patrick.net

tatupu70 says

Reality says

Of course there is a difference in the value of land. However quantifying that is not nearly as simple as you might think.

It's not simple. But it's not impossible either.

It is impossible to impute land value for every lot under an existing building, to any degree that resembles accuracy or fairness.

ja says

Using computer and algorithms doesn't mean not taking into account peoples individual value for items. But don't convince me, convince Facebook

You are thinking of Farmville, not Facebook. LOL. Perhaps in your apprentice control-freak mind produced by the dysfunctional education system, it's possible to run a simulation to account for all future human action.

Such a simulation is doomed to failure. Unlike the sophomoric clockwork universe that you are imagining, the real world operates on uncertainty principle and butterfly effect. Small deviation from your model assumptions can lead to drastically different outcome. New information and new discoveries take place everyday, hence your model accounting for everything there is to know is obsolete the day it is devised.

ja says

If I cook for a friend and the friend cooks for me.. should it be taxed?

Which tax? Restaurant tax? of course not as you are not operating a restaurant open to public. Income tax? You need to show an accounting profit over a certain threshold first before you are liable to income tax.

If neighbor A cooks for B, B cooks for C, C cooks for A.. should it b taxed?

Why? Are they operating as restaurant open to public? Are they generating accounting profit over a certain threashold?

Repeat step above (n=3) till n=world population

If any of the above uses an honor system (=memory), should it be taxed?

Honor system is not taxable. Quid Pro Quo and accounting profit over a certain threshold makes one liable to income tax.

If any of the above uses a software coin (to help with memory limitations), should it be taxed?

They may get busted for using alternative currency, but that's a different issue.

People playing a game of Monopoly would not be taxed according to their winnings in MonopolyMoney either; if there is gambling going on with Mnopoly Money convertible to Federal Reserve Notes, then yes the winnings after conversion are liable to income tax.

If any of the above uses money, should it be taxed?

Money changing hands and resulting in accounting profit, that would make them liable to taxation. However, a group of roommates or fraternity/sorority members pooling their grocery bills together and take turns cooking would certainly not result in income tax . . . unless they hire a cook who is paid for doing the job.

Reality says

It is impossible to impute land value for every lot under an existing building, to any degree that resembles accuracy or fairness.

You have a very narrow view of what's possible then.

Which tax? Restaurant tax? of course not as you are not operating a restaurant open to public. Income tax? You need to show an accounting profit over a certain threshold first before you are liable to income tax.

If neighbor A cooks for B, B cooks for C, C cooks for A.. should it b taxed?

Why? Are they operating as restaurant open to public? Are they generating accounting profit over a certain threashold?

So according to you, the difference if generating value and consuming it depends only on wether it's open to the public. A private club doesn't count?

ps. In case I'm not clear, I'm talking about how taxes *should* be, not about how they are.

ja says

So according to you, the difference if generating value and consuming it depends only on wether it's open to the public. A private club doesn't count?

No. Work on your reading comprehension please.

There are potentially two different types of taxes involved, as you did not make clear which tax you were addressing:

1. Restaurant tax. It's a form of sales tax collected by localities. In order to serve cooked food to the general public, most localities require license and restaurant tax. So a private gathering, even if taking place regularly, doesn't subject one to this particular form of tax, as the food service is not open to public.

2. Income tax. That is both federal and state. For this tax to apply, you have to have accounting profit. Deriving personal pleasure from doing something is not accounting profit; nor is pooling of resources for shared consumption, so long as no body is deriving accounting profit.

ja says

ps. In case I'm not clear, I'm talking about how taxes *should* be, not about how they are.

Is that the catch-call expression for pulling sh*t out of your ass? Should you pay tax for spouting off on the internet? You obviously derive pleasure from spouting off nonsense.

Reality says

2. Income tax. That is both federal and state. For this tax to apply, you have to have accounting profit. Deriving personal pleasure from doing something is not accounting profit; nor is pooling of resources for shared consumption, so long as no body is deriving accounting profit.

