patrick.net

The government already does this via the "inflation tax" being considerably less than savings returns.

Why do we tax work at all? We want people to work, so we should encourage work via 0% taxation on earned income.

As always, I say the solution is simply a tax on land values (not on the buildings, which are created by work).

And it's really hard to cheat, when all land ownership and land taxes paid are public record.

You're talking about uprooting the entire tax code and changing how everyone does business, and how taxes have been essentially collected for hundreds of years, if not way longer than that. While we've had major changes in the past, this isn't feasible.

People who had been ready to retire using a standard that has been solid for hundreds of years would all of a sudden lose everything they had saved for their entire lives. Anyone buying properties as an investment over the last 40 years to use as retirement would instantly go bankrupt. Any REITs would go belly up essentially. All land owners would basically lose everything they've got, while renters would likely be in the best position.

My quick napkin system would basically change one aspect. Deductions. Increasing them massively to whatever you spend. And increase the tax rates after that. Instead of having these 15% rates, just bump it up to the higher rates for anything up spent!

Why do we tax work at all? We want people to work, so we should encourage work via 0% taxation on earned income.
As always, I say the solution is simply a tax on land values (not on the buildings, which are created by work).
And it’s really hard to cheat, when all land ownership and land taxes paid are public record.

We can also encourage employers to hire by removing the Minimum Wage. If Walmart wants to pay someone some money (less than minimum wage) to stand there and do nothing, let them. They just would not hire if they had to pay them $6.75/hour for it; perhaps they would at $2/hour. We want to put America to work, but not for less than $X. We want to put families in homes, but not for less than $XXX,XXXX. If you remove the floor, everything will be okay. Government intervention of anything is just plain stupid.

Vain says

If you remove the floor, everything will be okay.

How is a $2/hr job OK? Whether you are unemployed or making $2/hr. you still can't feed your family...

pkennedy says

You’re talking about uprooting the entire tax code and changing how everyone does business, and how taxes have been essentially collected for hundreds of years, if not way longer than that. While we’ve had major changes in the past, this isn’t feasible.

A transition to this regime would take 20 to 30 years of gradual phase-in change, yes. Feasible now?

tatupu70 says

How is a $2/hr job OK? Whether you are unemployed or making $2/hr. you still can’t feed your family…

If there was no minimum wage or Section 8, rents would fall to $0. The poor would still be living hand to mouth, but the rentiers would also be taking it in the keister, and hard.

end Section 8 and all other welfare-for-housing that is for any housing that is not public owned... do it right now. Taxpayers should not be subsidizing investment homes.

@Bap33
One of the best welfare projects ever taken on, was the relocation of poor families within medium income families. While the parents didn't benefit all that much, the children took on the values and expectations of the children they grew up around. Their lives were dramatically effected by this project.

Section 8 basically does that, and I'm all for that type of behavior, which helps out poor children get into better neighborhoods where they learn to expect more and achieve more.

Some section 8 housing might be more profitable for some, but don't forget these people are also higher risk often, so the extra income helps offset "problems" the landlord might experience.

In the grand scheme of things, these programs don't affect our well being by all that much. Worrying about someone who is scrapping out a living and trying to beat them down further isn't what we should really be trying to achieve in life. Landlords aren't likely to accept these tenants without some kind of added income, because they are higher risk. Without this program we would just be sending them off to more desperate housing.

I would rather see attacks on large scale projects that are just purely wasteful and helping no one but large corporations.

pkennedy says

Landlords aren’t likely to accept these tenants without some kind of added income, because they are higher risk. Without this program we would just be sending them off to more desperate housing.

And the empty housing left behind . . . what would LLs rent them as? Museums of 20th century multifamily housing?

The market will shift likely. The wholes will be filled with other qualified applicants most likely. I'm not exactly sure what the section 8 numbers look like, but I'm betting that they don't make up that much of the rental market. I could be wrong here, and I haven't done any research on this. I'm looking at the number of people in California, number of renters, number in poverty and working backwards to a "Can't be very large number"

If your option is to get someone in there who can't afford the rent, who is going to default, you might lower the rents. But you're also going to screen applicants far more aggressively. The ones who aren't accepted are going to end up in the worst neighborhoods once more.

I would say section 8 does raise rents, but by how much? How many people are actually participating in this program? How many units can they rent if they've got an apartment building? Can they all go to section 8? 10%?

Real indepth numbers explaining the situation would be nice!

"About 2 million people nationwide receive housing assistance under the program, a slight increase from the previous year. Hundreds of thousands more are on waiting lists.
This year, the program received $18.1 billion in federal funding, according to White of HUD. The Obama administration is seeking $19.6 billion in funding for next year" -- Fresno Bee

$9000/person subsidy. $750/mo. Cha-ching!

That's about right, there's about 7K section 8 in Contra Costa County alone. There's a little over 100K housing unit non-owner occupied in the county which leaves section around 7% of the rentals or a little over 2% of the overall population on section 8.

