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Nominal wages or real wages? Nominal price or real price? If you use nominal for both over 100 years, you are just plotting inflation more than anything else.
Nominal. Of course inflation is the major driver. That's my point.
Then that's a pointless point. Over 100 years spanning 3 different monetary synstems, you can draw correlation in nominal price between just about anything. That says absolute nothing about the real relationship between the two goods.
Just like I suspected, you are looking at a graph that has way too coarse granuality. My surprise is that you didn't even bother to normalize them with inflation. As the old saying goes, there are lies, damned lies and statistics. I actually love statistics, but I hate lies. That's why I always look into the details when presented with graphs or statistics.
pkowen
2011 Aug 24, 5:02am
Perhaps we have different definitions of the word "arbitrary."
Indeed, mine is from a dictionary. Yours is whatever mangled logic it takes to continue your opinionated and confused rants.
No, to me, valuation has to be somewhat reflective of market reality . . . not some number pulled out of some academic's ass because they had a convention somewhere, like in the former Soviet Union.
To me, valuation deviation form market reality is "arbitrary."
"Academics ass" ... "Soviet Union". You clearly are not worth my time.
You cloud your own assessment of rational and logical solutions with a blind dislike of the bogeyman of government "bureaucracy", academics, and apparently Soviets. Soviet Union? Really? Do you know anything about the subject at hand?? Clearly not. I'm done with you.
One last thought for those who might actually be listening to this clown as though he actually had rational arguments:
Valuation using mass appraisal is indeed "somewhat" reflective of market reality, but more stable and consistent and less prone to irrational market swings (reference: the past 10 years). Typically, appraised value as defined by the tax assessor is LESS than recent market sales data. Rather than being at the whim of the volatile "market", which is by any definition more arbitrary than a formula - mass appraisal uses common characteristics of property rather than whims of buyers. Of course, in CA we threw out mass appraisal in favor of a less stable, more inconsistent supposedly "market driven" system. Now, some pay 10x more (or less) than their neighbors, simply because of market fluctuations.
Georgism is likewise a rational solution. Too bad we now live in a country where we cannot discuss things rationally. Instead, reason and logic have been replaced with opinionated half-baked rhetoric.
"Academics ass" ... "Soviet Union". You clearly are not worth my time.
Then you proceed to contradict yourself.
You cloud your own assessment of rational and logical solutions with a blind dislike of the bogeyman of government "bureaucracy", academics, and apparently Soviets. Soviet Union? Really? Do you know anything about the subject at hand?? Clearly not. I'm done with you.
Which subject? I know quite well about the subject on how Soviet and Marxian system of relying on wise men (academics) to evaluate goods and plan their economy.
BTW, stop contradicting yourself every paragraph with "I'm done with you" then proceed to do the exact opposite.
One last thought for those who might actually be listening to this clown as though he actually had rational arguments
You are not very funny . . . for a clown.
Valuation using mass appraisal is indeed "somewhat" reflective of market reality, but more stable and consistent and less prone to irrational market swings (reference: the past 10 years).
In other words, "don't confuse me with facts on the ground." You obviously believe your "somewhat reflective of market reality" is more "rational" and more appropriate than the market reality itself . . . which was precisely my point earlier: if we leave to the government bureaucrats to decide what the land owners land is really worth and tax that value heavily, we are all screwed! They are perfectly willing to contort themselves in order to come up with a steady stream of tax revenue . . . real land value be damned!
Rather than being at the whim of the volatile "market", which is by any definition more arbitrary than a formula - mass appraisal uses common characteristics of property rather than whims of buyers.
The whims of bureaucratic formulae must be better than the whims of people spending their own money! Welcome to the USSR. LOL! Show me one formula that encompasses everything that can ever happen to a house. Does it account for meth lab history? dog/cat pee? fluting on the eves? guilding? etc. etc.?
Georgism is likewise a rational solution.
No it is not. Self-proclaimed Georgists can't even agree among themselves what "land" is
Â¥
2011 Aug 24, 5:17am
reason and logic have been replaced with opinionated half-baked rhetoric.
what i call misean / right-libertarian bullshit.
My "institutional defenses of intergenerational wealth" was referring to Heritage Foundation, Cato, Hoover Institution, Manhattan Institute, AEI, the WSJ, FOXNEWS, etc etc.
The forces of wealth have built up quite the message machine. Opposing it is centrists like Krugman, and some moderately left mirror-image organizations like CBPP and whatever Soros is funding.
Red-baiting is a standard thing the defenders of wealth do; from my "Royal Libertarian" link:
"Royal libertarians are fond of confusing the classical liberal concept of common land ownership, particularly as espoused by land value tax advocate Henry George, with socialism."
The funny thing is Georgism is generally quite compatible with capitalism, just not the rent-seeking kind we are suffering under today.
William F Buckley and Georgism:
http://freeliberal.com/archives/003247.php
Given the immense amount of wealth currently sitting in land, one would expect to see immense amounts of push-back on directly taxing this wealth away. Anything less would be the dog that didn't bark.
aka misean / right-libertarian bullshit.
More content-free diatribe.
I don't even consider myself Misean, as I advocate direct debt burden relaxation.
My "institutional defenses of intergenerational wealth" was referring to Heritage Foundation, Cato, Hoover Institute, Manhattan Institute, AEI, the WSJ, FOXNEWS, etc etc.
In case it's not obvious, many of those organizations do not agree with each other on many subjects.
The forces of wealth have built up quite the message machine. Opposing it is centrists like Krugman, and some moderately left mirror-image organizations like CBPP and whatever Soros is funding.
What a joke. Krugman advocates the worst kind of Trickledown Economics: government bailouts and hand-outs to the ultra-rich. Soros is actually an ultra-rich rent-seeker.
You are just a joker advocating for raising taxes so more money can be fed to the ultra-rich rent-seekers who control the governments. Your preference for packing millions of people into tight spaces like Tokyo so that they can be taken advantage of by local monopolies further proves your real color.
BTW, the real problem with "communists" is not their ideal per se, but the fascist methods that they always end up adopting in enslaving the people after they establish economic and political monopoly. Monopolistic management of economy is simply unworkable, regardless what the ideal is. People have to be allowed to discover economic value of goods on their own. That's how new creative use of limited resources is to be found and enhance living standards for humanity.
