A Flat Tax Isn't Simpler, Right?

[retire@40]

Quote:

Originally Posted by Alan As to a national real estate tax, I'm sure it would quickly get very complex and plenty of folks would find innovative ways of reducing their taxes, keeping the current army of tax accountants in full employment. This year I visited a lot of old historic towns in the UK and plenty of those old houses had some of their windows bricked up - this was in response to the "Window Tax" of the 18th and 19th centuries.

Could you list some examples of how a national real estate tax could get very complex?

Regarding your example of the window tax, Chief Justice John Marshall once said, "The power to tax is the power to destroy." People don't necessarily need a lot of windows in their home, but they always do need a place to live.

[retire@40]

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Originally Posted by Texas Proud In response to the national RE tax.... First, (and this is from memory of 30 years ago... so who knows)... I think it is unconstitutional... And if it is not, it will never pass... the highest cost property are more 'blue state' than red... (NY, New England, Washington DC, Cali...) The coasts would have to pay a lot higher tax then the midwest or south... politically, it is a non-starter... Also, would you have an ag rate If not, then you are going to kill off a lot of ranchers and farmers... heck, ranchers today are selling cattle for less than it costs to feed them here in Texas...

If property taxes are constitutional locally, then I'm not sure why they would not be constitutional from a national perspective, but it would be nice to see a good source to back up that claim either way.

There is a reason the highest cost properties are in on the coasts. It's because people want to live there more than in the middle of the country. So for the luxury of being near the beach, better paying jobs, etc, there would be a higher tax due to the higher demand for those properties.

I mentioned in my original post that the government could have "tax-free" zones. Farmland could be at a reduced or tax-free rate.

[retire@40]

Quote:

Originally Posted by samclem This would be the best rationale for building one of those groovy earth-sheltered homes. Live in your 2000 sq feet of underground comfort, only a two-room tin shack at ground level for the appraiser to see. "Yep, it ain't much, but we get by. Sorry to ask you to leave, but we have to dump out the chamberpot now."

LOL!!! Think of all the open land that would create! Although getting flood insurance might be tougher.

[Texas Proud]

Quote:

Originally Posted by retire@40 If property taxes are constitutional locally, then I'm not sure why they would not be constitutional from a national perspective, but it would be nice to see a good source to back up that claim either way. There is a reason the highest cost properties are in on the coasts. It's because people want to live there more than in the middle of the country. So for the luxury of being near the beach, better paying jobs, etc, there would be a higher tax due to the higher demand for those properties. I mentioned in my original post that the government could have "tax-free" zones. Farmland could be at a reduced or tax-free rate.

Because States work under their state constitution and the Federal gvmt works under the US Constitution...

Here is the langugae that allows taxes:

"The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."


Oh... found what I was looking for, from Wiki, including the comment:

"Article I, Section 9, Clause 4:

No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken.

This clause basically refers to a tax on property, such as a tax based on the value of land,[2] as well as a capitation."


So, until there is an amendment to our Constitution, there will not be a federal property tax....

[harley]

Quote:

Originally Posted by Texas Proud So, until there is an amendment to our Constitution, there will not be a federal property tax....

Good one!...Wait, were you serious? You think they actually pay any attention to the words on the paper if it gets in the way of "progress"?

[Animorph]

An RE tax can drain the "wealth" of someone with no income, and whose "wealth" is totally tied up in their house. Especially if federal and state taxes are being collected. My MIL would probably have to sell her house.

The state RE taxes are not particularly simple. They have waivers or freezes for seniors, assessed values with constrained growth versus market values, and procedures for challenging the estimated value of your house. Heck, it costs a few hundred to have someone come over to assess your house for a sale or a loan, so valuation is not going to be very simple. Maybe the tax guy would have to visit your house each year? I'm sure it can be screwed up even more than that.

[samclem]

Quote:

Originally Posted by Animorph Maybe the tax guy would have to visit your house each year?

