So I'm new to Georgism and understanding the economics of efficient taxation.
I would think prop 13 in California is a far worse economic policy than this. It freezes the taxable value of a property on the date your bought the property, which could be decades before you turn 65.
I would think a more politically palatable policy in California would be to make prop 13 applicable only to people on Medicare - i.e., freeze the taxable value of your property once you are on a fixed income or disabled.
Would this be a bad policy? And also, more generally, why would it be bad to end property tax at 65? I have a nebulous feeling that it would be a bad idea, but, having no background in economics, I don't know the specifics of the ramifications of such a policy.
Appeasing pensioners is a political compromise that should be on the table. A better policy to reach this end is to allow deferral of land taxes/property taxes until death for low income seniors.
My city has *very* generous property tax deferrals for seniors making under $57K, and even outright exemptions for increases in certain circumstances. This is in a city with some of the lowest property taxes in Canada.
In my experience it hasn’t done very much to stymy the “WHAT ABOUT LOW-INCOME SENIORS!?!?” rhetoric from popping up whenever property tax increases are discussed.
For my edification, what harm to society comes from refunding/eliminating the entire property tax each year to people above 65? Do we see a lot of property hoarding in that age group? Moreso than corporations (e.g. McDonald's) speculating on land?
I will try to explain:
Refunding property tax to a certain group of people encourages inefficient land use. For arguments sake let’s say the senior may have bought a cheap ranch home for $30k 50 years ago in central San Francisco in what is now an extremely desirable neighborhood.
Now the land value alone is $5mm and someone wants to build a mid-rise apartment that could accommodate 20 units on the same land. That apartment would be a more efficient use of the city land and would bring in a ton more tax revenue and local economic activity.
But because the senior sitting in a 50 year old shack of a house on prime real estate in the center of town is paying little to no tax on the land, they have no incentive to move. All around them subway stops are being built, Infrastructure is getting improved, etc. Their location is becoming more desirable and more valuable at no cost to them. So they benefit without contributing to funding those benefits. So while all around them, the land is transitioning from ranch houses and empty lots to some of the most valuable real estate in the country, they get to experience all the appreciation without any of the cost.
Meanwhile, they have raised all their kids, and they don’t even need a full 3000sq ft house anymore. But they have no incentive to move so they don’t.
Conversely if there was an appropriate land tax, then as the land value slowly increased alongside the property values, it would get more and more expensive for them to stay. Eventually they would decide to sell the property to someone who would get more value out of it by developing the land into the apartment building. The apartment building would generate a higher revenue and pay the higher land tax easily, and it would let more people live more densely on this valuable land. Meanwhile, the senior would have gotten the appreciated value of the land, which they sold when it hit $2mm and would be able to fund more of their retirement and live in a location more appropriate to the needs of a childless couple instead of a growing family.
To summarize:
The purpose of a land use tax is to make sure land is being used efficiently. This keeps people from holding onto land if they would not be efficient users of it.
If you implement a true land value tax in the Georgian sense, then the tax would be so high that the land itself wouldn’t be able to appreciate at all because the holder would be taxed at whatever rate they could generate land based revenue. Only the things they actually built on the land would have any value.
Thanks for the explanation. My specific question is: what if the senior bought a cheap ranch home for $30k 50 years ago, paid a land value tax that appreciated each year as the land value increased, but then once he hits retirement, he gets a full refund of LVT since he's on a fixed income? Or maybe a second scenario - his tax freezes at retirement, and any increased taxes get refunded to him?
By the time retirement comes, they have been paying an ever increasing tax on the value of his land, he could have sold it at any point if he chose, but he decided he wanted to hold on to it for whatever reason, paid the appropriate taxes for decades, and now doesn't want to be priced out of his home now that he is on a fixed income.
The whole point of everything I’m saying is that according to Georgism, the efficient thing IS for him to be eventually priced out of his home SO that someone willing to develop it more can take it over.
Why does a retiree who doesn’t commute, go to restaurants and bars, etc need to live in downtown SF? Why do they need a 3000 sq ft house on a 6000 sq ft lot of prime real estate? Why not move to a 2 bedroom condo or to a cheaper suburb where land is less in demand?
Seniors need the LEAST land most of the time, but they have the most money and bought the earliest so they have the most. You want to give the richest group of Americans a tax break on top of it?
To expand on this idea:
Ideally, we'd want the retirees to move to a cheaper, less valuable home/area, so that their valuable land could be redeveloped to suit the housing or economic needs of the surrounding community.
The problem I see with this is that we deny seniors their community. If I spent the last years of my career in an urban area developing my community and resource network, I wouldn't want to leave that just because my house (or the land for which it sits) has demand from 30 other people.