Patrick
2011 Aug 24, 6:20am
if we leave to the government bureaucrats to decide what the land owners land is really worth
So what is your objection to letting people bid on the land tax they are willing to pay?
Not when the Georgists can't even figure out what "land" is .
lemme try my "Georgist" cap on here this lovely afternoon
land - all the material universe outside of man and his products
how do you define "land" in your "reality", Reality?
are Land and Capital one in the same, or do you perceive them as two separate things?
if we leave to the government bureaucrats to decide what the land owners land is really worth
So what is your objection to letting people bid on the land tax they are willing to pay?
I'd be fine with if the bid amount then is proportionally allocated to all other bidders who did not win the auction, instead of the government. [edit: I wrote this first sentence before reading the link; I thought you were talking about auctioning new land to developers; I will address the specifics with auctioning land below existing house after each death in a separate paragraph specifically]
Accruing all future economic value to the government bureaucrats is not at all the same as paying the society. The experience of countries that tried the land lease auction method to fund government, like Hongkong, showed that the result is not at all what Georgists expected: the 99-yr lease auction process created extreme wealthy developers who could win those auctions vs. the masses of middle class being reduced to service a huge debt/rent because the supply of housing was so tight. The poor ended up renting stacked beds! not even rooms.
It is important to keep in mind that Government actually functions as a feudal territorial monopoly regardless what its de jure form is. Auctioning exclusive privileges (territorial feudal privileges) is in effect feudalistic tax farming.
If I have to guess, if every house has to come up for land auction when the owner dies, families all over this country would be quickly reduced to bankrupt renters: the banks financed by the FED can bid on those land auctions; if they win, they hold the land and rent back to whoever moves into the house (the bank would be getting the house for free, as moving house is uneconomic in most cases, especially with existing laws protecting trees on sidewalks), if the relatives of the diceased have to borrow to bid against the banks, they'd be in hock to the banks for the loan.
We already know who win tax lien auctions and what they do with their wins: the banks, and they charge enormous interest to the hapless homeowners or steal their house altogether. Luckily the land tax auction after each death plan wouldn't fly at all, as imposing hardship on newly berrieved families would have enormous political backlashes. The very purpose of the threshold in inheritance tax is set so that most family don't have to worry about paying tax on their dead parents' house. Only the millionares can be politically singled out if they do not plan ahead.
A much better way is what the US government did in the 19th century when the West was opened up: giving land out to anyone and everyone who would pioneer / homestead the land with nominal registration fees, and limited the size of that give-away to each family to no more than 160 acres (a day's traverse), a homestead, so that the pioneering farmers would compete against each other to produce farm products, and accruing the benefit of new land to all buyers of farm goods (in addition to the farmers who own the land).
BTW, I'd be fine with limiting the concentration of ownership in any given area, such as a law prohibitting any one (or related ones) from owning more than 10% of the total housing stock within a zip code (unless there are less than 100 home owners total in a really really rural or new area being developed; someone founding a new town obviously would have to be the concentrated owner at the very beginning).
Not when the Georgists can't even figure out what "land" is .
lemme try my "Georgist" cap on here this lovely afternoon
land - all the material universe outside of man and his products
how do you define "land" in your "reality", Reality?
are Land and Capital one in the same, or do you perceive them as two separate things?
The main appeal of Georgism to the uninitiated is that "land" is "God-given" and unmixed with human labor. However, in practice, it becomes impossible to identify on the ground what is "land" what is "improvement." Is a buildable lot that had been a swamp before the developer filling it "land" or "improvement"? How about a level lot that used to be a ravine or a cliff before developer? Since the first home buyer had purchased the developer's service in his purchase many decades ago, and subsequent assignees have purchased the value of that service in their turns . . . how would it be fair now for the government to assess the current owner for the entire value of the flat lot even if the house is struck down by the lightening (in a very lucky scenario for Georgists)? The lot would have to be reverted to swamp or unbuildable ravine to find a buyer to arrive at real market value for "original raw land" value. . . which is obviously unpracticable both for obvious efficiency reasons and for book keeping reasons keeping track of what a plot of land had been before civilization arrived there.
That's why Henry George eventually arrived at the conclusion that all improvements that last longer than the original improver is defined as "Land" in official Georgism. Defined as thus, Georgism loses much of its romantic appeal about "God-given Land."
My personal view is that the crux of the issue is not "God-given" or not. The iron in your car is "God-given," nobody can use that iron until you sell the car (or rent out the car as the case may be); DMV has the title registeration for your car just like town deeds office and county title office for the land/house; does that mean there should be a use tax charged for the entire use value for all the material content of your car? Of course not, despite your continued possession is preventing someone else from scrapping your car for the raw material.
The real issue is government granted monopolistic economic power; i.e. Economic Rent. On this point, B.Bob is actually close to my understanding. A liquor license or a hospital license actually carry far greater Economic Rent than the land sitting under the store or the hospital. Where B.Bob and I differ is that I understand that the more the government charges for that license / (feudalistic territorial) privilege, the more costly the services would be to the local residents . . . whereas for some odd reason that I don't quite understand, B.Bob thinks a more expensive liquor license would lead to cheaper liquor (analogy to landlords if they had real market power like the holder of an exclusive liquor license).
Also, I don't believe small time landlords for residential housing command much Economic Rent, thanks to the large number of them competing against each other in any given area. The high cost of rent/use-fee in some parts of the country is simply the result of many people wanting to be there running up against the zoning laws preventing landlords from building more. The fact that landlords enjoying Prop-13 protection pass substantial amount of tax savings to the renters making rent/use-fee much much lower than monthly payment on unamortized mortgage on similar house is indicative of the competitiveness among landlords. The monthly payment on unamortized mortgages (plus down payment) is the true extent to which the highest bidding renters/buyers are willing to pay for housing in an area, and would be the price in the absence of landlords offering similar housing for less rent.
