an overpriced rate (without the possibility of the new owner to quickly evict you or force you to pay overpriced rent) sounds like a sweet deal to me.

They haven't paid over market price unless I've inflated the value of my house and overpaid property taxes.

They have my house, so they'll want me out. Are you suggesting that the new owner will have to allow me to keep living there ? If so at what price? How long do I get to stay ? What if I simply do not want to leave "my" house ?

At the moment I own Don Towers free and clear so anything I have to pay the new owner puts me at a financial disadvantage.

 

[JoeMorgue]

The idea that some of you can't comprehend why someone wouldn't want to leave their home against their will provided they get paid a lot is scary.

"I don't want to move every time someone with enough money to spend on the value of my house comes by" should require exactly zero explanation.

 

[lobosrul5]

The idea that some of you can't comprehend why someone wouldn't want to leave their home against their will provided they get paid a lot is scary.

"I don't want to move every time someone with enough money to spend on the value of my house comes by" should require exactly zero explanation.

Or essentially play a game of roulette by trying to guess what an investor values my house at and pay enough extra in taxes for the privilege of staying in the home that I bought And if I get it wrong, my penalty is paying moving fees then going thru the cost of financing another house or renting at whatever overinflated prices this system creates... again

And thats before considerations that some people value their home and land intrinsically. I, in this case, don't.

 

[JoeMorgue]

Why just my house? Why shouldn't I be required to sell anything I own the second someone else has enough money to buy it?

The whole concept is absurd. "Let's give everyone in society a weird hybrid power of eminent domain and a hostile takeover."

 

[lobosrul5]

Why just my house? Why shouldn't I be required to sell anything I own the second someone else has enough money to buy it?

The whole concept is absurd. "Let's give everyone in society a weird hybrid power of eminent domain and a hostile takeover."

I mean in a way its democratizing leveraged hostile takeovers that only billionaires and huge firms can do... ie Twitter. I don't think thats a good thing though.

 

[Suddenly]

what is the problem of the rich overpaying for real estate when there are firm rent control and eviction protections in place?

The whole involuntariness thing. Not to mention a massive trap for the unwary.

after all, the goal is for everyone to have affordable housing, and for those of low to medium income, owning property usually binds to more assets than is desirable.

Which in a lot of circumstances is a good thing. My brother in law is kinda stupid and irresponsible. Sure, the equity in the house he owns free and clear from inheritance might bring more return if wisely invested but if he got his hands on it he'd do something stupid. He's hardly unique.

It being illiquid is for the working poor is on the whole a feature more than a bug.

Being bought out of your house at an overpriced rate (without the possibility of the new owner to quickly evict you or force you to pay overpriced rent) sounds like a sweet deal to me.

I honestly find this train of thought disturbing. It's like encountering a strident libertarian or communist. Fatally inconsistent with how humans behave.

Not everywhere is a city. I can think of neighborhoods where if someone got a house bought out from under them like this that house would be burnt to the ground within a week. Or rural properties that if this happened there would be gunfire at some point.

 

[psionl0]

Actually, incorporating yourself isn't that hard. There's paperwork to be sure, but it's quite doable. It's not worth it for most people who earn a paycheck because current tax law treats that stuff as income anyway, but if we are going to ditch income taxes for a consumption tax, I see a lot of single person corporations forming overnight.

Food, shelter, transportation, clothing, if they are not exempt from the consumption tax they can easily be transformed into "business expenses".

All you really need is an employer who is willing to write checks to "John Smith, LLC", instead of "John Smith". Of course, then people would look at shuffling around business taxes...

You can be sure that the government would pass laws that prevent individuals reducing their tax burden by incorporating.

For example, Australia has an 80/20 law. If more than 80% of your income comes from one source then you are classified as an employee for tax purposes regardless of what entity you impose between yourself and the person who contracts with you.

 

[Ladewig]

Providing free beverages to your employee might be fine. Office chair is probably fine as well. You might need internet to do business (pretty hard to avoid in this day and age) so that would be fine.

Trying to explain how Disney+ is a business expense might be more problematic.

To whom would one have to explain it?
Once the IRS is abolished, is there really going to be a tax investigative agency with the resources to go after a business for $40-60?
And even if there were, is there anything to stop one from tap dancing through an explanation? “Well, we here at Ladewig Amalgamated, LLC are always looking to diversify. The subscription fee is a business expense because we are trying to decide if we are going to invest in Disney stock. It’s very similar to our research into Diageo (NYSE: DEO) which owns Crown Royal, Captain Morgan, Johnny Walker, Ketel One, etc.” Or “our company provides daycare to all its employees - of course we have to have Disney+.”

 

[Blank]

Being bought out of your house at an overpriced rate (without the possibility of the new owner to quickly evict you or force you to pay overpriced rent) sounds like a sweet deal to me.

Lets say A owns a house that business B buys with 200,001 dollars loaned from C and rolls over the house to C for 200,002 dollars - can C evict A immediately or not? How big of a chain is needed for eviction rights?

Who sets the scale for this "overpriced" rent?

 

[gnome]

The ostensible "Market value" of anything is not always equal to the personal value (utility?) to the owner. If I really love my house, I might turn down millions to sell it.

In fact, it could be argued that's how any market economy works, even fundamental bartering. Two people trade something that are of approximately the same "objective" value, to the extent there is such a thing, but each of them values what they receive more than what they're giving up.

 

[The Great Zaganza]

Lets say A owns a house that business B buys with 200,001 dollars loaned from C and rolls over the house to C for 200,002 dollars - can C evict A immediately or not? How big of a chain is needed for eviction rights?

Who sets the scale for this "overpriced" rent?

these are not problems caused by the suggested scheme - they are inherent in any renter/landlord system.

 

[pzkpfw]

The suggested scheme will turn owners into renters.

It will benefit the already rich. Just what we need more of.

 

[novaphile]

The idea that some of you can't comprehend why someone wouldn't want to leave their home against their will provided they get paid a lot is scary.

"I don't want to move every time someone with enough money to spend on the value of my house comes by" should require exactly zero explanation.

Note that this could happen again and again and again and again...

Every time, costing you a fortune.

If you want radical reform ideas, how about "Eat the rich" ?