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It's the same across the world.
The problem is that real estate has become an asset, a form of capital.
The only way out of this mess is to shift taxation away from labor and onto capital.
Higher property taxes (1-2%), that can be subtracted from income tax for working people are the answer.
Let's say Joe the Plumber and Elon the Muskrat both have an income of $100K and pay an income tax of $25K.
Joe owns one property worth $1M that he lives in and pays 2% tax on it, $20K. Which gets subtracted from the $25K income tax, meaning he effectively pays $5K income tax + $20K property tax = $25K combined property and income tax. Pretty sweet deal.
Elon owns 20 properties valued $500M collectively, which means $10M in property taxes. He officially resides in the most expensive $100M property and gets a $50K credit for that. The $50K is larger than the $25K, so he pays zero income tax.
Total tax is $10M.
This (or something like it) is the system the whole world must move towards if we want to simultaneously (a) lower taxes on working people (b) increase taxes on property and (C) not let working people lose economic power relative to the capitalists over the longterm.
The middle class has to outsmart the owning class if we want our children to remain middle class.
I really hate all the replies attempting to poke holes with minimal effort. Thanks for this comment and your robust set of examples.
Housing shouldn't be a vehicle for interest or making a living, I'd take it more extreme than what you have if I'm being honest. You can own the buildings you use 60% of the year for work or for housing but nothing else. We don't sell stocks in bananas, we sell stocks in farms. Housing should be a consumable commodity not a line item in a corp's assets sheet.
What would stop owners from shifting the burden to the renters?
As of right now this is already how property taxes are handled by most landlords: mortgage + tax + est. cost to fix incidentals + time managing paperwork = rent (in a fair situation - though most will tack on as much extra for "profit" as they can)
So if you have a house worth 600k (12k tax), the mortgage is $3500/mo, they would just charge $4500+ a month to cover their costs.
I think the only way is to add extremely progressive property tax to multiple ownerships, and a name always has to be attached as "owner". So your first house and second might have limited property taxes, but your third would be double, fourth would be quadruple, fifth would be 8x etc.
My example is already an extremely progressive property tax on multiple ownership, but yeah, it can be tailored as needed.
I, personlly, would be in favor of doubling the tax if no one is living there.
As for rent: the price of rent cannot be arbitrarily raised. If renters can buy more cheaply than renting, then landlords will have empty units.
So in your example, renters would just buy and pay the $3500 mortgage instead of renting.
Of course real life is more complex. Renters need access to financing, etc.
I'm glad we currently don't have this tax system in place otherwise rents would be absurd and growing right now!
This is a good idea which is why it will never implemented
There's a dozen ways to fix the housing problem. Knowing how to fix it isn't the problem. Getting politicians who are paid not to fix the problem to do it anyway, is the problem.
It will if poor people can work together against the common enemy.
Poor people can't come together if you elevate one part of them to a privileged position over the other part which is placed at a right-less position. The privileged workers don't want to lose their power over their degraded compatriots, so they will fight tooth and nail (on behalf of the owners) to prevent any attempt from their degraded compatriots to free themselves.
Scapegoats of the world unite.
Housing cannot be both affordable and an investment.
It theoretically can. Yes. It realistically won't, no. Your home should be a security and not an investment. Speculation and hoarding with relation to housing should be largely outlawed. And usury being restricted to the point of being almost pointless.
If we, as a society prioritize desirable public housing for members of our society. Who the fuck cares if a house is an investment or not. That simple security is worth far more than any so-called investment could ever be. If people wanted to work extra hard and save up for something better, that's always an option. But that shouldn't be the premise for basic housing entirely.
Whats your plan for investment groups that back corporations buying 1000 houses each month to rent?
They will need to pay the property tax with no possibility of getting a tax discount, so they will have a competitive handicap against owner-occupiers, who will be able to outbid them in contrast to the current situation.
Government could consider providing a discount if the houses are rented out at affordable rates.
That just makes the asset more expensive and would likely get passed onto the renter. There's got to be something done to curb their purchases. Making it more expensive on the backend won't change them paying cash up front to outbid a regular family.
What if the property tax is higher than the income tax? They get money back?
What about those who have to sell at a loss and are now stuck with a debt instead of profit for their retirement? Heck, some of them might be forced to go bankrupt because you can't have a mortgage for a house you don't own anymore!
I literally covered these situations in the example, which leads me to believe you are just slinging mud and not seeking to understand.
If you own $500M in property and have a $10M tax bill but only have $100K in income, you can figure it out, even if it means downsizing and hoarding less real estate.
We have to stop feeling sorry for the top 0.1% of society and start taking care of the 99.9%.
I'm talking about my 90 years old grandma who bought her house in the 70s and now lives on whatever's left of my late grandfather's pension, my parents who will have a mortgage to pay and never had a pension fund at work, they're not fucking millionaires! You guys always seem to forget about regular folks that will lose their house while the rich will find ways to dodge whatever tax you would love to see implemented because they have the means to do it
I, too, have retired parents.
You should have a look at their income tax. You apparently have no clue what it looks like.
Spoiler: they are still paying tax, well into retirement.
In a typical example they might have a $60K per year retirement income (social security plus pension), paying $20K income tax, owning a $500K house (if they downsized after the kids moved out). A 2% property tax on that would be $10K and leave them with $10K income tax + $10K property tax = $20K total tax, just as they have now.
You don't get what I'm saying. Your tax reform happens, house are now flooding the market. Their house would lose so much value that what they had saved for their retirement (i.e. the money they put in their mortgage) will now have disappeared and if they ever needed to sell before paying off more of their mortgage they might have to go bankrupt instead because they wouldn't be able to sell for what they owe on the house.
And you wouldn't need to own a big expensive house for that to be the situation you would be put in.
Heck, you're just recreating 2008 but now it's the government/municipality that's responsible instead! A house is worth less than what's owed on it? Might as well stop paying and go bankrupt instead of paying off your mortgage!
Ok, you are just opposed to houses becoming more affordable too quickly.
That won't happen. Some math geeks working for the government would have to work out the details, but these type of changes are always engineered to not disrupt markets.
So what would realistically happen is that property tax rates rise by a certain percentage per year until the target is met. Property prices will grow at less than inflation, but won't stagnate.
What happened in 2008 was an uncontrolled subprime crisis that imploded, not the controlled introduction of a tax reform.
Yeah the "make it progressive"solution just means a reversal whenever the party in power changes.
Yes, he's slinging mud. Can't possibly be that there are holes in your perfect plan or that you explained it poorly