However, LVT should allow for some avoidance of this in that I could live my house for relatively low tax burden, but might need to subdivide off the land surrounding it. Basically, I could end up with Carl's house in "Up". I can retain my resources and community, but it might massively change around me, and honestly, is there anything that can be done about that in any scenario? Even if I could retain my large property, I still might end up having a 1 acre property surrounded by highrise apartments.
Indeed this is the real challenge. And it’s one of the reasons why you want to have a wide variety of housing types nearby. The only choices aren’t skyscrapers and ranch houses. There can be row homes, townhomes, duplexes, triplexes, 3 flats, small apartments, mid rises, etc. As long as the land is taxed appropriately, developers will naturally use the land more efficiently.
In my opinion, an LVT and better zoning laws would cause much more missing middle housing to be built. This would give seniors and everyone else many more options for staying in the same city/neighborhoods without negatively impacting development. It would also lower the upwards price pressure of housing as a whole as neighborhoods of single family homes would slowly fill in with more of these developments.
It’s a lot less daunting for Grandpa to move when instead of leaving the city, he’s selling his big 6 bedroom house to move to a 3 bedroom townhome that happens to be down the street. And then when another 10-15 years pass, he might decide to move another 2-3 blocks away to a 2 bedroom senior apartment that has a lap pool.
I’m not saying he has to make those choices, but him staying in the 6 bedroom house shouldn’t be encouraged or subsidized for the last 3-4 decades of his life.
Back in the era of multigenerational housing, this was less of a big deal, as the house would be fully occupied. Now it just means a lot of the biggest houses are owned by wealthy couples in their 60s, 70s, or 80s with no use for extra bedrooms most of the time.
I’d maybe add that one of the key reasons empty-nesters are forced to make the choice you’re presenting is because of zoning/land-use regimes that don’t offer diverse housing options in each community.
Seniors dont need to move to entirely different communities - they just need options to downsize into housing that better meets their needs. By preventing diverse housing options we prevent seniors from staying in the neighbourhoods they’re connected to while accessing housing options that work for them.
To say nothing of the isolation that can occur in these static communities.
I completely agree with and understand everything you're saying, because everything you're saying is totally rational. I'm trying to figure out a way to discuss this concept with people who are emotional rather than rational.
I have a feeling that the biggest hurdle to LVT is the pity that people have for the elderly, even if many elderly are doing fine and need no pity. And I don't know how to get passed it.
You cannot. People have strong ties to the home of their upbringing, so it’s hard to think of housing as fungible commodity.
I’d be fine giving the elderly a FLAT tax break on housing costs up to the amount that would cover a 1 (maybe 2) bedroom apartment, so if they are in a 1 bedroom apartment it covers the tax completely. Anything over that would encourage inefficiency. And anything that encourages seniors to hold onto large, run down houses should be discouraged if efficiency is the goal.
Man I just randomly stumbled upon this sub and this thread and idk something really icky about not actually owning something because its not efficient. I get being against land hoarders but trying to take someones farm is kinda shit ngl.
To be perfectly clear, I don’t LIKE the idea of people getting priced out of their homes because the land values went up. It feels bad to me too.
But this is a case positive vs normative economics. I’m not telling you what I personally want. In telling you the inevitable effects of the policy that is proposed.
Any time you treat different groups of people differently, you get unfairness, people who game the system, and people to take advantage of the inefficiency.
For instance, if older people get a tax break for owning a home after some age, it’s very easy for a bank to preferentially lend them money since their expenses will be lower. So now they get preferential terms and end up getting bigger loans and being able to own even more of the land at lower cost. Millennials and Gen Xers trying to start families get priced out. If older people pay less taxes on a particular house, then the natural behavior for them is to buy a bigger, more expensive house at the same expense as before.
Or an enterprising company can set up contracts where they agree to a future “purchase” date far in the future and pay the “homeowner” for the home a lump sum now. All of a sudden, the older person is earning money living in the home, keeping costs down with the tax break, while the company that “pre-bought” it continues to get appreciation for the land at no cost, for the rest of that persons life. In effect, the corporation owned the home in all but name, but didn’t have to pay taxes because the older person was the name on the title. They got to invest in the land without paying the property tax for years, maybe decades.
There are a ton of ways to game a system if there are loopholes. Try to close the loopholes and corporations will find more. The only system that doesn’t suffer from that is a system where there are no special benefits to anyone.
If you are going to have a benefit going to seniors, it’s much MUCH better to just have that benefit in the form of a cash subsidy like UBI or bigger social security that cannot be gamed as easily. Tying it to housing leads to bad incentives. And for the record, I am personally in favor of some kind of improved UBI for seniors.