"..and when the taxman comes to the door, Lord, the house looks like a rummage sale."
--John Fogerty, Fortunate Son, 1969

[Alan]

Quote:

Originally Posted by retire@40 Could you list some examples of how a national real estate tax could get very complex? Regarding your example of the window tax, Chief Justice John Marshall once said, "The power to tax is the power to destroy." People don't necessarily need a lot of windows in their home, but they always do need a place to live.

How many places do they need to live? Would there be a break on a 2nd home either for work or vacation purposes?

Some MPs in England have recently gone to prison for cheating on their property taxes related to the fact that there is a tax break for owning or renting 2nd properties to be able to work in Westminster and back in their constituencies. (many more paid money back and had their wrists slapped)

I am sure that any implementation of a new tax like this will be riddled with deductions, credits, exemptions etc. One thing the government does well is make things complicated.

[Texas Proud]

Quote:

Originally Posted by harley Good one!...Wait, were you serious? You think they actually pay any attention to the words on the paper if it gets in the way of "progress"?

Yep... serious on that one... most of the time they play games, but I doubt either side would try and go against this one... no matter how much 'progress' they think there is....

[ChiliPepr]

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Originally Posted by gerntz I like the idea. Thanks for bringing it up. Why wouldn't cash, gold, art, stocks, etc., be "property"? I.e., why not a wealth tax that includes all tangible assets? 0.5% of Gates' or Buffett's ~$50B wealth tax/yr would $250M. Somebody with $5M assets tax would be $25K. Somebody that's in net debt would be $0.

What about the family that has a small business or a farm worth 2 or 3 million, but only breaks even every year on cash flow?

[samclem]

Quote:

Originally Posted by ChiliPepr What about the family that has a small business or a farm worth 2 or 3 million, but only breaks even every year on cash flow?

They might not be big supporters of this plan.

Maybe there will be various agricultural rates indexed for soil quality, rainfall, etc. But, the only way to keep things simple is to tax all real estate at the same rate (after all, if we make an exception for farms we'd also need a special rate for pay parking lots, for drive-in theaters, etc) and just go with a standard rate for all real estate based on property values regardless of use. When farms start to go under due to the high taxes, there won't be many buyers and their value will go down (a long way) to a point where the land costs plus the tax will allow farming to be profitable. And, as land is taken out of farming, food prices will go up which will also be a help to those three remaining farmers.

[M Paquette]

Quote:

Originally Posted by samclem Maybe there will be various agricultural rates indexed for soil quality, rainfall, etc.

A land tax or real estate tax would be a type of direct tax, and as such falls under Article 1 Section 9 of the US Constitution, which requires that it be apportioned by state population.

I suspect setting up such a rated valuation scheme would run up against some basic issues pretty quickly.

[retire@40]

Quote:

Originally Posted by Texas Proud "Article I, Section 9, Clause 4: No Capitation, or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken. This clause basically refers to a tax on property, such as a tax based on the value of land,[2] as well as a capitation." So, until there is an amendment to our Constitution, there will not be a federal property tax....

OK, such a radical change in the tax system would require an amendment. Seeing that the 16th amendment has turned into a disaster, perhaps it's time for that change. There are so many people in favor of scrapping the current tax code that there could be enough support for a national real estate tax to take hold.

[retire@40]

Quote:

Originally Posted by Animorph An RE tax can drain the "wealth" of someone with no income, and whose "wealth" is totally tied up in their house. Especially if federal and state taxes are being collected. My MIL would probably have to sell her house. The state RE taxes are not particularly simple. They have waivers or freezes for seniors, assessed values with constrained growth versus market values, and procedures for challenging the estimated value of your house. Heck, it costs a few hundred to have someone come over to assess your house for a sale or a loan, so valuation is not going to be very simple. Maybe the tax guy would have to visit your house each year? I'm sure it can be screwed up even more than that.

That's why there could be a very low rate (possibly even a threshhold exemption) on the first few hundred thousand dollars of value.

Yes, there will be challenges to assessed values, but since towns don't have a major problem doing this, the federal government wouldn't either. They may just piggyback off the already existing assessed values established by the towns.