Buying a house (+land) to rent out is no different from any other business; if it commands far superior returns than stocks or factories, investors would quickly rush in and bid down risk adjusted returns. They did precisely that a few years ago, leading to many of them being foreclosed upon. The cause for their rushing in wasn't even rent/use-fee from tenants but rather asset appreciation due to dropping interest rate and lax lending standards.
There are real Economic Rent issues in some other cases: such as hospital license and liquor license. The way to reduce hospital Economic Rent is by relaxing licensing requirement, so people have to service providers to choose from. As for Liquor License or night club license, that is indeed a form a tax imposed by the community with explicit purpose to limit supply. Do we really want to apply the same logic to limit supply on housing or medicine?
Patrick
2011 Aug 24, 10:05am
If I have to guess, if every house has to come up for land auction when the owner dies, families all over this country would be quickly reduced to bankrupt renters
The owner could be a married couple. One dies, the other remains, no problem.
But I do have a problem with letting children inherit the low tax base of their parents. That's another step toward landed aristocracy, and impoverishment of all others.
My personal view is that the crux of the issue is not "God-given" or not. The iron in your car is "God-given," nobody can use that iron until you sell the car (or rent out the car as the case may be); DMV has the title registeration for your car just like town deeds office and county title office for the land/house; does that mean there should be a use tax charged for the entire use value for all the material content of your car? Of course not, despite your continued possession is preventing someone else from scrapping your car for the raw material.
I want some of what you're smoking!
people don't live in cars though. It is merely transportation.
a bit apples and oranges, if you ask me
I didn't notice if you answered my question in all those words, did you?
The owner could be a married couple. One dies, the other remains, no problem.
But I do have a problem with letting children inherit the low tax base of their parents. That's another step toward landed aristocracy, and impoverishment of all others.
I can certainly sympathize with the sentiment. However, in practice, the real "landed aristocracy" with tens of thousands of acres can pass down the generations through family foundations . . . and in some cases even nominally "donating" to the government so that the taxpayers would have to provide grounds keeping service.
Luckily for us, the super wealthy nowadays are not relying on residential rent income . . . probably due to legal liabilities. The field of residential rental is very competitive, which is good for the renters and avoiding Economic Rent. A tax raise there actually would hurt the renters and the economy in general.
My problem with "married couple" only is that then government gets into the business of defining what's a marriage. What about the dutiful kid who chose to stay home to help the elderly parent so he/she did not become a burden on the public? So long as we are talking about inheriting a single house (even if a multi-family), I doubt there is any basis for "landed aristocracy."
Let's not have green eyes on our neighbors. If the neighbor can get away with paying less taxes, that means the government bureaucrats have less resources to pick on you.
I want some of what you're smoking!
Why do people running short on logic have to hyper-ventilate? I like the tone in your earlier post much better.
people don't live in cars though. It is merely transportation.
Ask a homeless sleeping in a car about that . . . or a homeless who can not recycle your car for scrap metal in exchange for his next meal about that. I mean, why shouldn't the homeless be allowed to "mine" your catalytic converter? Your continued ownership of the palatinum is preventing other people from using the limited resource. Palatinum as an element is certainly God-given (from Super Nova) and is certainly finite on this planet.
Conversely, if people don't live in it is the new standard, does that mean commercial land should have zero LVT? LOL. It's the economic value of finite natural resource that we are talking about . . . whether the benefit should accrue to the end user in a competitive market process or should the entire economic benefit of the finite resource accrue to government bureaucrats via tax.
a bit apples and oranges, if you ask me
Not really:
House: land is an input factor, allegedly god-given, and finite, then intermixed with labor in its improvement, is registered with government agencies for "title" for ease of litigation in the future, and can be rented for use value. The land is not useable by anyone else while the house owner is using that land.
Car: metal (ore) is an input factor, alleged god-given, and finite, then intermixed with labor in refining into alloy and made into a car, is registered with government agencies for "title" for ease of litigation in the future, and can be rented for use value (car rental). The metal in the car is not useable by anyone else while the car owner is using the metal as part of his car.
I didn't notice if you answered my question in all those words, did you?
What's your question? I thought I gave a very detailed explanation . . . that the "Land" that arouses righteous Georgist antipathy is actually an abstract concept standing for government granted monopolistic Economic Rent. That did apply to some degree to farm land in Henry George's time in Europe (Feudal land holdings in a predominantly agrarian economy) . . . however, today government granted monopolistic Economic Rent do not primarily involved land holdings, especially not in the case of small time landlords who do not command much Economic Rent.
Or when you do something stupid like allow grandchildren to inherit tax bases, as under Prop 193. This is one of the dumbest tax policies ever and only entrenches wealth for undeserving people.
The logic is thus: people coming into owning a house through involuntary circumstances are not like the new buyers who are flush with money. Prop-13 is simply a way to enable a town to raise tax whenever new buyer flush with money is coming in. It's simply a customer price discrimination policy, like any vendor with marketing power (the government certainly does have that monopolistic marketing power), trying to differentiate between those who can afford to pay more, who can not, and charge accordingly.
Most towns people are protected under Prop-13 to one degree or another. It just gives the town an excuse to charge more for new comers. Not at all a "tax break" for a few.
Patrick
2011 Aug 24, 10:50am
2. Why should the full economic value of the land accrue to the monopolistic government bureaucracy instead of the renters who then can enjoy lower rent without the tax burden?
You're joking, right? As if a landlord would ever lower rent because of lower taxes! ALL the benefit of lower taxes ALWAYS goes to the landlord. Period. Can you imagine this conversation:
Landlord: "Well, the government has lowered land taxes, so I will lower your rent."
Tenant: "Gee, thanks. You didn't need to do that."
The landlord always charges the maximum the tenant is willing and able to pay. Period.
You're joking, right? As if a landlord would ever lower rent because of lower taxes! ALL the benefit of lower taxes ALWAYS goes to the landlord. Period. Can you imagine this conversation:
Landlord: "Well, the government has lowered land taxes, so I will lower your rent."
Tenant: "Gee, thanks. You didn't need to do that."The landlord always charges the maximum the tenant is willing and able to pay. Period.