You can go to the top of the thread. We have been talking all along about income tax and how it *should* be

My point is that we should tax everything that creates value for a person, whether it's traded in money or by bartering

ja says

You can go to the top of the thread. We have been talking all along about income tax and how it *should* be

My point is that we should tax everything that creates value for a person, whether it's traded in money or by bartering

Then you are no longer talking about income tax, but a new form of taxation: you'd have to pay that tax on the personal gratification that you derive from having written the drivel that you just did; you may have to pay that tax of yours on masturbating next time or even just using your hand to hold your wiener and taking a piss . . . what would be the cost of that if you had been paralyzed and a nurse had to be doing that for you? Well, pay tax according to that cost!

tatupu70 says

Reality says

It is impossible to impute land value for every lot under an existing building, to any degree that resembles accuracy or fairness.

You have a very narrow view of what's possible then.

When it comes to forcibly taking money from people, a narrow view on what's do-able is probably safer than the expansive view that if you put a gun to someone's head, he/she will cough up the money.

Reality says

Then you are no longer talking about income tax, but a new form of taxation:

Yes.. on a new taxation that applies on a re-defined version of income. Real value vs exchanged money.

Real value with yourself.. we can leave that for a second phase

ja says

es.. on a new taxation that applies on a re-defined version of income. Real value vs exchanged money.

Real value with yourself.. we can leave that for a second phase

So how much tax should you pay the next time you take a piss? There is certainly a lot of "real value" in being able to pass water, and it would cost a lot if you couldn't do it yourself due to disability and had to have a medical staff to help you. So how much should you be taxed in your scheme for holding up your own wiener to the urinal and take a pee? LOL.

Reality says

When it comes to forcibly taking money from people, a narrow view on what's do-able is probably safer than the expansive view that if you put a gun to someone's head, he/she will cough up the money.

Nice pile of gibberish there.

tatupu70 says

Reality says

When it comes to forcibly taking money from people, a narrow view on what's do-able is probably safer than the expansive view that if you put a gun to someone's head, he/she will cough up the money.

Nice pile of gibberish there.

Thanks for wasting time with your content-free post.

Reality says

So how much tax should you pay the next time you take a piss? There is certainly a lot of "real value" in being able to pass water, and it would cost a lot if you couldn't do it yourself due to disability and had to have a medical staff to help you. So how much should you be taxed in your scheme for holding up your own wiener to the urinal and take a pee? LOL.

Anything the open market would pay. Of course, you would have to take into discounts things like moving expenses for the medical stuff and the cost of the yuk factor (that most likely you don't have for holding your own thing, what makes it a non open market since there is a unique seller-buyer match - yourself with yourself -)

But for big items whose cost is easily verifiable in an open market, I still for it. So, let's start with rent imputed income, like the Swiss.

ja says

Yes.. on a new taxation that applies on a re-defined version of income. Real
value vs exchanged money.

Not that it's just wrong to tax people on money saving activities such as brewing your own coffee or making your own lunch/dinner, but additionally, who would quantify the savings or the sa called "version of income"? Who would determine the ahem benchmark? If you are making stir fry chicken at home, does the benchmark become chinese restaurant or elephant bar? And who the heck is gonna be actually making these determinations? And lastly, I am gonna call out the swiss and call them corrupt for the so called "imputed rent!"

ja says

So, let's start with rent imputed income, like the Swiss.

That would be pure corruption. You would force homeowners to pay rent and they would still have a mortrgage payment. No rationale, no reason and no justice.

dublin hillz says

No rationale, no reason and no justice.

justice = no subsidize (= different taxation) either using your property or your's landlords
Rationale = reason = with no subsidies, open market allocates resources better than planed government

tatupu70 says

Reality says

When it comes to forcibly taking money from people, a narrow view on what's do-able is probably safer than the expansive view that if you put a gun to someone's head, he/she will cough up the money.

Nice pile of gibberish there.

So you think forcing people to cough up tax money as they see fit under the threat of jail if you don't pay is not akin to sticking a gun to your head?

mell says

So you think forcing people to cough up tax money as they see fit under the threat of jail if you don't pay is not akin to sticking a gun to your head?