[retire@40]

Quote:

Originally Posted by Alan How many places do they need to live? Would there be a break on a 2nd home either for work or vacation purposes? Some MPs in England have recently gone to prison for cheating on their property taxes related to the fact that there is a tax break for owning or renting 2nd properties to be able to work in Westminster and back in their constituencies. (many more paid money back and had their wrists slapped) I am sure that any implementation of a new tax like this will be riddled with deductions, credits, exemptions etc. One thing the government does well is make things complicated.

I don't see a need for a break for owning more than one home. Anyone that can afford more than one home does not need a special break.

It's possible that there may be some exemption for the truly poor, but compared to the thousands of loopholes in our current tax system, they would be minimal.

[retire@40]

Quote:

Originally Posted by ChiliPepr What about the family that has a small business or a farm worth 2 or 3 million, but only breaks even every year on cash flow?

Read the previous posts for the answer on this.

[Alan]

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Originally Posted by retire@40 I don't see a need for a break for owning more than one home. Anyone that can afford more than one home does not need a special break.

No arguments from me. However I can see all the politicians with the thousands of lobbyists and special interest groups funding their election campaigns not following the advice of the likes of us.

I'm really just saying that I can't see any type of radical, simple, tax reform happening any time soon, whether it's a flat tax or a national RE tax or something else.

[deserat]

I think the US has a VAT tax, it's called sales tax, but it is just levied at the local level - it's a consumption tax - and for anyone who says a VAT taxes everything in the line of production - uhhh, well, I used to pay 16% VAT in Germany but it is now 19%----those taxes are filtered down to the consumer...always.

Notice I say the VAT used to be 16% but is now 19% - problem with the VAT is it can be raised and has been raised over the years - think about that - 20% of what you pay for a product is tax.....that's a huge amount. Oh, and they also tax income and property here in Germany.

The Europeans find ways to get around this - they come to the US with large suitcases to buy clothes and electronics - I don't buy clothes nor electronics in Europe - way too expensive. What is cheap here? Booze - well, beer and wine (except in the northern tier countries which have alcoholism issues with their populations - but then they just travel to more southern countries to purchase their libations) and certain German foods that are available in Aldi......

Fewer people have cars (gas is four times the price in the US), fewer people have smart-phones (although when I go to Brussels, I see a lot of people with iPhones and iPads, but then Brussels is analogous to DC in the US - the government bubble town) - I live in the country so more people have houses, but most people live in flats.

Plus, it is easier to administer and manage the taxes in a European member state merely due to scale....everytime I come back to the US I marvel as just how damn big the place is. To drive five hours in Europe I can be in Italy or southern France.....I can't get from southern FL to northern FL in that time let alone to the end of the panhandle - amazing......

Hmm - I guess I sort of highjacked the thread - I guess the bottom line is, taxes are a necessary evil, but just because it works well in one place or is based on a specific philosophy in another place doesn't mean it work well in the US. Plus, people will behave in ways to avoid paying the taxes....they do it here in Europe as much as they can get away with it.....witness the Greeks and Italians.

[MichaelB]

Well, I guess I was close to the mark in my previous comment. Flat tax is so ill-defined everyone concludes something different. The word "fair" is also being applied here. "Fair" and "tax" are mutually exclusive words that never should be used together.

Taxes are taxes. What we pay is (painfully) evident, what we receive is not, what others receive is clear as day - to us. They are the expression of unfairness, injustice and waste. That politicians can channel this into positive energy is an ability to be respected (and feared).

[haha]

Quote:

Originally Posted by Hamlet +1 Keep the progressive rate structure, and get the rates down some by removing most of the deductions.

Statists usually reject this because one of the ways they can smack down high earners is the phaseout of deductions and tax credits with income thresholds.

Repeal the income tax and go 100% with a sales tax. Take the ensuing recession, and then enjoy a thriving economy without the extreme debt buildup for a very long time.

Ha