Oh Wilbur...

[TwoCitiesCapital]

he calculation, but in the situation you've described, if everything stayed the same but the house price would be 200,000 as you said instead of 1,000,000 you'd be making a very decent yield on your investment.

 

How could it all stay the same?  500,000 mortgage on a 200,000 investment?  Clearly I meant something different than you thought.

 

I shrank the house price by 1/5 when somebody argued that examples that favor the rich don't matter. 

 

So now it matters based on their argument  :D

 

You need to scale down the mortgage as well by 1/5.  But the interest rate and gross rental yield both remain 4%.

 

1.2% of $200,000 home is 2,400 in property tax.

50% debt to equity is $100,000 mortgage. So $4,000 in interest expense on 4% mortgage.

4% gross rental yield is $8,000.

 

$8,000 less the interest expense is only $4,000 pre-tax profit.

 

Property tax of $2,400 is 60% of pre-tax profit.

 

Very, very high tax relative to the pre-tax profit.

 

And that is assuming 0% income tax!

 

1) Agreed that "inflation" should be considered when making investments, but I hesitate to call it a tax as it's not money taken at gun-point for social good. But, let's ignore that for a second. The higher inflation goes, the lower the real debt level gets all things equal. So, to pay off down the real amount of debt, we need higher "taxes" (even inclusive of higher inflation this time around). There's no disagreement between us here.

 

2) If real estate returns are really that poor, I don't blame tax rates/inflation. I blame the price of real estate. No one is forcing you to buy a house.

 

3) No one is entitled to make a positive cash return. Especially not entitled to receive one in excess of a mortgage/inflation/taxes/etc. You're buying something and gaining 3-5x leverage (or more in some cases). Some investments require a negative carry. I don't think that just because you're cash return AFTER paying the mortgage/interest is negative is indicative of exceptionally high tax rates. It's simply a negative carry trade where you're paying for that leverage. When I'm short a stock, is it the taxes that I should be blaming for the monthly cash outflow? Or the cost of borrow? If I can't make enough money on the short to cover the borrow and make a decent after-tax profit, I'm not good enough at shorting and should try something else.

 

Anyhow, I don't really feel that this argument is adding much to the overall conversation. Taxes on traditional forms of income are low. The share of the country paying these traditional forms of income is low. Gov't spending on social programs is likely to explode from an aging population and interest on a 19 trillion debt burden when rates rise. We're already have massively high, recurring deficits if comparing to anything outside of the last 12-16 years with a massively high debt with the expectation that costs are going to rise even further.

 

It's most reasonably to assume that historically low tax rates will go UP and that the tax base will be broadened in this environment. It's as simple as that. Could I be wrong? Sure. But what is the most likely outcome? Higher taxes. Those could be in the form higher income taxes, higher sales taxes, higher capital gains taxes, higher taxes on transfers of wealth, taxes on wealth itself, a reduction in credits/deductions, a higher bar to be eligible for social programs, higher inflation, etc. etc. etc. but it's all the same thing. You either give more to your gov't or you get less from your gov't. Those are really the only two options for the younger generation.

 

For the better part of two decades, the debt has grown faster than GDP. Why we think that we're going to magically start growing at a rate that will make up for two decades of largess AND the expected increases in spending is beyond me. Is it possible? Sure! Is it likely? Hell no. 

 

 

 

 

 

 

 

 

 

[muscleman]

https://www.buzzfeed.com/chrisgeidner/obama-commutes-sentences-of-more-than-200-people-serving-fed?utm_term=.eij9gY2qK#.yt3A67Waz

 

Let's commute sentences of all prisoners so they can be grateful for the Dem party and vote for Hillary Clinton! Yeah! Win-win!  ;D ;D

 

[Jurgis]

https://www.buzzfeed.com/chrisgeidner/obama-commutes-sentences-of-more-than-200-people-serving-fed?utm_term=.eij9gY2qK#.yt3A67Waz

 

Let's commute sentences of all prisoners so they can be grateful for the Dem party and vote for Hillary Clinton! Yeah! Win-win!  ;D ;D

 

You know that in a number of states prisoners or former prisoners cannot vote?

