Politics: The Tax Code

[SAM_Hard8 50]

Fair Tax

[hblask 1]

I'm not sure if it's a con either. I'm not assuming a static world. People wouldn't all move to the same part of the country. Eveyone would spread out, constantly moving toward land of lesser and lesser value.I'm not sure I fully understand the system. Is there any type of income or sales tax?If not, and if all of one's taxes come from the value of dirt that one owns, then to motivation to own cheap land would be HUGE. I guess it could encourage less land usage, which is probably a good thing. It would also eliminate growth in cities, which I think is a bad thing since cities are good for the economy... I think. I'm sure they're good for something.

Hmmm, interesting. Yeah, the idea is it would replace ALL other taxes.Yeah, this is an interesting idea that people would move to smaller and smaller parcels of land. Perhaps what this is doing is finally showing people the true cost of the land they take up, forcing them to conserve. But if it reduces the demand for land, then prices fall, giving people incentive to own more land, increasing demand..... so what is the equilibrium point? Is it higher or lower than before? Since income taxes would be gone, it would mean more people would have more disposable income, to spend on what? The new taxes on their land? Again, these are all transition issues. What kind of economic turmoil does this wreak until everyone adjusts their economic activities to this new plan? I think once the adjustment is done, people would wonder how we put up with income taxes and it's intrusive, loophole-ridden, time-consuming maze of special interests. This would be one simple bill: land value X tax rate.

[hblask 1]

It's an interesting idea, though. I appreciate it for its simplicity (which I guess is the whole point). Another problem I guess is the fact that the numbers wouldn't work our right. A rich person may make 100 times as much as even an average person, but this doesn't mean that they own 100 times the amount of value in land. So, they wouldn't necessarily be paying as much taxes. And under the new system, they would be encouraged to own less and less land, so the ratio of land owned by rich to land owned by the average person would go down. However, the average person can't really afford to own less land. That is, there's more or less a "base" amount of land that one needs to own to be comfortable (ie enough to physically put a house on). Thus, I believe that the system would raise taxes on the average person, which is bad.Maybe it would make up for this with the lack of paperwork and jobs necessary to figure out tax stuff.

I've never seen a study or anything, but my guess is that the vast majority of land value in the US is concentrated in a few areas, such as the downtown areas of major cities. Does this make corporations move out to rural areas? Wouldn't this just make the land *there* go up in value? And with high corporate tax rates, is there a savings?Since this plan has never really been publicly proposed, I've never seen an analysis of where taxes would be paid, but my gut is that the rich own most of the most valuable land. A few years ago I had a house worth about $130K and the land was about $90K. An equivalent parcel of commercial real estate nearby was worth over half a million. What's curious about this is that the only difference between the two is an arbitrary zoning law. Hmmm, another big problem? A power-hungry city council member can zone you into bankruptcy?See, I knew I was coming to the right place, this is a good discussion so far.

[hblask 1]

Fair Tax

I think this is the best plan that is actually politically feasible. The biggest drawback is the potential for it to turn into a European-style Value Added tax. Those suck, and are a seriously economic drag. If that can be avoided, this is a MAJOR improvement over the current plan, and probably provides similar results to this Land Tax idea without the transition costs. I think one of the keys of the Fair Tax plan would be to make sure that the poor end up paying no or little tax, possibly by exempting "necessities". It can't really be income based, because then we are quickly back to the current system where people have to prove their incomes, and the incentive to cheat to make it look low is back, and accounting quickly becomes a shell game.Also, this plan is not without transition costs, too, as many people buy their house knowing that the interest is tax deductible. These people may suddenly find themselves facing financial hardship until the system adjusts.

[David_Nicoson 1]

Since this plan has never really been publicly proposed, I've never seen an analysis of where taxes would be paid, but my gut is that the rich own most of the most valuable land. A few years ago I had a house worth about $130K and the land was about $90K. An equivalent parcel of commercial real estate nearby was worth over half a million. What's curious about this is that the only difference between the two is an arbitrary zoning law. Hmmm, another big problem? A power-hungry city council member can zone you into bankruptcy?

This is already a huge problem with just the current rate of property taxes.

[mtdesmoines 3]

So here is his proposal: replace all taxes with one single tax -- a land tax. Notice: this is NOT a property tax. It is a land tax, levied only on the value of the land itself, not any buildings or improvements.

Yeah, I think the return to the feudalism is long overdue.