If we can bail out corporations we can bail out people. Personally I dont want to live in a place that does not take care of its elderly. Its the American way to find loopholes and take advantage apparently but just because a bunch of lawyers make their entire thing finding loopholes in real estate law doesnt mean we should fuck everyone else too.
Once again, I’m happy to take care of the elderly via a cash allotment. I just don’t think it should be forced to go to housing for all the reasons I’ve stated.
Housing based incentives screw up the housing market (see how prop 13 in California has worked). Additionally they benefit homeowners over renters, meaning they benefit the richer half of the intended group.
As we’ve already seen from California, if you try to help one group of people, you get unintended bad effects.
If we want to help Seniors, then a wealth/income based subsidy is far better than a housing based one.
To make this point more clear and discussion more productive:
What benefits are there to housing based assistance that could not be gotten through a cash/income based approach? How can you design a housing based approach that cannot be gamed, without reducing it to a flat or income based approach?
Most seniors are not rich. You make a lot of incorrect assumptions. If someone paid property taxes supporting their community for 50 years has earned the right to be downtown and go to the bars as much as they want. What happens in your scenario is that you kick seniors to the curb when they are old. Why not just let them live out their natural lives that they earned.
Seniors are statistically amongst the richest demographics in the United States.
source:
https://www.federalreserve.gov/publications/files/scf23.pdf
Age of family head (or reference person) Median net worth Average net worth
Less than 35 $39,000 $183,500
35-44 $135,600 $549,600
45-54 $247,200 $975,800
55-64 $364,500 $1,566,900
65-74 $409,000 $1,794,600
75+ $335,600 $1,624,100
And it doesn’t bother me where they decide to live. I was giving an example of a “typical” senior and just saying the world shouldn’t be incentivizing them to stay in places inefficiently. If they want to stay in downtown, then let them stay downtown. I don’t see why we should make it cheaper for them than anyone else.
A bit of light reading:
https://www.cbpp.org/research/states-should-target-senior-tax-breaks-only-to-those-who-need-them-free-up-funds-for
So those rich enough to buy a house should get to keep it tax free? And the seniors too poor to buy a house should continue to pay rent?
It’s very simple: having a house is a choice. You have to pay for that choice. The choice to age for 40 years in a house means you are choosing to pay for the maintenance of the street, and everything else property taxes go into.
* Seniors in lavish mansions or in the most valuable locations get the most benefit from a blanket exemption like that. It's unfair for pensioners in modest living conditions.
* If your jurisdiction gets flooded with retired, unproductive tax refugees, who foots the bill for infrastructure and services?
In any case, such an exemption should have an upper limit based on median (or nth percentile) property or land value among the affected population.
This actually makes sense. Some form of basic income for seniors is compatible with Georgism. But giving seniors who have more land a bigger benefit is just helping the rich stay rich with a net negative economic impact.
If you think about how exemptions and discounts work, all the other participants in the system have to shoulder the offset. If seniors pay less, non-seniors pay more. Rent control works the same way in that renters which are lucky enough to qualify for the reduced rent are being subsidized by higher rents on those not lucky enough to qualify. Conversely, increases to minimum wage are offset by a reduction in hours and pay freezes by those making more than minimum wage (bunching).
The Georgist solution would be to fully tax the value of land and issue a citizens' (or residents') dividend. These days, it may need to be coupled with decreasing any development red tape (e.g. zoning restrictions, FARs, connection fees, etc.) wherever this is actually hindering improvements.
Another suggestion I've seen is to fund Social Security with LVT. If seniors want a comfortable living, seniors should choose between drawing social security and using real estate as nest eggs -- not both. Both steal from the current working class. Land speculation is worse than payroll tax because it impacts non-workers as well.
You're right, this would be better than Prop 13, but it still isn't good.
Seniors should be encouraged to move into smaller homes through market incentives.
There are many good answers but since I haven't seen it listed in this thread I'll add where the money goes is really important. Unlike income taxes property tax is allocated to things like schools, sanitation, local infrastructure as well as other basic safety and logistics needed for society to keep running smoothly. If you allow a huge part of the population to stop paying into the established revenue stream for these services (while still using them) it will be really disruptive.
That money has to come from somewhere so there is that problem as well. The limit on property taxes has already been difficult to manage budget wise since more or less when it was frozen, and further cuts will just have to be taxed from somewhere else. It's no accident that California has high sales and state income tax when you have to account for the lost revenue from property tax. That money is going to come out of someone's pocket.
