I’m not sure this is the right lens. Poorer renter isn’t a static label, we need to build paths that allow the lower and middle class to build equity.
The goal of these policies, IMH(umble)O, should be to help poorer renters become richer homeowners.
I feel like you do that by reducing the total cost of walking that path. Not by increasing their tax obligation every step up the socio-economic ladder they climb on their way out of the lower class.
Equally, you don't help people by taxing the poorer more than the richer. So maybe we should just tax land as land, and leave it at that? Being a renter is part of that path after all.
Renters are not building equity. They are spending their wealth every month and accumulating no equity in return.
I don't agree with calling a "homeowner" rich. Owning the ground beneath your feet is a big part of having equity. With a mortgage, unlike rent, every month an increasing amount of your wealth accumulates as equity as you pay off your principal. Once you pay off your mortgage, you've significantly reduced your monthly burn rate and can start moving your accumulating equity into retirement accounts.
Reducing the total cost of primary home ownership, reducing the cost of financing a primary residence to help build equity, etc. are all important parts of giving upward class mobility.
These are not things you want to disincentivize. You want your renters to become owners. You want your workers to become small business owners. You want your communities to build equity in themselves.
If you tell me that being a homeowner today makes you rich, I'll tell you that is part of the problem.
> Taxes would still happen on renter investment property.
Exactly. It makes renter investment property more expensive to maintain, hence making rental properties a less desirable asset, reducing the numbers built and increasing the cost of renting.
Whereas a homeowner doesn't pay that tax at all, meaning the entire residential property burden is put onto renter.
> hence making rental properties a less desirable asset, reducing the numbers built and increasing the cost of renting.
On the flip side it would increase the number of single family homes and make them cheaper so people could afford them and stop renting.
Sounds like a huge win for single familys and huge hit to giant private equity funds buying up homes and land to turn the middle class into an eternal population of renting serfs.
It would also keep communities intact as people would never be priced out of their own home.
Net win for everyone but the
private equity landlords and bloated government.
Also anyone who rents, which is most people at some point but especially students, immigrants (even richer ones), new grads, divorcees, basically anyone who can't dedicate a minimum of 5 years to an area.
I've been a victim to people thinking like that - which is why I'm currently paying £1600/month for a 500sqft 1-bed flat, shared with my girlfriend.
The mortgage interest tax deduction is one of the least popular policies among economists because it fails in its objectives. It made homes less affordable and raises prices, and enriches banks, without helping new homeowners.
The concept of imputed income also helps homeowners. If you own a house that you rent out to people, the money you get is counted as income. If you are an owner-occupier and paid off your mortgage, then you effectively pay rent to yourself... money that you otherwise would've needed to pay to others, but don't need to pay tax on it.
So essentially you get a deduction even besides the mortgage interest deduction. All of this is also factored into home values, and thus the purchase decision for new buyers won't ever be dramatically better than renting.
The solution of a land value tax is necessary. It is most necessary in the residential space, including for first homes, because that is the most important place where we need to ensure high and quality supply, and affordability.
Helping homeowners, specifically, but not others is arbitrary and unfair.
Providing a citizen's dividend out of the revenue of a land value tax, to help all, would be fair, and would help enable people to acquire homes if they want them.
>The concept of imputed income also helps homeowners. If you own a house that you rent out to people, the money you get is counted as income. If you are an owner-occupier and paid off your mortgage, then you effectively pay rent to yourself... money that you otherwise would've needed to pay to others, but don't need to pay tax on it.
Imputed income is everywhere, are you suggesting it should all be taxed? When you prepare a meal in your kitchen instead of paying for it in a restaurant, you effectively pay chef's wages to yourself, "money that you otherwise would've needed to pay to others, but don't need to pay tax on it." Another reason why singling out homeowners on imputed rent is fallacious is that if the imputed rent were to be taxable, then the cost of maintaining and improving the home would be deductible, just like it is for landlords, and there would be no caps on mortgage or real estate tax deductions related to acquiring or improving the property, just like for landlords.
You get an income tax deduction for real property taxes paid on all the property you own, whether for business or personal use. (Although there is a temporary cap on the total amount of state and local taxes on personal-use property one can deduct on their federal tax return, along with a workaround for wealthy business owners, the so-called pass-through entity elective tax that many states have enacted.)
> I personally think people's first property should be tax-free. their actual home.
This is how it works in Canada: principle residence has no capital gains on sale.
If you move to a new place, and don't sell the old one, then you have to change its status and the clock starts ticking on any price appreciation after the status change. Further if you rent out part of the structure (e.g., basement), then you have to pro-rate a status change of the property (generally proportional to surface area) and declare rental income.
I think GP was talking about property taxes. Even the US has tax free capital gains up to a limit.
No capital gains isn't necessarily a great system either. It leads to people treating their primary home as a retirement savings vehicle.
Taxing inflation-adjusted capital gains on home sales is a sensible compromise. And maybe also allowing the gain to be divided over years of ownership.
It's capital gains tax free, but it's far from tax-free. Myself, I pay about $7000 a year in property taxes on mine.
Eliminating those and increasing corporate/second property taxes instead would be insane. That means that renters would be responsible for most of the taxes required to maintain the streets in front of my house.
What you seem to not understand is that the government has enough money to maintain the roads with out property tax entirely. It would force the government to be more efficient with their money and shrink the governement to just the essentials.
You think any for of US government operates on a shoestring budget? They are the most bloated entities on the earth. And its based off the backs of the poor and middle class.
People that can't afford things tend to pay little tax, if any. They are net receivers. And how are people that bought something with their own money subsidized?
Indeed, actually owning land rather than leasing perhaps should not be a right of private entities at all.
But a place to live is obviously a requirement of existence, and therefore must be a right.
As for 'own money' etc, it isn't god-given out of thin air, but results from our current system of organizing work and distributing rewards. Some would say that system is unfair, even rigged.
Capitalist societies across the world are in complete demographic collapse because young people can’t afford homes to raise families, and yet progressive land taxation remains an unpopular idea.
I find it absurd that the government can come take the house of a 70-year-old whose retired and cant keep up with the property tax skyrocketing around them.
I find it absurd that rich people can move to an area they like and displace all the families that have been there generations by virtue of property tax increases effectively conquering the land.
I find it absurd that the government can take your home AT ALL after you have spent your whole life paying for it.
> I find it absurd that the government can take your home AT ALL after you have spent your whole life paying for it.
They can, but IIRC the Supreme Court just ruled that they have to give you the proceeds from the sale minus whatever lien value they had on the property.
Not that I necessarily disagree with your sentiment, but the situation isn't quite as dire as the statement makes it appear to be.
For what it's worth: I'm from the Netherlands, generally considered a very high tax country. I've only recently learned about US property taxes and I'm shocked.
We too have such a thing, in a much more complicated way, but it's a mere fraction of what you pay.
On average, a dutch household that owns a home pays 851€ per year in municipality taxes, which includes property tax, waste/garbage services and sewage rights. Pure property tax may be as low as 50€ per month.
The idea behind it is very simple: you can't eat a home. A home you occupy does not generate any immediate income. Further, a home owner has little influence on the value of its property. When it rises in value that might be great, but your income, whichever it is, does not rise along with it. Finally, one can effectively never retire in their own bloody home with such a scheme.
Property tax is deeply unethical and cruel. Astonishing how the ultimate capitalist country allows for it.