The tenant can move to the next landlord who is charging less because his tax expense is lower. I actually negotiated a rent reduction from my landlord in 2008 after the economic collapse, just by hinting about moving. Why do you think many new landlords had negative cashflow? instead of asking for more so they can at least break even? The tenant would simply move to the cheaper service provider!
The very fact that Prop-13 has enabled many landlords to rent their units for much much lower price than the purchase monthly PITI on the a similar house is clear proof that landlords do pass along tax savings to tenants, through the competitive market process. Heck, they pass along more than their tax benefits! They pass along even some of the lower monthly payment due to their having successfully managed the place for decades, as reflected at a time rent was less than half of monthly cost of buying.
It is indeed very important to understand this competitive market process. It explains why the competition among American carmakers in the 1920's and 1930's were able to deliver cheaper and better made cars to American consumers whereas German and Soviet central planners could not despite their alleged efficiency and government coordination to make cheaper cars.
Likewise, we have witnessed this phenomenom again in the last 30 years as the competitive semiconductor and communication devices industries in this country due to multiple competitors "greedily" pursuing their own profitability while delivering cheaper and faster devices . . . whereas the soviet and Japanese and Chinese government sponsored research facilities in the same fields went nowhere.
Of course the landlord would like to charge the maximum he can get away with . . . as does the tenant who wants to pay as little as possible. However, due to competition, neither can get their full wishes . . . or put it another way both indeed get what they wish, with a caveat "they can get away with" under the competitive pressure. That's the beauty and dynamic equilibrium of free market. Government taxation OTOH is much more monopolistic.
When tax is lowered, the tenant is simply less willing to pay the old rental amount because the landlord next door is offering housing for less due to the lowered tax expense.
Patrick
2011 Aug 24, 11:49am
The tenant can move to the next landlord who is charging less because his tax expense is lower.
Doesn't work that way in Silicon Valley. All rents are already at the upper limit of what tenants can possibly pay, as determined by salaries, because continuing bubble prices prevents any new houses from being bought and rented out profitably. So this makes rental supply artifically tight.
Prop 13 does reduce a long-time landlord's obligation to the community to essentially zero. That, combined with the very high rents, makes old Prop 13 landlords into a hereditary aristocracy that simply sucks money from the economy while producing nothing of use to anyone, except for some maintenance, and that only if absolutely necessary to avoid getting in trouble with the law.
Great work if you can get it.
Doesn't work that way in Silicon Valley. All rents are already at the upper limit of what tenants can possibly pay, as determined by salaries, because continuing bubble prices prevents any new houses from being bought and rented out profitably. So this makes rental supply artifically tight.
The rent amount is not even close to the upper limit of what tenants can possibly pay . . . as evidenced by none other than the frequently repeated stats that renting in the Silicon Valley is much much cheaper than buying (i.e. renting money) in terms of monthly payment. The ITI (no P) on new purchase reflects how much people can actually afford to pay if they really want a house.
Prop 13 does reduce a long-time landlord's obligation to the community to essentially zero. That, combined with the very high rents, makes old Prop 13 landlords into a hereditary aristocracy that simply sucks money from the economy while producing nothing of use to anyone, except for some maintenance, and that only if absolutely necessary to avoid getting in trouble with the law.
Great work if you can get it.
So why didn't you get it? It's like saying, someone bought 10,000 shares of Microsoft in 1989 or 10,000 shares of Walmart in 1985 are all parasites. Now both worth multiple millions. What did they ever do besides holding onto those shares? So why didn't you buy them? They were fairly cheap back then. The rental service provider in Silicon Valley is certainly doing much more work over the years than the stock holders of MSFT or WMT.
What you are missing is that numerous wannabe landlords have gone bust along the way just like numerous other stocks have gone bust, before you can turn your green eyes on those success stories.
As for producing nothing of use to anyone, do you consider HR managers who interviewed you for your last job as having produced nothing of use to anyone in their entire lives? How many people do you think the landlords had to interview for the 25+ years of ownership before they can really let Prop-13 cap their tax to "essentially zero." Property price was already fairly high in the late 1980's (about half of the recent peak at then peak), so someone purchased as early as 1988 can't really benefit more than about 25-50% reduction compared to current tax level. It's the ones who bought before about 1982 that really benefit from Prop-13. That's 3 decades of consistent management! When was the last time you had stayed at a job for 3 decades? Should an HR manager with 3 decade of experience be called parasite and kicked out?
As for obligation to the community, towns love really long term residents and owners . . . because the short-term homeowners with only a few years of stay in good towns are usually there to take advantage of the good school system! Considering that something like 80-90% of the town's budget go to the schools, it's highly advantageous for the town to have someone who pay tax for 30 years, even at half-off or 3/4-off, but do not have kids to register at the schools.
BTW, if you think small time landlords who have to interview tenants, fix buildings, collect rent, pay bills on time and put his capital on the line for risk exposure . . . are all parasites, what do you think government tax collectors are? And why should they be paid more?
American in Japan
2011 Aug 24, 2:49pm
@Troy or should I say Bob
>Given the immense amount of wealth currently sitting in land, one would expect to see immense amounts of push-back on directly taxing this wealth away. Anything less would be the dog that didn't bark.
LoL!
American in Japan
2011 Aug 24, 2:53pm
@Troy (Bob)
>Cruising around Tokyo in google street view I am shocked to see all the new building done since I left in 2000).
Yes, I am here. The has been lots of new building (Mori Building, Omote-Sando Hills, Shidome, Tokyo Midtown, new Shibuya towers and more)....
Patrick
2011 Aug 24, 3:42pm
The rent amount is not even close to the upper limit of what tenants can possibly pay . . .
Sure it is. Buyers and renters are not the same groups of people for one thing.
But back to Prop 13. My landlord pays about 1 month of my rent per year as property tax. Without Prop 13, she'd pay about 6 months of my rent per year as property tax.
She's making a big profit either way, but 5 extra months of profit at public expense is totally uncalled for.
f you think small time landlords who have to interview tenants, fix buildings, collect rent, pay bills on time and put his capital on the line for risk exposure . . . are all parasites, what do you think government tax collectors are? And why should they be paid more?