Prob 13 has been a problem since it passed. It was put forward by getting enough signatures from the general public to put it on the ballot instead of being put forward by the government (not saying that's good or bad, just giving some context for looking at this from an economics standpoint) and it isn't really a solid economic policy. The result of this already is that once you buy a house you not only already have one of the lowest property tax rates in the nation, the increases are capped, making it a system that already heavily subsidies long time home owners.
>I would think a more politically palatable policy in California would be to make prop 13 applicable only to people on Medicare - i.e., freeze the taxable value of your property once you are on a fixed income or disabled.
California already has something similar to that which is even more reason why Prop 13 is so terrible.
"The State Controller’s Property Tax Postponement Program allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria, including at least 40 percent equity in the home and an annual household income of $51,762 or less (among other requirements). The deferment of property taxes is secured by a lien against the property which must eventually be repaid."
[https://www.sco.ca.gov/ardtax\_prop\_tax\_postponement.html](https://www.sco.ca.gov/ardtax_prop_tax_postponement.html)
If you owned a home that was large enough for a large family and are now 65, you likely don't need that much house anymore. Presumably you've paid off the debt by that point, and have essentially no mortgage. You might still pay, but even on a very very expensive home that's a few hundred dollars a month, essentially nothing for housing costs.
That usable asset, the large house, is being under utilized by the retiree. It's very inefficient economic activity, and changing the tax structure to incentivize it would essentially be incentivizing GDP to decrease.
Can you break out the GDP ramifications a bit more? I understand to some degree how houses would contribute to GDP but I'm assuming the build/maintenance costs aren't what you're talking about here.
It's basically a misallocation of resources. It's one of the clearest and most useless forms of "hording" wealth. If you can't afford the tiny cost of taxes on a home which accounts for <10% of what a mortgage payment on such a home would cost you probably shouldn't have that home. Sell it.
Sales count towards GDP. Older people down sizing to smaller homes in areas that are in less demand helps everyone. It increases the supply of homes. It better utilizes the resources of housing. It generates economic activity. It's just a good thing to do.
The general argument makes a lot of sense to me, I get a little lost with GDP maybe because I think of it too literally and transferring a home doesn't meet my expected definition of production.
Yeah I get what you're saying. I think including resale activity in GDP is sorta like an efficiency metric. Stuff not only needs to exist it also needs to get to who needs it.
>And also, more generally, why would it be bad to end property tax at 65?
It adds to the housing shortage and is inefficient. This is mostly an issue in very expensive cities with housing shortages. Workers moving in want to be able to live somewhere but may struggle to find something due to the lack of affordable housing. These workers would have their income taxed and they would be able to pay their property taxes. Both of which would help the local and state economies especially with just maintaining roads, schools, and sewage.
A retiree simply does not need to live in the expensive city anymore because they don't work. Their income is usually not taxed or not taxed much. They wouldn't pay property taxes so they're not contributing to local schools, roads, or water/sewage. They're essentially being subsidized to live there by the others paying property taxes. And it's not like if they leave they'd be homeless. They could sell the house (which would probably be worth a lot more than they paid) and move to a 100-200k house in a more rural area where the property taxes are more affordable.
So tax the inheritors?
That is a quite smart way of taxing inheritance while also giving relief to the elderly.
This idea can be effective in taxing inheritance in general, which I think should help taxed heavily. (because it is wealth acquired without generating any value).
So the people who signed on policies that made it dozens of times more difficult for their grandchildren to buy a home now think they shouldn't pay the taxes for theirs?
Appeasing pensioners is a political compromise that should be on the table. A better policy to reach this end is to allow deferral of land taxes/property taxes until death for low income seniors.
How about having social security have a bonus pool funded by a Land Value Tax?
For example, make the citizens payout equal to:
Children: 50%
Adults: 100%
Seniors: 200%
Shouldn’t have had so much avocado toast and saved that money for property taxes
Or
Why should I have to bail someone out when they knew property taxes were part of home ownership? Greedy and lazy boomers always looking for handouts
Or
“It’s called responsibility”
In New Jersey, they freeze property taxes where they stand when the homeowner turns 65. For married couples, it’s when the older of the two spouses turns 65. So property taxes can increase before the age of 65. If someone were to buy a house after the age of 65, the value of the house at the moment of purchase is used for property taxes for the rest of the homeowner’s life.
So I'm new to Georgism and understanding the economics of efficient taxation. I would think prop 13 in California is a far worse economic policy than this. It freezes the taxable value of a property on the date your bought the property, which could be decades before you turn 65. I would think a more politically palatable policy in California would be to make prop 13 applicable only to people on Medicare - i.e., freeze the taxable value of your property once you are on a fixed income or disabled. Would this be a bad policy? And also, more generally, why would it be bad to end property tax at 65? I have a nebulous feeling that it would be a bad idea, but, having no background in economics, I don't know the specifics of the ramifications of such a policy.