You are correct. I think it's a ridiculous analogy that has no useful purpose in intelligent conversation.

ja says

dublin hillz says

No rationale, no reason and no justice.

justice = no subsidize (= different taxation) either using your property or your's landlords
Rationale = reason = with no subsidies, open market allocates resources better than planed government

I don't see how it's fair to have people pay tax on "imputed rent" while they are paying off a mortgage. Please elucidate.

ja says

Anything the open market would pay. Of course, you would have to take into discounts things like moving expenses for the medical stuff and the cost of the yuk factor (that most likely you don't have for holding your own thing, what makes it a non open market since there is a unique seller-buyer match - yourself with yourself -)

The same "unique match" would also apply to cooking for myself and "renting" to myself. If I had the requisite skills and good practice for running a restaurant, I wouldn't be wasting time cooking for myself only. Both running a restaurant and renting residential properties involve a lot of overhead, much more than "moving expenses for the medical staff" (did you mean commute expense?)

But for big items whose cost is easily verifiable in an open market, I still for it. So, let's start with rent imputed income, like the Swiss.

Verifiable in what sense? The rent paid by strangers covers myriads of services and overhead precisely because the two parties are strangers to each other. Do you think renting to oneself would entail lease contract? deposit segregation? insurance against law suits by oneself? income and job verification? interviewing oneself? etc. etc..

As for the Swiss citation, I'm afraid you are missing a lot of the details. Instead of being "fair" as you claim, it seems to me such a tax system is designed to limit home ownership and benefit a few big landlords with sophisticated accountants and tax lawyers. The average homeowner would not go through the trouble of accounting for all the expenses and amortization (most American homeowners don't even itemize to take advantage of mortgage interest deduction) to offset such an "imputed income," whereas a big landlord with a team of accountants and tax lawyers would make sure the actual taxable income from rent is minimized.

ja says

justice = no subsidize (= different taxation) either using your property or your's landlords

What subsidy? Home ownership comes with all sorts of expenses. If the homeowner is forced to "rent" to oneself for tax accounting, then he would be able to deduct interest payment, amortization and repairs/improvements, as well as all the other operating expenses, such as insurance and utilities. Do you really believe there's much tax revenue to be generated on this scheme? What is granny's 1960's decoratiion apartment worth in "open market" anyway? Do we really want bureaucrats to tell granny she can't live there anymore because the bureaucrats think the house' rental value is higher?

Rationale = reason = with no subsidies, open market allocates resources better than planed government

Your proposal would entail vastly increased central planning/valuation by the government.

Reality says

What subsidy? Home ownership comes with all sorts of expenses. If the homeowner is forced to "rent" to oneself for tax accounting, then he would be able to deduct interest payment, amortization and repairs/improvements, as well as all the other operating expenses, such as insurance and utilities. Do you really believe there's much tax revenue to be generated on this scheme? What is granny's 1960's decoratiion apartment worth in "open market" anyway? Do we really want bureaucrats to tell granny she can't live there anymore because the bureaucrats think the house' rental value is higher?

So we should subsidize all industries that have expensive costs? Great, let's encourage those least productive

Last time I checked, around 30% of income is spent on living and rental is a good chunk. But if you have accurate data, please send us those papers.

I can use the average rental-to-value in the area, and use as value a the house appraisal.

Rationale = reason = with no subsidies, open market allocates resources better than planed government

Your proposal would entail vastly increased central planning/valuation by the government.

Just like it happens in other big Comunist countries of the world, like Switzerland.

Wait, we already appraise all our homes. We must be communist then.

ja says

Wait, we already appraise all our homes. We must be communist then.

How goes ascertaining market value of a home for purchase or refi loan resemble communism?

dublin hillz says

How goes ascertaining market value of a home for purchase or refi loan resemble communism?

I don't know, but the same way that appraising rental value.

ja says

appraising rental value

Appraising rental value is not communism. Taxing imputed rent is communism!

ja says

So we should subsidize all industries that have expensive costs? Great, let's encourage those least productive

What industries? You are talking about kicking granny out of her own home! Just like I have suspected for a long time, Georgists are really shills for big corporations trying to wield a tool that's even more disruptive than Eminent Domain, all in the name of "efficiency."