1. Interview tenants? Just a form I filled out.
2. Fix building. Yes, minimally, but honest work.
3. Deposit my check? Very hard work, right...
4. Pay bills on time. Also very hard work.
5. Put his capital "on the line". Why should anyone be rewarded for speculating in real estate that already exists?
Government tax collectors... yeah, what have the Romans ever done for us?
http://www.youtube.com/watch?source=patrick.net&v=ExWfh6sGyso
What you're not seeing is that that rent on the land is itself a TAX with no BENEFIT. I suspect that might be because you need to feel entitled to money that you're not really entitled to. Maybe you're a landlord? If you can mix in the honest income from actual work with the dishonest income from land ownership, then it just feels better.
The solution is to call a tax a tax, and stop calling it rent. Then let the government collect it so we can eliminate income tax and sales tax.
Given the immense amount of wealth currently sitting in land, one would expect to see immense amounts of push-back on directly taxing this wealth away. Anything less would be the dog that didn't bark.
Bingo!
Sure it is. Buyers and renters are not the same groups of people for one thing.
Without the landlord let service, buying would be the only option. Qualifications for buyers are actually higher than for renters, so in a normal market, monthly fee for renters should actually be higher than that for buyers who have the superior credit worthiness. i.e. rent should be higher than the monthly payment for buying. That is actually one of the cardinal rules for buying investment property in a normal housing market: the landlord is actually arbitrarging his/her superior credit worthiness to provide the renter a roof over the latter's head.
The availability of houses for renting at half the monthly payment of mortgage on comparable house is almost entirely the result of competition among landlords, as is the phenomenon of negative cash flow among new landlords.
But back to Prop 13. My landlord pays about 1 month of my rent per year as property tax. Without Prop 13, she'd pay about 6 months of my rent per year as property tax.
She's making a big profit either way, but 5 extra months of profit at public expense is totally uncalled for.
That means she has owned the property since probably before 1980! That's 30+ years of successful track record on her job! Assuming the property tax rate in your town is 1.5%, her rental revenue is only about 3% of the house' value! That's before insurance, tax, repair expense and her mortgage payment (if any) What big profit are you talking about? 3% revenue - 1% insurance and repair = 2%, that's about 1.5% Return On Capital after Prop-13 protected property tax! (and would be 0.5% if there had been no Prop-13 protection) And you are complaining as if she enjoys some kind of Economic Rent?!
1. Interview tenants? Just a form I filled out.
If you are the only applicant, then the landlord has even less market power than the tenant, as the tenant probably looks for housing at multiple different places. When I was in college, I had to sublet to my roommates in 4br apartment. When two of them moved, it was a pain the rear end to find new roommates. I spent multiple days interviewing dozens of them before picking two; they were not even my top choice, as some people that I wanted decided to live somewhere else. Two-way choice is a real bitch. LOL.
2. Fix building. Yes, minimally, but honest work.
Hardly. There are far more fixing around the house than a public road. You are forgetting the house needs new roofs every 10 years or so. New water heater every 6. Plumbing leaks, electric fixes, exterior painting every 3-5 years, etc. etc.
3. Deposit my check? Very hard work, right...
You need to check on deliquency rate among tenants.
4. Pay bills on time. Also very hard work.
There are full time jobs for that, called account managers. Are they "parasites" too?
5. Put his capital "on the line". Why should anyone be rewarded for speculating in real estate that already exists?
For the same reason that there are markets for stocks arleady issued, and bonds already sold by the Treasury. . . because without them who would be paying the builders and developers? Oh, home buyers you say? Then you need to pay more than double every month. Are you ready to cough up and buy? and ready to pay twice as much every month for the same roof over your head? Do you also believe any and all money that you have made from stocks should be taxed at 100? including dividends? Chances are that you bought the stocks on the secondary market not all IPO issues. Besides even if you bought IPO, you had to sell into the secondary market.
What you're not seeing is that that rent on the land is itself a TAX with no BENEFIT.
Of course there is BENEFIT! You are getting a roof over your head that is costing you half the price of what would cost you every month to buy the same house. Do you also believe hotels offer you no benefit? If it offers you no benefit, why did you sign up with your landlord at all? The fact that she is willing to charge you less than other landlords is your BENEFIT!
I suspect that might be because you need to feel entitled to money that you're not really entitled to. Maybe you're a landlord? If you can mix in the honest income from actual work with the dishonest income from land ownership, then it just feels better.
Like I mentioned before, my motivation is that I do not wish the Georgist nonsense drive up rent across the country. If you really believe the small time landlords have market power like liquor licenses do, what makes you think a more expensive liquor license would make the liquor cheaper?! My landlord has saved me $180k over a little over half a decade compared to if I had bought the house at the time. Unlike you, I'm rather appreciative of that service.
The solution is to call a tax a tax, and stop calling it rent. Then let the government collect it so we can eliminate income tax and sales tax.
If your idea is to let the government collect rent, who will be managing the building then? The government? Do you really want to interview in a facility like the DMV for your next house hunting? Wait, the government already run some rental units. Go to a public housing project in Detroit or Baltimore, and see what it's like.
There is a reason why having the government take over retail housing rental is a bad idea. We have already gone through that experiment: Marxians (and Henry Ford too) thought government/monopolistic resource management would bring efficiency. The result was the exact opposite: because no one person can do everything up and down the chain of responsibilities, the monopolistic bureaucracy that would grow out of such a monopolistic integrated operation (whether it be a commune in Russia or a the River Rouge Plant in Michigan) is nowhere nearly as efficient and flexible as multiple competitors at each level.
That's why we have multiple different private firms involved in growing lettuce, transporting them, and putting them on the shelves for you to choose from. The grocery store may well be charging you 3x per head the price that they are paying (a profit margin that is far higher than what your landlord is getting) . . . but that is still far more efficient than if a government monopoly were put in place to handle all the growing and distribution . . . for the very simple reason that a monopolistic bureaucracy would become far more self-serving without competitive pressure.