 

http://www.mypalmbeachpost.com/news/news/state-regional-govt-politics/florida-no-1-in-barring-ex-prisoners-from-voting/nXwZH/

[Otsog]

A commutation of sentence reduces a sentence, either totally or partially, that is then being served, but it does not change the fact of conviction, imply innocence, or remove civil disabilities that apply to the convicted person as a result of the criminal conviction.

 

A pardon is an expression of the President’s forgiveness and ordinarily is granted in recognition of the applicant’s acceptance of responsibility for the crime and established good conduct for a significant period of time after conviction or completion of sentence. It does not signify innocence. It does, however, remove civil disabilities – e.g., restrictions on the right to vote, hold state or local office, or sit on a jury – imposed because of the conviction for which pardon is sought, and should lessen the stigma arising from the conviction.

 

https://www.justice.gov/pardon/frequently-asked-questions-concerning-executive-clemency

[EliG]

I take issue with this statement. While I see what you mean in terms of technological development, advances in certain fields, etc., it's estimated that millenials will be the first generation in a long while to NOT be better off than their parents on average.

 

Millenials are graduating in a world that demands they go to college at an exorbitant cost, take on tens of thousands in debt to do so, to be eligible for jobs that are highly competitive and barely pay better than the $15/hr demanded by fast food workers who don't need degrees, just so they can become "contributing members of society"/tax payers which means they are immediately on the hook for carrying the rest of the country with their income taxes by taking.

 

Further, tax rates are at historical lows while deficit and debt are at historic highs. Any millennial with a brain can see that the likely trajectory in taxes is up even while the likely trajectory of benefits for our generation is down (social security being nonviable, growing health care costs to be carried publicly, deleveraging of public balance sheet at some point given the 100k/tax payer balance at the moment, etc.).

 

Millenials are looking at more debt (personal and public), higher taxes, more expensive housings/cars/etc., lower social benefits, lower incomes,  and lower investment returns going forward. On top of that, very little of this was their fault (other than maybe student loan balances). This is all the consequences of decisions made by those representing their parents and grand parents.

 

Sure we have smartphones and computers are ubiquitous. It's still hard for me to see how that makes up for a lot of the above and can definitely understand why the younger generation is pissed off and supporting non-traditional candidates like Bernie and Trump.

 

I agree with many points you made but not the last one that I bolded. The younger generation is not supporting Trump. Look at the poll breakdowns. Trump polls poorly in the younger demographic.

 

For example, here's the latest CNN poll

http://i2.cdn.turner.com/cnn/2016/images/08/01/2016.post-dem.convention.pdf

 

Under 45: Clinton 63%, Trump 30%

Over 45: Clinton 44%, Trump 48%

 

This poll is not an outlier. I've seen similar generational breakdowns in other polls.

 

I don't disagree, but defining young people as those "under 45" is sweeping with a very large brush. Maybe filtering down to a demographic of 18-lower/mid 30s would be more appropriate to capture the individuals I was referencing.

 

And of course, not necessarily all of them are supporting Trump, but a lot of them aren't supporting Hillary either. It may just be they feel forced to choose between one or the other. I know that my facebook feed is full of Bernie supporters who still trash Hillary. I don't know exactly what they'll do when it comes to vote, but they have a few options:

1) vote Hillary, the "anti-Bernie"

2) vote Trump (probably even worse than Hillary in their minds)

3) Don't vote or

4) vote 3rd party

 

When you have polls that remove those last two options that would arguably carry the majority of that group, and leave the two most unfavorable, you're obviously going to get skewed results among a number of people. And I don't know how it shakes out nationally, but a lot of my friends from traditional Southern/Republican districts definitely support Trump - and they're college educated.

 

^ Good analysis. Today's Marist poll supports your line of thinking.