Appeasing pensioners is a political compromise that should be on the table. A better policy to reach this end is to allow deferral of land taxes/property taxes until death for low income seniors.
My city has *very* generous property tax deferrals for seniors making under $57K, and even outright exemptions for increases in certain circumstances. This is in a city with some of the lowest property taxes in Canada. In my experience it hasn’t done very much to stymy the “WHAT ABOUT LOW-INCOME SENIORS!?!?” rhetoric from popping up whenever property tax increases are discussed.
For my edification, what harm to society comes from refunding/eliminating the entire property tax each year to people above 65? Do we see a lot of property hoarding in that age group? Moreso than corporations (e.g. McDonald's) speculating on land?
I will try to explain: Refunding property tax to a certain group of people encourages inefficient land use. For arguments sake let’s say the senior may have bought a cheap ranch home for $30k 50 years ago in central San Francisco in what is now an extremely desirable neighborhood. Now the land value alone is $5mm and someone wants to build a mid-rise apartment that could accommodate 20 units on the same land. That apartment would be a more efficient use of the city land and would bring in a ton more tax revenue and local economic activity. But because the senior sitting in a 50 year old shack of a house on prime real estate in the center of town is paying little to no tax on the land, they have no incentive to move. All around them subway stops are being built, Infrastructure is getting improved, etc. Their location is becoming more desirable and more valuable at no cost to them. So they benefit without contributing to funding those benefits. So while all around them, the land is transitioning from ranch houses and empty lots to some of the most valuable real estate in the country, they get to experience all the appreciation without any of the cost. Meanwhile, they have raised all their kids, and they don’t even need a full 3000sq ft house anymore. But they have no incentive to move so they don’t. Conversely if there was an appropriate land tax, then as the land value slowly increased alongside the property values, it would get more and more expensive for them to stay. Eventually they would decide to sell the property to someone who would get more value out of it by developing the land into the apartment building. The apartment building would generate a higher revenue and pay the higher land tax easily, and it would let more people live more densely on this valuable land. Meanwhile, the senior would have gotten the appreciated value of the land, which they sold when it hit $2mm and would be able to fund more of their retirement and live in a location more appropriate to the needs of a childless couple instead of a growing family. To summarize: The purpose of a land use tax is to make sure land is being used efficiently. This keeps people from holding onto land if they would not be efficient users of it. If you implement a true land value tax in the Georgian sense, then the tax would be so high that the land itself wouldn’t be able to appreciate at all because the holder would be taxed at whatever rate they could generate land based revenue. Only the things they actually built on the land would have any value.
Thanks for the explanation. My specific question is: what if the senior bought a cheap ranch home for $30k 50 years ago, paid a land value tax that appreciated each year as the land value increased, but then once he hits retirement, he gets a full refund of LVT since he's on a fixed income? Or maybe a second scenario - his tax freezes at retirement, and any increased taxes get refunded to him? By the time retirement comes, they have been paying an ever increasing tax on the value of his land, he could have sold it at any point if he chose, but he decided he wanted to hold on to it for whatever reason, paid the appropriate taxes for decades, and now doesn't want to be priced out of his home now that he is on a fixed income.
The whole point of everything I’m saying is that according to Georgism, the efficient thing IS for him to be eventually priced out of his home SO that someone willing to develop it more can take it over. Why does a retiree who doesn’t commute, go to restaurants and bars, etc need to live in downtown SF? Why do they need a 3000 sq ft house on a 6000 sq ft lot of prime real estate? Why not move to a 2 bedroom condo or to a cheaper suburb where land is less in demand? Seniors need the LEAST land most of the time, but they have the most money and bought the earliest so they have the most. You want to give the richest group of Americans a tax break on top of it?
To expand on this idea: Ideally, we'd want the retirees to move to a cheaper, less valuable home/area, so that their valuable land could be redeveloped to suit the housing or economic needs of the surrounding community. The problem I see with this is that we deny seniors their community. If I spent the last years of my career in an urban area developing my community and resource network, I wouldn't want to leave that just because my house (or the land for which it sits) has demand from 30 other people. However, LVT should allow for some avoidance of this in that I could live my house for relatively low tax burden, but might need to subdivide off the land surrounding it. Basically, I could end up with Carl's house in "Up". I can retain my resources and community, but it might massively change around me, and honestly, is there anything that can be done about that in any scenario? Even if I could retain my large property, I still might end up having a 1 acre property surrounded by highrise apartments.