Here's an interesting stat I was able to find from NYCHA

A total of 654,657 New Yorkers are served by NYCHA's Public Housing and Section 8 Programs. NYCHA residents and Section 8 voucher holders combined occupy 13.2% of the City's rental apartments and comprise 7.8% of New York City's population

101,049 apartments on section 8.
some 180,000 government apartment units.

http://www.nyc.gov/html/nycha/html/about/factsheet.shtml

Here's the SFHUD information summary

6,575 project units
10,000 section 8

16,575 with public assistance either through section 8 or projects.
323K households
about 5%

http://www.sfha.org/about-us.html

So roughly 1 in 20 get assistance in the SF area. Even if those people are paying slightly higher rents, I'm betting that a decent number of them should be. Some are probably well organized people with very limited income, while others probably have some serious issues.

1 in 20 doesn't seem like they're skewing the numbers for everyone, at least not offering huge profits, once you take into consideration the risk they potentially offer as well. This is much higher than I expected though!

Vain says

Why do we tax work at all? We want people to work, so we should encourage work via 0% taxation on earned income.

As always, I say the solution is simply a tax on land values (not on the buildings, which are created by work).

And it’s really hard to cheat, when all land ownership and land taxes paid are public record.

We can also encourage employers to hire by removing the Minimum Wage. If Walmart wants to pay someone some money (less than minimum wage) to stand there and do nothing, let them. They just would not hire if they had to pay them $6.75/hour for it; perhaps they would at $2/hour. We want to put America to work, but not for less than $X. We want to put families in homes, but not for less than $XXX,XXXX. If you remove the floor, everything will be okay. Government intervention of anything is just plain stupid.

Yeah, next time someone attempts to charge me a price that I don't like ill just kill them and take it. They can always fight back, but that's easily solved by having a bigger gun.

Great plan!

Why do we tax work at all?

Because the government needs the money ? If one guy makes just enough to live, then he shouldn't pay any taxes. But if another guy makes 700 times as much or 2000 times as much, then certainly he can afford to be taxed, without effecting his incentive. Does a guy paid 15 million/year feel 3/4 as motivated as a guy who gets paid 20 million ? How about 300,000 versus 400,000 ?

If we were to tax land, we can't count on that to fulfill all of our tax needs (local, state and federal), unless in some way land were to transition to where land value started to include the present value of work done on that land (people being paid less for their work). That's just a convoluted way of taxing work.

Maybe I just don't get it, and either you or Troy could help me understand, that is by breaking it down all the way. Keep in mind, under our current system land is already taxed (simultaneously with the improvements to the land). So obviously you see land being worth WAY WAY more than it is now, if it's going to generate what our income tax generates now.

Or would the land be worth way less, because so much tax was paid on it ?

The debate about how much land value is taxable is common in Georgist circles. It is estimated that 20% of our GDP is skimmed into the land economy.

At the end of the day anyone making money is either creating value or capturing value that either someone else has created or exists naturally.

People who invest in "income properties" are generally well on the wrong side of that continuum.

The main point of taxing land is to reduce if not end this particular predation of the idle class ("Capital") on the under class ("Labor").

This site is full of people cackling about how great their income properties are performing for them, all the free money they're getting.

And then we learn that poverty in this country is 1 in 7. These things are not unrelated.

Mildly scaling back this predation with a 10% tax on rents would over time redirect investment away from sheer predation and into productive enterprise again. This need not be a "single tax" (exclusively LVT), but the more we can shift off of wages and onto land the better off we'll all be.

Or would the land be worth way less, because so much tax was paid on it ?

In a perfect system one's housing expense would be solely the depreciation one is causing, plus the cost of capital to create the housing itself. Everything else paid for tenancy rights would be taxed to the State in replacement of one's other tax burdens.

I'm currently living in very nice apartment (as far as apartments go) built in 1989. There's maybe $300/mo in depreciation and $100/mo in services provided, $200/mo in interest. The rents back in 1989 were around $750, now they are $1400. The $800 difference between rent ($1400) and costs ($600) would, ideally, be applied against my income taxes, though of course one can see that this greater take-home pay would tend to increase rents in a feedback effect. (I don't have the answer to that)

What is really needed is enough (quality) housing supply to utterly gut the housing sector entirely, removing it as a significant cost factor in our daily lives. Instead of the past 5 years in Iraq & Afghanistan we could have built 6 million quality Freedom Rentals across this nation. With all the unemployed construction labor we could do this now, for $60B/yr or so for the next 10 years.

This is probably all a pipe dream as rental people don't take care of rentals that well, alas. I need to think through this whole policy thing a lot more. So many things are screwed up here it's tough to know where to start.

To answer the question, under an aggressive LVT, land would be free since land use rights are essentially leased from the taxing authority instead of traded in the land market.

Troy says

Instead of the past 5 years in Iraq & Afghanistan we could have built 6 million quality Freedom Rentals across this nation. With all the unemployed construction labor we could do this now, for $60B/yr or so for the next 10 years.

But what would that do for our feeling that we (the US) are the big kahuna, globally speaking ? Also, what about Haliburton and the rest of the MIC ? Are we supposed to just let them barely get by, as life for ordinary Americans gets better ? And how will regular Americans stay motivated enough ? Maybe as soon as their costs come down slightly and more are employed, they will start to feel that their financial dreams are nearly in reach, and that will somehow make them less ambitious and productive.