 

https://www.scribd.com/document/320225575/McClatchy-Marist-Poll-National-Nature-of-the-Sample-and-Tables-August-2016

 

18 to 29 year olds

 

Clinton: 41%

Johnson: 23%

Stein: 16%

Trump: 9%

 

Clinton leads but it's her weakest age cohort. Anti-Clinton young votes go to the 3rd parties, not to Trump.

[ERICOPOLY]

You're buying something and gaining 3-5x leverage (or more in some cases). Some investments require a negative carry. I don't think that just because you're cash return AFTER paying the mortgage/interest is negative is indicative of exceptionally high tax rates. It's simply a negative carry trade where you're paying for that leverage.

 

Okay but, would dividend taxes at 60% be not considered high?  After all, you can leverage stocks 3-5x just like you can with real estate, and you can still make a return in stocks even if it's negative carry.

 

So like, when the dividend taxes are debated, how come topics like negative carry are not really ever discussed if that is seriously the rational for having high tax rates on rental real estate?

 

[ERICOPOLY]

It just feels to me like I laid out a fact that the property tax is eating a massive amount of the income, and it looks like it's obvious to me, but it's just such a common thing that people would feel weird to live in a world without a property tax and so the arguments are justifying about how it's not really a tax (because people aren't used to thinking of it that way).  But that doesn't make it so.

 

Like, somebody pointed out that it is more of an occupancy tax.  Well, in most countries the income tax only applies to residents of the country -- that too is a form of an occupancy tax in most of the world.  But just not in the United States, so are people taking a specific situation (the US) and using it to generalize?  Hmm?  In the example of a country, it's the privilege of living within it's borders -- you don't pay the tax if you don't enjoy that privilege (even if you are a citizen).  The US is different.

[KJP]

It just feels to me like I laid out a fact that the property tax is eating a massive amount of the income, and it looks like it's obvious to me, but it's just such a common thing that people would feel weird to live in a world without a property tax and so the arguments are justifying about how it's not really a tax (because people aren't used to thinking of it that way).  But that doesn't make it so.

 

Like, somebody pointed out that it is more of an occupancy tax.  Well, in most countries the income tax only applies to residents of the country -- that too is a form of an occupancy tax in most of the world.  But just not in the United States, so are people taking a specific situation (the US) and using it to generalize?  Hmm?  In the example of a country, it's the privilege of living within it's borders -- you don't pay the tax if you don't enjoy that privilege (even if you are a citizen).  The US is different.

 

You also referred to bond income to which your property tax point doesn't apply.

 

As for the property tax, I agree it's a tax.  I don't know how else to describe it.  But isn't your argument driven by the low cap rate in your hypo?  For example, let's assume (i) property taxes are 1% of market value, (ii) you spend 1% of market value per year for a maintenance (I assume this is tax deductible); (iii) market value of the house (and your purchase price) is $100,000; (iv) you borrow 75% of purchase cost at 5%; (v) you get rent of $20,000 per year; and (vi) your income tax rate on this income is 40%.  I'm not a real estate expert, but your annual cash flow should look something like this:

 

Revenue:  $20k

Prop Tax:  ($1k)

Maintenance:  ($1k)

EBITDA: $18k

Depreciation: (~$3k)

Interest: (3750)

EBIT:  11250

Income Tax:  (4500)

Net Income:  6750

Cash Flow:  9750

Post-Tax Cash Yield on Equity:  39%

 

I realize you can't buy real estate today and get returns like this, but I'm attempting to illustrate the point that your argument appears to be driven by the low cap rates in your hypo.

[muscleman]

https://www.gatestoneinstitute.org/8619/sweden-asylum-seekers-violence

 

The daily Svenska Dagbladet reported that 30,000 people whose asylum application had been rejected and were scheduled for deportation, had gone missing. The police say they lack the resources to track down these illegals.

 

Three Somali men in their 20s, who took turns raping a 14-year-old girl, received very lenient sentences -- and all three avoided deportation.