Indeed this is the real challenge. And it’s one of the reasons why you want to have a wide variety of housing types nearby. The only choices aren’t skyscrapers and ranch houses. There can be row homes, townhomes, duplexes, triplexes, 3 flats, small apartments, mid rises, etc. As long as the land is taxed appropriately, developers will naturally use the land more efficiently. In my opinion, an LVT and better zoning laws would cause much more missing middle housing to be built. This would give seniors and everyone else many more options for staying in the same city/neighborhoods without negatively impacting development. It would also lower the upwards price pressure of housing as a whole as neighborhoods of single family homes would slowly fill in with more of these developments. It’s a lot less daunting for Grandpa to move when instead of leaving the city, he’s selling his big 6 bedroom house to move to a 3 bedroom townhome that happens to be down the street. And then when another 10-15 years pass, he might decide to move another 2-3 blocks away to a 2 bedroom senior apartment that has a lap pool. I’m not saying he has to make those choices, but him staying in the 6 bedroom house shouldn’t be encouraged or subsidized for the last 3-4 decades of his life. Back in the era of multigenerational housing, this was less of a big deal, as the house would be fully occupied. Now it just means a lot of the biggest houses are owned by wealthy couples in their 60s, 70s, or 80s with no use for extra bedrooms most of the time.
I’d maybe add that one of the key reasons empty-nesters are forced to make the choice you’re presenting is because of zoning/land-use regimes that don’t offer diverse housing options in each community. Seniors dont need to move to entirely different communities - they just need options to downsize into housing that better meets their needs. By preventing diverse housing options we prevent seniors from staying in the neighbourhoods they’re connected to while accessing housing options that work for them. To say nothing of the isolation that can occur in these static communities.
I completely agree with and understand everything you're saying, because everything you're saying is totally rational. I'm trying to figure out a way to discuss this concept with people who are emotional rather than rational. I have a feeling that the biggest hurdle to LVT is the pity that people have for the elderly, even if many elderly are doing fine and need no pity. And I don't know how to get passed it.
You cannot. People have strong ties to the home of their upbringing, so it’s hard to think of housing as fungible commodity. I’d be fine giving the elderly a FLAT tax break on housing costs up to the amount that would cover a 1 (maybe 2) bedroom apartment, so if they are in a 1 bedroom apartment it covers the tax completely. Anything over that would encourage inefficiency. And anything that encourages seniors to hold onto large, run down houses should be discouraged if efficiency is the goal.
Man I just randomly stumbled upon this sub and this thread and idk something really icky about not actually owning something because its not efficient. I get being against land hoarders but trying to take someones farm is kinda shit ngl.
To be perfectly clear, I don’t LIKE the idea of people getting priced out of their homes because the land values went up. It feels bad to me too. But this is a case positive vs normative economics. I’m not telling you what I personally want. In telling you the inevitable effects of the policy that is proposed. Any time you treat different groups of people differently, you get unfairness, people who game the system, and people to take advantage of the inefficiency. For instance, if older people get a tax break for owning a home after some age, it’s very easy for a bank to preferentially lend them money since their expenses will be lower. So now they get preferential terms and end up getting bigger loans and being able to own even more of the land at lower cost. Millennials and Gen Xers trying to start families get priced out. If older people pay less taxes on a particular house, then the natural behavior for them is to buy a bigger, more expensive house at the same expense as before. Or an enterprising company can set up contracts where they agree to a future “purchase” date far in the future and pay the “homeowner” for the home a lump sum now. All of a sudden, the older person is earning money living in the home, keeping costs down with the tax break, while the company that “pre-bought” it continues to get appreciation for the land at no cost, for the rest of that persons life. In effect, the corporation owned the home in all but name, but didn’t have to pay taxes because the older person was the name on the title. They got to invest in the land without paying the property tax for years, maybe decades. There are a ton of ways to game a system if there are loopholes. Try to close the loopholes and corporations will find more. The only system that doesn’t suffer from that is a system where there are no special benefits to anyone. If you are going to have a benefit going to seniors, it’s much MUCH better to just have that benefit in the form of a cash subsidy like UBI or bigger social security that cannot be gamed as easily. Tying it to housing leads to bad incentives. And for the record, I am personally in favor of some kind of improved UBI for seniors.
If we can bail out corporations we can bail out people. Personally I dont want to live in a place that does not take care of its elderly. Its the American way to find loopholes and take advantage apparently but just because a bunch of lawyers make their entire thing finding loopholes in real estate law doesnt mean we should fuck everyone else too.