Last time I checked, around 30% of income is spent on living and rental is a good chunk. But if you have accurate data, please send us those papers.

What does that have to do with anything? Encouraging home ownership in the long run helps keep housing cost down, as owner take care of the houses on their own dimes.

I can use the average rental-to-value in the area, and use as value a the house appraisal.

In case it's not obvious, rental homes drive down home price. The rental-to-value is much lower in sections of town where rentals are rare. In fact, in most parts of nice towns where almost all homes are owner occupied, the interest and tax expense if buying now tends to be higher than rental income. In other words, there wouldn't be any income/profit to tax.

ja says

ust like it happens in other big Comunist countries of the world, like Switzerland.

Wait, we already appraise all our homes. We must be communist then.

Appraisal is based on real arm-length transactions (even then, disputes are often). Imputing owner equivalent of rent OTOH is fraught with biases listed previously.

The Swiss case is much more than what you think it is. It's a scheme for keeping ownership rate low, benefiting the big landlords, as they can afford the team of accountants and tax lawyers to run up expenses against the rental revenue, whereas the typical home owner do not have the time to expense everything at tax filing time.

ja says

I don't know, but the same way that appraising rental value.

Appraising rental value doesn't work for renting to oneself. A big part of the rental price is counter party default risk (vacancy, squatting). Renting to oneself obviously does not run such risk. In fact, many homeowners offer massive discount when renting to friends (or simply let friends home sitting) because there is significantly reduced counter party risk.

Reality says

What industries? You are talking about kicking granny out of her own home! Just like I have suspected for a long time, Georgists are really shills for big corporations trying to wield a tool that's even more disruptive than Eminent Domain, all in the name of "efficiency."

You seem to have a granny. I don't. And I don't want to subsidize grannies. But if you are so fond about it, promote another tax exemption for them, an elderly earned income credit, or some like that.
Reality says

What does that have to do with anything? Encouraging home ownership in the long run helps keep housing cost down, as owner take care of the houses on their own dimes.

Again, same argument missing all the arguments. What about the opportunity cost of the time/money expent on your own house. The best way of assuring that you spent time/money on the house is efficient is not subsizing owning it. Unless, of course, that you think individuals do not realize how good is home ownership (vs rental) and government has to give us a "push". But all of the recent studies indicate that there are no externalities owning a home.

href="http://patrick.net/?p=1227085&c=983586#comment-983586">Reality says

the interest and tax expense if buying now tends to be higher than rental income. In other words, there wouldn't be any income/profit to tax.

Who is talking about mortgage interest? In a ideal-perfect market, rents should be the same than interest for infinite years amortization.
I'm talking about return on capital. Rental-to-value does not vary that much and even Zillow's approximations are better than nothing.

Reality says

The Swiss case is much more than what you think it is. It's a scheme for keeping ownership rate low, benefiting the big landlords, as they can afford the team of accountants and tax lawyers to run up expenses against the rental revenue, whereas the typical home owner do not have the time to expense everything at tax filing time.

Finally an argument that vaguely makes sense. We should subsidize home ownership because rentals have externalities when the scale is small.

Reality says

ja says

I don't know, but the same way that appraising rental value.

Appraising rental value doesn't work for renting to oneself. A big part of the rental price is counter party default risk (vacancy, squatting). Renting to oneself obviously does not run such risk. In fact, many homeowners offer massive discount when renting to friends (or simply let friends home sitting) because there is significantly reduced counter party risk.

Sure, whatever, deduct the price of the insurance as well.

BTW: I'm not alone, is one of those things that make perfect economic sense but it's difficult to implement politically. Sort of like getting rid of subsidies on farming.

http://www.ft.com/intl/cms/s/0/af6eacf8-23ff-11e0-b68c-00144feab49a.html#axzz2ZTqicuD6
http://www.ft.com/intl/cms/s/0/af6eacf8-23ff-11e0-b68c-00144feab49a.html#axzz2ZTqicuD6

tatupu70 says

NO you can't deduct property taxes, as for state income I don't know, I live in Florida we don't have intax

YES, you 100% can deduct property taxes.