 

On June 7, it was reported that British citizen Grace "Khadija" Dare had brought her 4-year-old son, Isa Dare, to live in Sweden, in order to benefit from free health care. In February, the boy was featured in an ISIS video, blowing up four prisoners in a car. The boy's father, a jihadist with Swedish citizenship, was killed fighting for ISIS.

 

"If you disagree with the establishment, you are immediately called a racist or fascist, which we definitely are not. At times I felt that this was what it must have been like to live in the old Soviet Union." — Karla, on why her family had left Sweden for Mallorca.

 

 

 

 

Hey guys, isn't US becoming like Sweden in all these aspects? If Clinton is elected, will it go more in this direction?

[KJP]

 

The significant contributor to the total tax burden is the property tax, not the income tax.

 

Therefore even if you are talking about a $200,000 property, the property tax still amounts to 60%.

 

So like, why are ordinary Americans in a 0% tax bracket actually paying a 60% tax rate (people love real estate because you can kick the tires).  Isn't that a heck of a lot higher of a tax rate than people commonly realize?

 

I still don't understand who are the "ordinary Americans" in the "0% tax bracket actually paying a 60% tax rate."  Median family wealth in the US is about $80,000, including all forms of wealth such as retirement plans and equity in your primary residence.  (http://money.cnn.com/2015/07/27/news/economy/wealth-diverse/).  The "ordinary American" does not own an investment property or anything close to it. 

[Valuebo]

 

The significant contributor to the total tax burden is the property tax, not the income tax.

 

Therefore even if you are talking about a $200,000 property, the property tax still amounts to 60%.

 

So like, why are ordinary Americans in a 0% tax bracket actually paying a 60% tax rate (people love real estate because you can kick the tires).  Isn't that a heck of a lot higher of a tax rate than people commonly realize?

 

I still don't understand who are the "ordinary Americans" in the "0% tax bracket actually paying a 60% tax rate."  Median family wealth in the US is about $80,000, including all forms of wealth such as retirement plans and equity in your primary residence.  (http://money.cnn.com/2015/07/27/news/economy/wealth-diverse/).  The "ordinary American" does not own an investment property or anything close to it. 

 

Which is seriously sad considering how rich the US is "on average". This is by far one of the most urgent economic matters for the US. But I guess propagating "the American dream" as something achievable for everyone is more important.

 

[ERICOPOLY]

You also referred to bond income to which your property tax point doesn't apply.

 

Of course it doesn't apply.

 

I mentioned that real estate is a very common investment for people. "Common" Americans typical trust it more than stocks and bonds.  So then I get some side show argument back that my example used an expensive piece of real estate and that common Americans don't have that much money.  You just can't win -- people will not address your message if they can attack you on a detail.  So I changed that detail to suit their objection.  The detail was unimportant.

 

I was also rebuffed on the ground that I can't make a generalization out of a specific.  Which of course I wasn't doing, because I said that taxes were actually high for some assets.  I didn't say for all assets (generalization), I was very clear for some.

 

I don't think people realize that they are high for some -- property taxes are relatively obvious.  They are easy to see.

 

So I wanted to find an example of a high tax on an asset where optically the tax rate looks a lot lower than it really is.  The best example I could think of was the taxation of bonds, where the inflation rate affects the level of real taxation.  And you can easily get to real tax rates in excess of 100%.

 

Arguing that only the nominal tax rate matters is IDIOTIC folks!  You guys don't argue that only nominal gains matter in the stock market, so adopt a little bit of intellectual honesty and just concede the point that the only rate that matters in both taxation and investment returns is the REAL rate -- be consistent and don't let politics sway you.

 

 

[KJP]

You also referred to bond income to which your property tax point doesn't apply.

 

Of course it doesn't apply.

 

I mentioned that real estate is a very common investment for people. "Common" Americans typical trust it more than stocks and bonds.  So then I get some side show argument back that my example used an expensive piece of real estate and that common Americans don't have that much money.  You just can't win -- people will not address your message if they can attack you on a detail.  So I changed that detail to suit their objection.  The detail was unimportant.