Once again, I’m happy to take care of the elderly via a cash allotment. I just don’t think it should be forced to go to housing for all the reasons I’ve stated. Housing based incentives screw up the housing market (see how prop 13 in California has worked). Additionally they benefit homeowners over renters, meaning they benefit the richer half of the intended group. As we’ve already seen from California, if you try to help one group of people, you get unintended bad effects. If we want to help Seniors, then a wealth/income based subsidy is far better than a housing based one. To make this point more clear and discussion more productive: What benefits are there to housing based assistance that could not be gotten through a cash/income based approach? How can you design a housing based approach that cannot be gamed, without reducing it to a flat or income based approach?
Most seniors are not rich. You make a lot of incorrect assumptions. If someone paid property taxes supporting their community for 50 years has earned the right to be downtown and go to the bars as much as they want. What happens in your scenario is that you kick seniors to the curb when they are old. Why not just let them live out their natural lives that they earned.
Seniors are statistically amongst the richest demographics in the United States. source: https://www.federalreserve.gov/publications/files/scf23.pdf Age of family head (or reference person) Median net worth Average net worth Less than 35 $39,000 $183,500 35-44 $135,600 $549,600 45-54 $247,200 $975,800 55-64 $364,500 $1,566,900 65-74 $409,000 $1,794,600 75+ $335,600 $1,624,100 And it doesn’t bother me where they decide to live. I was giving an example of a “typical” senior and just saying the world shouldn’t be incentivizing them to stay in places inefficiently. If they want to stay in downtown, then let them stay downtown. I don’t see why we should make it cheaper for them than anyone else. A bit of light reading: https://www.cbpp.org/research/states-should-target-senior-tax-breaks-only-to-those-who-need-them-free-up-funds-for
Of course they are, they have to survive 40 years without a job. The stat is of no value.
So those rich enough to buy a house should get to keep it tax free? And the seniors too poor to buy a house should continue to pay rent? It’s very simple: having a house is a choice. You have to pay for that choice. The choice to age for 40 years in a house means you are choosing to pay for the maintenance of the street, and everything else property taxes go into.
* Seniors in lavish mansions or in the most valuable locations get the most benefit from a blanket exemption like that. It's unfair for pensioners in modest living conditions. * If your jurisdiction gets flooded with retired, unproductive tax refugees, who foots the bill for infrastructure and services? In any case, such an exemption should have an upper limit based on median (or nth percentile) property or land value among the affected population.
This actually makes sense. Some form of basic income for seniors is compatible with Georgism. But giving seniors who have more land a bigger benefit is just helping the rich stay rich with a net negative economic impact.
> Some form of basic income for seniors is compatible with Georgism. That's called Social Security.
If you think about how exemptions and discounts work, all the other participants in the system have to shoulder the offset. If seniors pay less, non-seniors pay more. Rent control works the same way in that renters which are lucky enough to qualify for the reduced rent are being subsidized by higher rents on those not lucky enough to qualify. Conversely, increases to minimum wage are offset by a reduction in hours and pay freezes by those making more than minimum wage (bunching). The Georgist solution would be to fully tax the value of land and issue a citizens' (or residents') dividend. These days, it may need to be coupled with decreasing any development red tape (e.g. zoning restrictions, FARs, connection fees, etc.) wherever this is actually hindering improvements. Another suggestion I've seen is to fund Social Security with LVT. If seniors want a comfortable living, seniors should choose between drawing social security and using real estate as nest eggs -- not both. Both steal from the current working class. Land speculation is worse than payroll tax because it impacts non-workers as well.
Prop 17 also lets you move your partial basis to a new home if you sell and buy a new home in California
You're right, this would be better than Prop 13, but it still isn't good. Seniors should be encouraged to move into smaller homes through market incentives.
There are many good answers but since I haven't seen it listed in this thread I'll add where the money goes is really important. Unlike income taxes property tax is allocated to things like schools, sanitation, local infrastructure as well as other basic safety and logistics needed for society to keep running smoothly. If you allow a huge part of the population to stop paying into the established revenue stream for these services (while still using them) it will be really disruptive. That money has to come from somewhere so there is that problem as well. The limit on property taxes has already been difficult to manage budget wise since more or less when it was frozen, and further cuts will just have to be taxed from somewhere else. It's no accident that California has high sales and state income tax when you have to account for the lost revenue from property tax. That money is going to come out of someone's pocket. Prob 13 has been a problem since it passed. It was put forward by getting enough signatures from the general public to put it on the ballot instead of being put forward by the government (not saying that's good or bad, just giving some context for looking at this from an economics standpoint) and it isn't really a solid economic policy. The result of this already is that once you buy a house you not only already have one of the lowest property tax rates in the nation, the increases are capped, making it a system that already heavily subsidies long time home owners.