Getting the most that one can get away with is human nature (including sheer laziness). For crying out loud, your landlord is getting a shitty 2-3% or less return on capital, and you are here disparaging the morality of her being landlord, obviously hoping to pay less. LOL. It is only the freedom to choose alternatives that keep both parties to a transaction in check. If a government monopoly becomes one of the two parties in a transaction, the counter-party loses that freedom to choose entirely and has to suck up shitty service at high price. If you think the rent is too high, you should be pushing for government relaxing zoning restrictions so that more landlords can compete with more units instead of advocating raising taxes that may well drive some existing landlords out and make rent more expensive.
For what it's worth, most commercial spaces are rented on "triple-net" basis; i.e. the tenant is responsible for insurance, tax and utilities, largely because commercial zoning tax rate and insurance tend to fluctuate. A high LVT that get re-assessed every year may well make residential rental market into triple-net basis as well. . . perhaps not a bad idea to have rents quoted on triple-net basis, considering just how misinformed some people are nowadays.
What you're not seeing is that that rent on the land is itself a TAX with no BENEFIT.
It is not a TAX at all because you are free to rent from the next landlord in the same area. That very freedom to choose ensures that the price is two-way market driven not coercive. It's no different from say if you complain why a head of lettuce should cost $1.50 to you when it is only $0.10 cents in the field. It is your own responsibility to find a vendor who is willing to give you the service for less.
That two-way freedom to choose is what ensures efficient allocation of available living spaces . . . in a way that is far more efficient than a government monopoly (ie. government collects the rent instead).
Cook County resident
2011 Aug 24, 8:35pm
If the neighbor can get away with paying less taxes, that means the government bureaucrats have less resources to pick on you.
Well, that's a novel thought. Let's say, just for the sake of argument, that the Assessor is crooked and the big breaks he gives to his pals and cronies are beneficial to everyone.
Trickle down corruption! A win-win for everyone!!
If the neighbor can get away with paying less taxes, that means the government bureaucrats have less resources to pick on you.
Well, that's a novel thought. Let's say, just for the sake of argument, that the Assessor is crooked and the big breaks he gives to his pals and cronies are beneficial to everyone.
Trickle down corruption! A win-win for everyone!!
Nope. Its such a scenario that represents grounds that the government does not need the levy it sticks to its residents.
Take the Water Reclamation District you may be familiar with.
Cook County resident
2011 Aug 24, 10:38pm
Cook County resident says
Reality says
If the neighbor can get away with paying less taxes, that means the government bureaucrats have less resources to pick on you.
Well, that's a novel thought. Let's say, just for the sake of argument, that the Assessor is crooked and the big breaks he gives to his pals and cronies are beneficial to everyone.
Trickle down corruption! A win-win for everyone!!
Nope. Its such a scenario that represents grounds that the government does not need the levy it sticks to its residents.
The government has legitimate duties and they must be paid for. While it might be nice if we could be taxed at the same amounts as the cronyocracy, it just wouldn't work. Government costs and letting insiders get off on the cheap isn't fair.
Take the Water Reclamation District you may be familiar with.
Yeah, if the Water District really needed money, all those connected guys would have been getting water bills, too.
Well, that's a novel thought. Let's say, just for the sake of argument, that the Assessor is crooked and the big breaks he gives to his pals and cronies are beneficial to everyone.
Trickle down corruption! A win-win for everyone!!
What you have described is essentially Keynesianism! Money in a fiat money economy is get-out-of-jail-free-card: satisfaction of tax payment. Keynesianism is essentially about handing money out to the cronies in the hopes that the money (tax satisfaction notes) would trickled down to the rest of the economy.
The problem with Cronyism, as opposed to neighbors figuring out tax loopholes on their own that are open to all, is of course the issue of fairness and market efficiency. So long as the "loopholes" are available to all, the benefits accrue to third parties in the general public very quickly. Take for example, giant "sales tax loop holes" exists in the form of online shopping and shopping across state borders to states where there is no sales tax. Because those tax avoidance options are available to all, the benefits of these no-tax zones accrue directly to consumers.
The government has legitimate duties and they must be paid for.
While food distributors serve a legitimate purpose, that doens't mean a chicken is worth a day's labor, like it was when soviet government held the monopoly on food distribution; while surgical knife serves a legitimate purpose, it doesn't have to be the $900 price in the current government licensed and subsidized system. The "price" in a purely monopolistic system is inherently illigitimate (result of coercive power). If you think what small time landlords charge for rent is illegitimate despite ready competition right next door, the price that the government bureaucratic monopoly charges for "service" is far less fair due to the absence of competition. In a monopolistic market, prices go up to the maximum affordability completely unchecked by competition, and then go up some more (both in price increase and in the form of quality reduction)
Cook County resident
2011 Aug 25, 12:12am
Cook County resident says
Well, that's a novel thought. Let's say, just for the sake of argument, that the Assessor is crooked and the big breaks he gives to his pals and cronies are beneficial to everyone.
Trickle down corruption! A win-win for everyone!!
What you have described is essentially Keynesianism! Money in a fiat money economy is get-out-of-jail-free-card: satisfaction of tax payment. Keynesianism is essentially about handing money out to the cronies in the hopes that the money (tax satisfaction notes) would trickled down to the rest of the economy.
I was sarcastically responding to the comment:
If the neighbor can get away with paying less taxes, that means the government bureaucrats have less resources to pick on you.
+Property tax favoritism is the same thing as picking on the less favored, regardless of Keynesism, fiat money, tax satisfaction notes or any other wordfog.
The problem with Cronyism, as opposed to neighbors figuring out tax loopholes on their own that are open too all is of course the issue of fairness and market efficiency. So long as the "loopholes" are available to all, the benefits accrue to third parties in the general public very quickly.
Croynism makes government more expensive, not less expensive. Croynism makes bureaucracies more likely to pick on everyday people, not less likely to pick on them.
Cook County resident
2011 Aug 25, 12:22am
In a monopolistic market, prices go up to the maximum affordability completely unchecked by competition, and then go up some more (both in price increase and in the form of quality reduction)
In a monopolistic market, government regulation ought to serve as the check.
+Property tax favoritism is the same thing as picking on the less favored, regardless of Keynesism, fiat money, tax satisfaction notes or any other wordfog.
Instead of making senseless accusations like "wordfog," you should actually read what I wrote. In no way did I favor Cronyism. All I said was that if the neighbor can find a pre-existing loophole in tax codes (that is open to all) and exploits it, it's not a bad thing. I gave the example of tax-free shopping online and shopping across state lines to where there is no sales tax as example.