 

I was also rebuffed on the ground that I can't make a generalization out of a specific.  Which of course I wasn't doing, because I said that taxes were actually high for some assets.  I didn't say for all assets (generalization), I was very clear for some.

 

I don't think people realize that they are high for some -- property taxes are relatively obvious.  They are easy to see.

 

So I wanted to find an example of a high tax on an asset where optically the tax rate looks a lot lower than it really is.  The best example I could think of was the taxation of bonds, where the inflation rate affects the level of real taxation.  And you can easily get to real tax rates in excess of 100%.

 

Arguing that only the nominal tax rate matters is IDIOTIC folks!  You guys don't argue that only nominal gains matter in the stock market, so adopt a little bit of intellectual honesty and just concede the point that the only rate that matters in both taxation and investment returns is the REAL rate -- be consistent and don't let politics sway you.

 

That's a nice screed, but people have been trying to explain that what you call "high" effective tax rates are caused by a very high purchase price relative to revenue, which is causing property taxes (which are a function of market values) to be a very high percentage of income. 

 

If you buy a house for $1,000,000 and rent it for $40,000 per year, you're correct that your overall tax burden will be a very high percentage of your income.  That's just math.  But you appear to be going further and suggesting that the high relative tax burden in this scenario is actually a problem (and perhaps suggesting it is unfair).  I don't think your conclusion follows from the math.

 

If I'm wrong and you're just highlighting the math, then there's nothing really to discuss.  But if you are in fact going further and suggesting it's a problem, then you actually need to deal with the response that the tax burden you highlight is driven by the sky high purchase price (and rock bottom cap rate) you're hypothesizing. 

 

I think the facts are clear on the assets, net worth and investments of "ordinary" and "common" Americans.  I don't believe it can be disputed that the tax change you propose would be a tax cut for the wealthier than average, because they are the only ones who have any significant investments.  Everyone reading this has to come to their own conclusion about whether that fact is relevant to them. 

[LR1400]

 

The significant contributor to the total tax burden is the property tax, not the income tax.

 

Therefore even if you are talking about a $200,000 property, the property tax still amounts to 60%.

 

So like, why are ordinary Americans in a 0% tax bracket actually paying a 60% tax rate (people love real estate because you can kick the tires).  Isn't that a heck of a lot higher of a tax rate than people commonly realize?

 

I still don't understand who are the "ordinary Americans" in the "0% tax bracket actually paying a 60% tax rate."  Median family wealth in the US is about $80,000, including all forms of wealth such as retirement plans and equity in your primary residence.  (http://money.cnn.com/2015/07/27/news/economy/wealth-diverse/).  The "ordinary American" does not own an investment property or anything close to it. 

 

Which is seriously sad considering how rich the US is "on average". This is by far one of the most urgent economic matters for the US. But I guess propagating "the American dream" as something achievable for everyone is more important.

 

The American dream is achievable.

 

People are slanted too far toward materialism and consumerism. It's not the rest of our fault that people would rather buy boats and cars instead of investing their money, nor is it our job to mae it "equal" so the people who decide not to invest can consume more. People in the US have the ability to take responsibility for their own lives.

[ERICOPOLY]

That's a nice screed, but people have been trying to explain that what you call "high" effective tax rates are caused by a very high purchase price relative to revenue, which is causing property taxes (which are a function of market values) to be a very high percentage of income. 

 

I already know what they "have been trying to explain". 

 

I live in the real world and don't rationalize it.  The property tax is high relative to the income generated. 

 

You give reasons and rationalizations and I don't follow you there because I don't seek to rationalize the high taxation of the income. 

 

I seek to recognize that is it there, not to rationalize that it isn't really there.  Because it is in fact there.

 

Why it got that way... how we can sympathize that it got that way... 

 

Hmm.  All valid and interesting.  However, as I said, some assets are taxed really high.  Why?  Many reasons.  However, they are.

 

 

[ERICOPOLY]

what you call "high" effective tax rates are caused by a very high purchase price relative to revenue, which is causing property taxes (which are a function of market values) to be a very high percentage of income. 