Not for those subject to AMT. Or those who take the standard deduction.

Reality says

First of all, one has to understand what tax is: systematic armed robbery in order to maintain a geographical monopolizer on the use of violence.

I hear conservatives say this sometimes. What exactly is meant by this? There's no good level of robbery or theft other than zero, so if tax=theft or robberty, this statement means that there should be no tax whatsoever. Welcome to Somalia.

ja says

You seem to have a granny. I don't. And I don't want to subsidize grannies. But if you are so fond about it, promote another tax exemption for them, an elderly earned income credit, or some like that.

So more legislations, more taxation, more lobbying for special interest groups. You are precisely the type of wannabe busy body idiots that have provided the political capital for making our laws and tax code as convoluted as they are.

ja says

Again, same argument missing all the arguments. What about the opportunity cost of the time/money expent on your own house.

Would be less opportunity cost lost than having to write down all the expenses for deduction at tax filing time in addition to doing all the work. If renting to oneself results in taxable imputed income, obviously the expense for being one's own landlord would be used to subtract from that imputed income.

The best way of assuring that you spent time/money on the house is efficient is not subsizing owning it. Unless, of course, that you think individuals do not realize how good is home ownership (vs rental) and government has to give us a "push".

What a moronic and yet hubristic way of thinking how the world works. There's hardly ever a "push" by the government necessary, unless one is thinking of creating over paid job opportunities for the bureaucrats doing the "pushing." There is no subsidy per se. It's renting house vs. renting money, take your pick. Mortgage interest is deducted either by the owner-occupant or the landlord as expense and passed onto the tenant via competition.

But all of the recent studies indicate that there are no externalities owning a home.

There is no real ownership in the US. The "ownership" is fee simple long term renting from the town, which collects property tax as rent. Long term occupancy makes it feasible to invest for the longer term.

ja says

the interest and tax expense if buying now tends to be higher than rental income. In other words, there wouldn't be any income/profit to tax.

Who is talking about mortgage interest? In a ideal-perfect market, rents should be the same than interest for infinite years amortization.

Do you then not realize your tax scheme would collect exactly zero $ in that "ideal-perfect market"? The entire rent would be expensed via amortization. In most desirable parts of the country, the rent-to-sale price ratio is so low that new landlords buying to rent would indeed produce negative cash flow. Apparently the buyers are bidding prices so high that they are effectively counting on rising price in the future.

I'm talking about return on capital. Rental-to-value does not vary that much and even Zillow's approximations are better than nothing.

What return on capital if rent income is no more than amortization and interest payment? The return on capital would be zero in that case, as capital is being consumed while interest expense is being paid out.

Reality says

BTW: I'm not alone, is one of those things that make perfect economic sense but it's difficult to implement politically. Sort of like getting rid of subsidies on farming.

Yes, there are many shills out there looking for new ways to generate tax revenue.

SiO2 says

I hear conservatives say this sometimes. What exactly is meant by this? There's no good level of robbery or theft other than zero, so if tax=theft or robberty, this statement means that there should be no tax whatsoever. Welcome to Somalia.

Somalia under anarchy was a far more prosperous time than Somalia under any of its governments in the previous two centuries.

Reality says

So more legislations, more taxation, more lobbying for special interest groups. You are precisely the type of wannabe busy body idiots that have provided the political capital for making our laws and tax code as convoluted as they are.

one person, one vote. One type of income, one tax.
The overhead for an election system and for a fair income evaluation is small and worth it for the benefits.

Reality says

If renting to oneself results in taxable imputed income, obviously the expense for being one's own landlord would be used to subtract from that imputed income.

Sure, whatever, you can add the landlord income and substract it when deducing the rental income. Just don't do my taxes.

Reality says

There is no subsidy per se. It's renting house vs. renting money, take your pick. Mortgage interest is deducted either by the owner-occupant or the landlord as expense and passed onto the tenant via competition.

Sure, whatever. Competition passes all the savings from manufacturers to consumers. And you can forget about elasticity of offer and demand. Same idea that if goverment pays $1 for potato to farmers, savings are passed to the consumers. Just don't do my 101 economics homework.