Croynism makes government more expensive, not less expensive. Croynism makes bureaucracies more likely to pick on everyday people, not less likely to pick on them.
I do not endorse Cronyism at all . . . which is why I'm against Keynesianism, because it is Cronyism (money has to be handed out to someone in Kynesianism; that someone is selective). Not a wordfog at all, merely pointing out the blindspots some of your friends are having.
In a monopolistic market, government regulation ought to serve as the check.
Piling monopoly on top of monopoly doesn't work.
The track record of government self-regulation is even worse than industry self-regulation.
The real solution is free market choice and competition.
Patrick
2011 Aug 25, 1:57am
It is not a TAX at all because you are free to rent from the next landlord in the same area. That very freedom to choose ensures that the price is two-way market driven not coercive.
No, you are not free to rent from the next landlord and it is not a two-way market. Landlords here form an informal cartel in the areas where there are jobs. They do not compete, because the salaries are high and the rental options are few. Just the opposite: renters are forced to compete to pay them, because the landlords are monopolizing scarce land. Every landlord with an old Prop 13 exemption from paying their fair share of tax simply has a licence to take money from workers. It's like the company store.
To be near the jobs of Silicon Valley, I must either buy pay extortionistic rent (bad choice) or buy a house at bubble prices (worse choice). If I choose not to live near the jobs, I lose anyway.
It's a large and ongoing forced transfer of wealth from productive members of society to unproductive rentiers. You object to transfers from the rich to the middle class, but are happy with transfers from the middle class to the rich.
No, you are not free to rent from the next landlord and it is not a two-way market. Landlords here form an informal cartel in the areas where there are jobs. They do not compete, because the salaries are high and the rental options are few. Just the opposite: renters are forced to compete to pay them, because the landlords are monopolizing scarce land. Every landlord with an old Prop 13 exemption from paying their fair share of tax simply has a licence to take money from workers. It's like the company store.
Do you have any evidence that there is such a cartel? What's preventing any alleged cartel member from "cheating"? They are not at all like the "company store" especially when their own "rent"/tax is low. The very fact that they have failed to push rent even past half of the purchase monthly payment on a similar house in the area is indicative that there is no such cartel. You are talking about thousands if not tens of thousands of members to a cartel! How is that even remotely possible without government enforcing a cartel (hmm, like mandating minimum fee and charging high "rent"/taxes to them)?
To be near the jobs of Silicon Valley, I must either buy pay extortionistic rent (bad choice) or buy a house at bubble prices (worse choice). If I choose not to live near the jobs, I lose anyway.
You may as well say the local restaurants and grocery stores are charging extortionist fees on food; and that would be a far more credible charge because there are far less restaurants and grocery stores in the same area. The very fact that rent is substantially below purchase monthly payment, and that new landlords are having negative cash flow! should be indicative that there is no such cartel. The high price is simply a matter of a lot of people trying to live there running up against zoning laws.
It's a large and ongoing forced transfer of wealth from productive members of society to unproductive rentiers. You object to transfers from the rich to the middle class, but are happy with transfers from the middle class to the rich.
The small time landlords are the middle class. It would not surprise me at all if your landlord has lower income than your previous job had. If not for the FED artificially suppressing interest rate, I'd think she would probably have preferred to have sold the house and collect a normal 5% bank CD interest rate instead of the measely 1.5-2% that she is collecting from the house. A high tax on those small time landlords would be horrendous injustice on both landlords and renters (both will be paying for the new tax; if you believe there is an effective cartel then new burden will fall exclusively on renters) to enrich the wealthy who get the government contracts constructing $80million school building boondongles when no new school building is needed just to get the town in hock to the banks.
Landlords here form an informal cartel in the areas where there are jobs. They do not compete, because the salaries are high and the rental options are few.
I just checked Craigslist right now for SF Bay area, presumably where you are. There were 600+ listings yesterday alone on the C-list! on a Wednesday! 1BR units ranged in price from $600 to $3800. What cartel are you talking about? Looks to me like a very vibrant competitive market place.
No, you are not free to rent from the next landlord and it is not a two-way market. Landlords here form an informal cartel in the areas where there are jobs. They do not compete, because the salaries are high and the rental options are few. Just the opposite: renters are forced to compete to pay them, because the landlords are monopolizing scarce land.
With all due respect Patrick, you've gone off the rails. Landlords now have an informal cartel? Really? Most mom and pop landlords and even large corporate housing like Avalon want to get as much as the market will bear like any other business using basic supply and demand economics. I would venture to say that the vast majority of landlords don't even know other landlords and if they do they are from landlord blogs around the country and don't compare notes. I'm sure that the big boy players like Avalon use data to make their business decisions and don't talk to mom and pop landlords either.
No, you are not free to rent from the next landlord and it is not a two-way market. Landlords here form an informal cartel in the areas where there are jobs. They do not compete, because the salaries are high and the rental options are few.
It's a large and ongoing forced transfer of wealth from productive members of society to unproductive rentiers.
Patrick with all due respect you need to get your head out of your silicon valley. Ass, gas, or grass no one rides free. If you want to be part of the silicon valley scene and play with the big boys then that's the cost of doing business. If you don't want to play then go somewhere else. There are many cheap places to rent in America.
None of the georgists have even begun to explain where rental housing would come from under their scheme. In no real world scenario I can think of would everyone be an owner. In no real world scenario would everyone be a renter in a multi family. So the whole georgist thing doesn't even begin to work except perhaps in a very small densely populated area. I notice the examples offered of supposedly "working georgism" (that's a very debatable point) were exactly that. What about the other 98% of the country?
Most towns people are protected under Prop-13 to one degree or another. It just gives the town an excuse to charge more for new comers. Not at all a "tax break" for a few.
This is nonsense. It's not a very good argument and doesn't exist in any other context. NIMBYism shouldn't be rewarded. Do newcomers use more local services? Not necessarily. Let's call it what it is -- a subsidy.