 

And you are in fact making the point that the taxes are too high relative to the underlying economic value.  If the housing were priced closer to intrinsic value (you argue the prices are high), then the tax would be more fair.

 

One of the problems with this sort of taxation scheme is that it causes local municipalities distress when asset values collapse.  And it makes them spend unsustainably when they inflate (and later collapse).

 

It drives boom/bust cycles in local tax revenues.

 

It made the economic pain from the housing bust far worse, because it meant a cutback in spending as tax revenues plunged.

 

I don't find it wise to tax the bubble value of an asset.  Causes a tax revenue problem if the air drops out of the market.

 

Rather, if they would just tax the rent only and leave it at that, it would keep the taxation more focused on the intrinsic value of the asset, which seems wholly fair and reasonable.

 

[ERICOPOLY]

To expand more on that, one of the comments in this thread is that interest rates are low and Federal taxes are low.

 

Well Federal taxes are low, but the low interest rates are causing property taxes to be inflated.

 

So the low interest rates are driving up tax rates on some assets.

 

So some taxes are in a bubble -- so fucking shoot me for pointing to the unfairness of that and how it's unhealthy for the system to have tax revenues at bubble highs and prone to a bust when the interest rates reverse.

 

And that reversal of interest rates will bring property tax relief if it collapses housing prices, which frees up tax dollars for higher future Federal income taxes.

 

And one of the worries in this thread is that we won't be able to manage higher Federal taxes.

 

So if I point out that people who otherwise pay little tax are paying a very high property tax, then realize that the tax dollars can be shifted from one place to the other and the shift will be relatively automatic if the high rates drive down asset values.

 

Just think a bit further than the "aw, he wants tax cuts for the rich" bullshit -- this isn't a popularity contest.

[boilermaker75]

 

 

So some taxes are in a bubble --

 

 

My daughter bought a condo in West Hollywood in March of 2012. She got lucky. Probably a once-in-a-lifetime event with the timing buying at the bottom.

 

The condo just above hers just sold for about three times what my daughter paid. These are identical properties but the new owner is paying three times the property tax my daughter is paying.

 

My daughter can't afford to sell and buy anything else because of the increase in property tax she would experience.

 

Edit: Of course she is happy her investment has tripled. I was just pointing out the tax consequence.

[KJP]

what you call "high" effective tax rates are caused by a very high purchase price relative to revenue, which is causing property taxes (which are a function of market values) to be a very high percentage of income. 

 

And you are in fact making the point that the taxes are too high relative to the underlying economic value.  If the housing were priced closer to intrinsic value (you argue the prices are high), then the tax would be more fair.

 

One of the problems with this sort of taxation scheme is that it causes local municipalities distress when asset values collapse.  And it makes them spend unsustainably when they inflate (and later collapse).

 

It drives boom/bust cycles in local tax revenues.

 

It made the economic pain from the housing bust far worse, because it meant a cutback in spending as tax revenues plunged.

 

I don't find it wise to tax the bubble value of an asset.  Causes a tax revenue problem if the air drops out of the market.

 

Rather, if they would just tax the rent only and leave it at that, it would keep the taxation more focused on the intrinsic value of the asset, which seems wholly fair and reasonable.

 

What does "tax the rent only" mean for people who live in their houses, rather than rent them? 

[KJP]

 

So some taxes are in a bubble -- so fucking shoot me for pointing to the unfairness of that and how it's unhealthy for the system to have tax revenues at bubble highs and prone to a bust when the interest rates reverse.

 

...

 

So if I point out that people who otherwise pay little tax are paying a very high property tax, then realize that the tax dollars can be shifted from one place to the other and the shift will be relatively automatic if the high rates drive down asset values.

 

Just think a bit further than the "aw, he wants tax cuts for the rich" bullshit -- this isn't a popularity contest.