Reality says

There is no real ownership in the US. The "ownership" is fee simple long term renting from the town, which collects property tax as rent. Long term occupancy makes it feasible to invest for the longer term.

Sure... Property tax denies property, no matter how small it is or what services you receive on its behalfReality says

What return on capital if rent income is no more than amortization and interest payment? The return on capital would be zero in that case, as capital is being consumed while interest expense is being paid out.

Sure, whatever. If you pay cash then it makes sense and you should pay imputed income? Just don't give ideas to the Wall Street guys or they would start buying securities on (income tax free) leveraged money.

Reality says

Yes, there are many shills out there looking for new ways to generate tax revenue.

Yes, and if you follow their profile, they'll try to generate just the minimum government revenue. But all of it without market distortions.

Reality says

Somalia under anarchy was a far more prosperous time than Somalia under any of its governments in the previous two centuries.

You seem more informed that the World Bank, that doesn't have official GDP statistics about Somalia since the 90s.

But even with CiA's estimations, you are right. Congrats!
Oh wait, if you compare GDP growth of Somalia with the neighbors, it's really shitty.

ja says

one person, one vote. One type of income, one tax.

The overhead for an election system and for a fair income evaluation is small and worth it for the benefits.

What are you talking about? Aren't forgetting the lobbyists? Once you start exempting this group that group from "income" calculation that may amount to as much as 1/3 of what they are currently making, trust me, the lobbyists will be fully engaged.

ja says

If renting to oneself results in taxable imputed income, obviously the expense for being one's own landlord would be used to subtract from that imputed income.

Sure, whatever, you can add the landlord income and substract it when deducing the rental income. Just don't do my taxes.

What the heck are you talking about? Are you old enough to have filed income tax? or are you just some pimply faced high school kid? or college kid not making enough to need to file anything more than an EZ form?

ja says

There is no subsidy per se. It's renting house vs. renting money, take your pick. Mortgage interest is deducted either by the owner-occupant or the landlord as expense and passed onto the tenant via competition.

Sure, whatever. Competition passes all the savings from manufacturers to consumers. And you can forget about elasticity of offer and demand. Same idea that if goverment pays $1 for potato to farmers, savings are passed to the consumers. Just don't do my 101 economics homework.

Are you bragging about taking Econ 101 now? Is that for high school?

ja says

What return on capital if rent income is no more than amortization and interest payment? The return on capital would be zero in that case, as capital is being consumed while interest expense is being paid out.

Sure, whatever. If you pay cash then it makes sense and you should pay imputed income? Just don't give ideas to the Wall Street guys or they would start buying securities on (income tax free) leveraged money.

Once again, what the heck are you talking about? Do you know anything about accounting or paying taxes on profit?

ja says

Yes, there are many shills out there looking for new ways to generate tax revenue.

Yes, and if you follow their profile, they'll try to generate just the minimum government revenue. But all of it without market distortions.

Dream on. All taxation schemes create distortions. It is human nature to minimize one's own tax bill. You will know that after you have filed tax returns.

ja says

You seem more informed that the World Bank, that doesn't have official GDP statistics about Somalia since the 90s.

But even with CiA's estimations, you are right. Congrats!

Oh wait, if you compare GDP growth of Somalia with the neighbors, it's really shitty.

Rapid economic growth in Somalia during the period of "anarchy" could be verified by the vibrant market place that showed up there, compared to many decades of socialist and fascist rules before then. Even Paul Krugman admits in his latest column that all government economic statistics are essentially boring science fictions. All those dams and other big infrastructure projects that Somalia's neighbors built added greatly to their GDP but benefited the people very little, aside from the crony contractors.

I still don't understand what exactly is rationale for this so called "imputed rent" bullshit. Seems to me that some people are simply pissed that homeowners can deduct interest and property taxes via schedule A over the standard deduction hurdle from their taxable income. To those who are so upset about it, if you actually ran the numbers you would realize that what renters pay in federal + state taxes is very similar to what owners pay in federal + state + property. So the overall tax burden is extremely close. But I guess it's easier to get people emotionally manipulated via the hysteria over "tax breaks."