retire@40
Thinks s/he gets paid by the post
- Joined
- Feb 16, 2004
- Messages
- 2,670
I didn't have to think very long to come up with some big negatives.
The distortion of the real estate market by this system would be extreme. If people are taxed on the value of their house and other real estate exclusively, they will go to some pretty extreme lengths to reduce their property ownership. I can see people in places with no shortage of space living in those little pods that the Japanese use for travelling.
I suspect that you would see an awful lot of real estate become government owned as people try to ditch their tax liability.
Businesses would contract their property use to reduce their tax liability. A sit-down restaurant would become a luxury only the very wealthy would indulge in. Most fast food places would become kiosks.
Millionaires would stop building fancy houses. The ultra-high end RV, plane, and yacht markets might explode depending on whether they were categorized as "real estate" for tax purposes.
People may want to reduce their property ownership to pay less tax, but what is wrong with that? People do that now anyway. Why don't you live in a $50 million home right now under the current tax system? What's that? Because the cost of maintaining it is so high? People will always tend to purchase as much as they can afford. It happens with motor vehicles. It happens with homes. You want to live in a pod. Be my guest. Most people will not. Many millionaires will still want to live in luxury.
The government will not want to keep any real estate foreclosed upon due to unpaid real estate taxes. It will be sold at auction to recover at least those unpaid taxes plus interest and penalties so no tax revenues are lost.
By the way, since people have to live somewhere, you won't see many people "ditching" their home due to non-payment of taxes since they will still need to pay the tax in the next home they live in.
Businesses will always seek the most tax-efficient method to operate. Why wouldn't they look for ways to reduce their tax liability? They do it now with loopholes and creative accounting. The NRET would make any property ownership by a business cleaner and more transparent to tax.
Yes, any home including any RV, yacht, etc with a kitchen and bath that one may live in would be included in the NRET. Most of these type vehicles are very expensive, so the value would approximate a land-based home. The reason people would live in an RV or yacht is because they want to, not because they would do it strictly to save on taxes.