[dms26 3]

what about land that has been passed down through generations? Are those people just forced to sell the land that has been in their family for years? I would assume like David said, that farmers would be really affected by this. Even if the land isn't worth much per acre, if they own a thousand acres that were bought 100 years ago for pennies there is no way they could stay in business.There is no way I'd stay in Florida if this were to ever pass.

[hblask 1]

Yeah, I think the return to the feudalism is long overdue.

Under this system, people would continue to own whatever land they currently own, and nobody would be required to fight or declare any oaths of loyalty to govt in order to maintain ownership.

[hblask 1]

what about land that has been passed down through generations? Are those people just forced to sell the land that has been in their family for years? I would assume like David said, that farmers would be really affected by this. Even if the land isn't worth much per acre, if they own a thousand acres that were bought 100 years ago for pennies there is no way they could stay in business.There is no way I'd stay in Florida if this were to ever pass.

We have similar problems under the current system with estate taxes. Are these worse, or just different? I guess one of the questions we would need answered is what the tax rate would be per land value. Current estate taxes are 55%, I believe. Income tax rates are up to 39% federal, and another 8-12% state and local. Presumably, this land tax would be much much lower. On the other hand, this would be payable yearly, compared to estate taxes paid just once. In the end, it seems that the people who are hurt the most are people who have low income but lots of property. Who is that? People with lots of writeoffs, I think? Who has lots of writeoffs? The rich. For example, under this land tax, my taxes would go up dramatically, as I own ten acres on the edge of a suburb, but my income disappeared in investment and depreciation losses.Hey, why am I suggesting this?!!?!? This is a terrible deal for me!

[El Guapo 8]

What if I live in an apartment. I'm not renting, but rather I own an apartment. Does only the person on the first floor have to pay? If I'm in the air, do I also have to pay?Con: If all taxes are based on real estate, then people would simply tend to move toward less expensive places. Cities would slowly vanish and people would drift out toward the countryside. Eventually, the country would become more or less homogeneous (except for the terrible places like Death Valley and such). This would lead to more land being taken up and fewer growing cities.

This is not necisaarily true, because people that own more expensive homes pay higher property tax as it is, and some areas, like Texas have property tax as high as 4%

It's an interesting idea, though. I appreciate it for its simplicity (which I guess is the whole point). Another problem I guess is the fact that the numbers wouldn't work our right. A rich person may make 100 times as much as even an average person, but this doesn't mean that they own 100 times the amount of value in land. So, they wouldn't necessarily be paying as much taxes. And under the new system, they would be encouraged to own less and less land, so the ratio of land owned by rich to land owned by the average person would go down. However, the average person can't really afford to own less land. That is, there's more or less a "base" amount of land that one needs to own to be comfortable (ie enough to physically put a house on). Thus, I believe that the system would raise taxes on the average person, which is bad.Maybe it would make up for this with the lack of paperwork and jobs necessary to figure out tax stuff.

This would definately happen

We have similar problems under the current system with estate taxes. Are these worse, or just different? I guess one of the questions we would need answered is what the tax rate would be per land value. Current estate taxes are 55%, I believe. Income tax rates are up to 39% federal, and another 8-12% state and local. Presumably, this land tax would be much much lower. On the other hand, this would be payable yearly, compared to estate taxes paid just once. In the end, it seems that the people who are hurt the most are people who have low income but lots of property. Who is that? People with lots of writeoffs, I think? Who has lots of writeoffs? The rich. For example, under this land tax, my taxes would go up dramatically, as I own ten acres on the edge of a suburb, but my income disappeared in investment and depreciation losses.Hey, why am I suggesting this?!!?!? This is a terrible deal for me!

In the estate tax their are bypass trusts, you can use life insurance to pay the taxes, there are a lot of moving parts. If a 30 year old inherited his fathers house worth 1,000,000 dollars and it did not have any revenue, he could not foreseably keep it. This would happen all over the country with forced sales driving property value down and forcing the owner to sell for less than the original value.

[whatgreatis 0]

I really like the idea, it would make a lot of things soo much easier. It's a cool thing to think about but there are a lot of flaws in it. I'm sure not smart enough it figure it out though.

[hblask 1]

I really like the idea, it would make a lot of things soo much easier. It's a cool thing to think about but there are a lot of flaws in it. I'm sure not smart enough it figure it out though.

You know, this brief discussion here has brought up more interesting points than the guy who first introduced it to me did in several months.I still think it would be a great idea once we got there. I don't know how we get there from here. The only way I see is to make taxes so low that their effect is negligible on financial decisions. I'd be all in favor of that, but have no hope congress will offer us that possibility, either.