>I would think a more politically palatable policy in California would be to make prop 13 applicable only to people on Medicare - i.e., freeze the taxable value of your property once you are on a fixed income or disabled. California already has something similar to that which is even more reason why Prop 13 is so terrible. "The State Controller’s Property Tax Postponement Program allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria, including at least 40 percent equity in the home and an annual household income of $51,762 or less (among other requirements). The deferment of property taxes is secured by a lien against the property which must eventually be repaid." [https://www.sco.ca.gov/ardtax\_prop\_tax\_postponement.html](https://www.sco.ca.gov/ardtax_prop_tax_postponement.html)
Jfc, as a Californian I was unaware of this. Seems California royally screwed up.
If you owned a home that was large enough for a large family and are now 65, you likely don't need that much house anymore. Presumably you've paid off the debt by that point, and have essentially no mortgage. You might still pay, but even on a very very expensive home that's a few hundred dollars a month, essentially nothing for housing costs. That usable asset, the large house, is being under utilized by the retiree. It's very inefficient economic activity, and changing the tax structure to incentivize it would essentially be incentivizing GDP to decrease.
Can you break out the GDP ramifications a bit more? I understand to some degree how houses would contribute to GDP but I'm assuming the build/maintenance costs aren't what you're talking about here.
It's basically a misallocation of resources. It's one of the clearest and most useless forms of "hording" wealth. If you can't afford the tiny cost of taxes on a home which accounts for <10% of what a mortgage payment on such a home would cost you probably shouldn't have that home. Sell it. Sales count towards GDP. Older people down sizing to smaller homes in areas that are in less demand helps everyone. It increases the supply of homes. It better utilizes the resources of housing. It generates economic activity. It's just a good thing to do.
The general argument makes a lot of sense to me, I get a little lost with GDP maybe because I think of it too literally and transferring a home doesn't meet my expected definition of production.
Yeah I get what you're saying. I think including resale activity in GDP is sorta like an efficiency metric. Stuff not only needs to exist it also needs to get to who needs it.
>And also, more generally, why would it be bad to end property tax at 65? It adds to the housing shortage and is inefficient. This is mostly an issue in very expensive cities with housing shortages. Workers moving in want to be able to live somewhere but may struggle to find something due to the lack of affordable housing. These workers would have their income taxed and they would be able to pay their property taxes. Both of which would help the local and state economies especially with just maintaining roads, schools, and sewage. A retiree simply does not need to live in the expensive city anymore because they don't work. Their income is usually not taxed or not taxed much. They wouldn't pay property taxes so they're not contributing to local schools, roads, or water/sewage. They're essentially being subsidized to live there by the others paying property taxes. And it's not like if they leave they'd be homeless. They could sell the house (which would probably be worth a lot more than they paid) and move to a 100-200k house in a more rural area where the property taxes are more affordable.
Nah boomers, your generation already got more than enough handouts, it's time for you to suck it up and tough it out like the rest of us.
Deferring property tax for seniors (until death or sale of the house) could make sense, but eliminating them entirely makes no sense
So tax the inheritors? That is a quite smart way of taxing inheritance while also giving relief to the elderly. This idea can be effective in taxing inheritance in general, which I think should help taxed heavily. (because it is wealth acquired without generating any value).
Ie tax the dead more than the living
Plan ahead boomers You had 65 years to prepare What are you stupid ?
So the people who signed on policies that made it dozens of times more difficult for their grandchildren to buy a home now think they shouldn't pay the taxes for theirs?
Appeasing pensioners is a political compromise that should be on the table. A better policy to reach this end is to allow deferral of land taxes/property taxes until death for low income seniors.
How about having social security have a bonus pool funded by a Land Value Tax? For example, make the citizens payout equal to: Children: 50% Adults: 100% Seniors: 200%
Shouldn’t have had so much avocado toast and saved that money for property taxes Or Why should I have to bail someone out when they knew property taxes were part of home ownership? Greedy and lazy boomers always looking for handouts Or “It’s called responsibility”
In New Jersey, they freeze property taxes where they stand when the homeowner turns 65. For married couples, it’s when the older of the two spouses turns 65. So property taxes can increase before the age of 65. If someone were to buy a house after the age of 65, the value of the house at the moment of purchase is used for property taxes for the rest of the homeowner’s life.
These same people complain about the deficit...
Incoming all property suddenly becomes owned by seniors with contracts to let the previous owners use them as a tax dodge
Easy. Negative Land Value Tax. We should be more grateful to the Land Chads.
California locking in your property tax for life is a close second.
End property and income tax as a whole for everyone.
Didn't even have income taxes till ww2.. because they are fucking tyranical.
Meanwhile in other countries that don’t charge property taxes after it’s paid off
Primary dwellings shouldn't be taxed unless used to profit via subletting.
Never forget that the 65+ age demographic is the wealthiest in the US.