 

You chose to buy a million dollar house (perhaps buying into a bubble) knowing what the property taxes were, and now you complain that you aren't making enough money and that the tax is "unfair"?  That's rich (pun intended).

 

Also, who again are the "people who otherwise pay little tax are paying a very high property tax"?  Who exactly are the penniless who have million dollar houses?

 

You've already been bailed out by rock bottom interest rates; there's nothing fair or reasonable about millionaires being given another tax cut (funding by cuts to government services for the poor most likely) to bail them out of bad property investments.   

[adesigar]

That's a nice screed, but people have been trying to explain that what you call "high" effective tax rates are caused by a very high purchase price relative to revenue, which is causing property taxes (which are a function of market values) to be a very high percentage of income. 

 

I already know what they "have been trying to explain". 

 

Do you really?

 

Firstly property taxes vary by state from like 0.5% to 2.3%.

 

Secondly in my neighborhood (in south California) homes are selling for 500,000 and they rent for 3000/mo. If someone choses to be dumb and buy a Million dollar property with 40k in rent per year that's the problem.

 

Finally please don't turn future threads into whines about taxes like you have a tendency to do.

[ZenaidaMacroura]

Total neophyte here but there are people who comment on Asian markets and say that the lack of a burdensome property tax is the reason why Asian Real estate is in a bubble (you just have to stretch for the initial purchase/your family just has to give it to you -there's no upkeep/nothing compelling you to divest a property that is unused).

 

Thoughts @ eric?

 

 

[DTEJD1997]

Hey guys:

 

I'm based in Michigan now.  I sometimes go into and deal with Detroit.  Detroit used to have/still has to some degree, a HUGE problem with property tax.

 

Property tax may assess a house a $50k value....that sold for $28k.  So the assessed value of the property is WAY too high.  Now you can go in and challenge it, and you MIGHT be successful...but you are NOT going to get the assessed value reduced by half.

 

A couple of years ago, when I was looking at property, you could find properties that had 3x or 4x higher tax value than market value.

 

So, if there are problems with the economy as a whole, OR, a local area hits trouble, this is a way for a government to get more tax money.  Simply have the assessed value be MUCH higher than market value.

 

In this area, property taxes can be a HUGE deal...

[ERICOPOLY]

Do you really?

 

Yes, really.

 

Firstly property taxes vary by state from like 0.5% to 2.3%.

 

Yes I know.

 

Secondly in my neighborhood (in south California) homes are selling for 500,000 and they rent for 3000/mo. If someone choses to be dumb and buy a Million dollar property with 40k in rent per year that's the problem.

 

That's such a mature viewpoint.  If the taxes don't make sense relative to the particular asset, then the person is just plain stupid to have this asset.  You have now reduced entire communities to "stupid" without having met these people.

 

 

Finally please don't turn future threads into whines about taxes like you have a tendency to do.

 

Please don't be a dick as you are demonstrating yourself to do.

[ERICOPOLY]

You chose to buy a million dollar house (perhaps buying into a bubble) knowing what the property taxes were, and now you complain that you aren't making enough money and that the tax is "unfair"? 

 

I do not own a 1m house rented at 4% with a 4% mortgage and 50% leverage.  It was a conjured hypothetical example that represents the LOW END of the market in Santa Barbara (where I don't even live).  These people are not rich people, they are just scraping by.  I moved out of the area a few months ago.  My tree guy (the guy who was cutting trees for me) told me this year that he bought a property in Montana and is leaving the "rat race".  He's had a rental in Carpenteria worth about $1m and it had so much leverage on it that they had to put money into it every month.  Absent the taxes, it would have been possible to keep it. 

 

So like, put your biases aside.  Having already lived in Santa Barbara and met the people in these $1m homes, I know that they aren't rich by any stretch of the imagination.  Most of them have borrowed money for the homes and own very little.  They have a couple of kids, both work, and the whole thing would collapse on top of them if they stopped working (people who would be toast in just a few months if they stopped working are certainly not rich).

 

So stop being just another moron who believes that everyone who bought a million dollar home is rich.  You know better.