If Prop 13 didn't exist, prices would be lower because the property market would be more liquid, and we shouldn't be price-discriminating like this. It does fuck over newcomers and young people, but it doesn't help as many people as you think -- illiquidity hurts on the back end too because there are fewer buyers. Furthermore, it makes it harder for people to "move up" to the more appropriate house since no one is trimming down. Overall it's a bad housing policy.
You still haven't adequately answered my criticism with respect to inheritances. Why should we let that pass?
If you think Prop 13 only lowers taxes for homeowners without other consequences, you are very naive. There are numerous problems:
1) entrenches wealth as I mentioned, including the stupid generational and skip-generational rules
2) results in greater state legislature control because localities are starved for money
3) results in higher sales taxes because localities are starved for money
4) over the long-term shifts the overall property burden to residential owners from commercial property owners
5) screws over newcomers and artificially elevates property prices
6) results in inefficient use of land and structures
7) makes an illiquid property market
The list goes on. There are better ways to keep grannie in her house and there are better ways to prevent government growth, if those are your arguments.
Pretty much everything from mises.org is ideological bullshit, and evidenced by the above post.
Ding ding ding. We have a winner. Not that any other ideology is right. Ideologies tend to use circular logic to justify themselves.
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The so-called "geolib" position has been long refuted many years ago:
http://mises.org/rothbard/georgism.pdf
Bob/Troy's pet link article written by Dan Sullivan makes several rudimentary errors:
1. It's a farce to make a distinction between "community" and "government" when the so-called "community" has the power to tax. "Communitarianism" is a just a new-age name for "communism" when the latter went out of fashion. A plantation owner is the government of the plantation regardless what he euphemistically calls his rule.
2. Arden is a corporation just like most towns in the US are incorporated. The fact that even the only alleged working example of "one-tax" in the entire article can only collect 1/4 of what it allegedly is entitled to goes to show just how absurd it is to try to tax the entire land rent. Incidentally, 1/4 of alleged land rent is comparable to 1-2.5% property tax, assuming properties are 10x-20x rent income and land accounting for about half of property value. It should be no surprise that most towns in the country pay for all their expenses out of property tax . . . so the whole Arden experiment is a farce, and little different from most other incorporated town that collect property tax or a giant trailer park, where the incorporated landlord rents out land and provide "community" service . . . and more importantly makes rules.
3. Land can certainly be created by human effort: land filling, for example. Half of Holland wouldn't exist if not for land making. Many city land plots on the two coasts would be under water too if not for man-made land.
4. Land is not a limiting factor in modern economic growth. Agriculture has ceased to be the primary economic engine since just about Henry George's time. High cost of rent in population centers has little to do with alleged land monopoly but everything to do with people's desire to be in those locations running up against zoning laws restricting housing supply. The most recent housing bubble was an experiment in bypassing the "landlords" altogether, and guess what happened? the cost of housing did not go down but went up instead! It's the competitive supply vs. demand that set price. "Landlords" with numerous others nearby to compete against do not collect a monopolist Rent.
5. The proposed "one-tax" "land tax" however would be monopolistic Rent imposed on the rest of the economy by the bureaucratic class. It's ironic that Dan Sullivan would use the term "royal libertarian" to describe his critics. Most land titles in the US have little to do with old feudal land titles. OTOH, his proposed land taxation to the full economic value of the land would concentrate land ownership into the hands of the government thereby creating a new land-based royalty. In other words, the so-called "geolibs" are the "royal libs" . . . in the same way that "communists" are often effectively feudalists/monarchists as their policy proposals would lead to feudal dark ages with a new class of royalty on top, like in North Korea, which incidentally does have all land owned by the government
6. Georgists are dealing with mythical concepts when they talk about "land" as separate from improvement, just like their use of terms "community" / "government" / "the public." There is not a "community" / "government" / "the public" separate from concrete actions by individuals on the ground. Likewise, "land," as nice as an abstract concept, can not be separated from improvement. Most land plots were reshaped by developers before selling to the current owners (or their predecessors) along with infrastructure that was part of the sale. Government had little to do with that.
7. Where the government does have a role, one which really confuses the Georgists, is that it maintains a record of deeds and titles that make future land disputes easier to settle in court. Having that record does not mean that the government owns all the land or is entitled to collect all rent on that land . . . any more than the registrar of motor vehicles has the right to collect the entire use value of your car! or on all the iron in your car! Iron as an element is actually finite on the planet and not made by human. Your exclusive right to the iron content in your car before the car is recycled is your property right, despite the title paper playing a significant role in settling disputes should any arise. Likewise, it would be silly to talk about the value of the iron in a car as separate from the car's manufacturing before the car is ready for recycling and reduced to components. Georgists are obviously not talking about the trash/recycling value of land (say, how much a plot is worth if the entire area is wiped clean by fire or flood) but trying to have the government monopoly collect rent on land with improvements just like steel as part of a working car's value. Land value is inseparable from improvement. Henry George eventually had to draw an arbitrary line that improvements lasting longer than the life span of the improver should be deemed part of "land." In other words, a policy of discouraging long term land improvement and management.
8. Why is this topic important to renters? Because it is important to understand that "rent" would become much higher in a monopolistic land management system. The term "Rent" originally refers to monopolistic market positions. The use-fees that owners of properties collect in competition against other property owners are not monopolistic rent. The Georgist one-tax (much higher tax) on land value would actually create a monopoly Rent to be imposed on the rest of the economy. While the property owners can and do compete on their own margins of operation, they do not compete on the tax portion, which all "landlords" have to collect on behalf of their Landlord, the government. The Georgist aim to collect the entire land rent means land would have zero value, and negative value during economic down turns. That means eventual government take-over of all land ownership. Just like what a nightmare things turned out in countries where "capitalists" were cut out and the government became the only employer (i.e. the soviet system where "they pretend to pay and we pretend to work"), letting the government become the only landlord without any sub-divided and competitive land and property maintenance/management services on the ground would be disasterous to renters seeking good housing at reasonable prices. It is another competitive capitalist employer's ability and willingness to pay just a little more to hire you away that keeps your real wage up; likewise, it is another competitive landlord's offer of better housing at lower price that lets you get the bang for your buck on housing.
#housing