ERICOPOLY

I bet if you thought I was a poor disabled elderly person and I was here saying I was losing my house because I couldn't pay the property tax... then you'd just say "what a rich old whiner!".

The most incredibly bizarre part of this discussion is that... property taxes are regressive!!!! Yet you are claiming that it's a rich person's whine. Usually people rebuff the idea of a national sales tax because it is regressive, they say it unfairly targets the poor. Well... well... well.... Thinking at it's finest you guys. How come you always have to dismiss arguments and points on the very mature grounds that rich people are just whiners?

Check out this house for $1.3m. http://www.realtor.com/realestateandhomes-detail/4457-Nueces-Dr_Santa-Barbara_CA_93110_M22077-65755 Must be a rich bastard that owns it and we should take all his money. The fucker doesn't deserve to have it while the rest of us are suffering in much nicer and bigger homes pretty much anywhere else in the country that can be had for like 1/3 the price.

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.

Yes, really. Yes I know. 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. Please don't be a dick as you are demonstrating yourself to do.

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.

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.

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.

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.

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.

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?

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!

Oh yeah, a property tax isn't a tax, it is a fixed expense. Well then, perhaps Ted Cruz's camp is right -- we can pretty much eliminate all the taxes. We can levy a 1% property tax on all financial assets. It won't even be a tax increase! It will just be a fixed expense. Lovely.

"Ordinary Americans" have barely any investments; they certainly don't buy $1,000,000 investment properties at 4% cap rates. Your position seems to be that tax rates on investment assets, i.e., the tax rates that rich people pay, should be cut to protect the rich from current low yields, even though the rich have already benefited from the rise in asset prices that occurred as yields plummeted. What would be the policy justification for cutting taxes as you suggest? And who would pay more to make up for the lower taxes that asset owners would pay? 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?

So my general point is that the Federal rate isn't necessarily indicative of your actual tax rate because it is applied improperly sometimes. Like if your Federal rate were to be raised to 50%, then in my example you would be left with zero net gain in wealth because you'd give up 100% of your real income. The "improper" application is that the taxes need to be applied to your real income. Things aren't what they seem. Depending on your asset. Thus, you can't generalize that tax rates are low. It depends on the type of income. The low interest rates are raising the real tax rate on these bonds. Anyways, trying to stimulate some thinking because the tax rate alone doesn't tell the story given that it isn't applied to real income. The fix is painfully easy to apply -- just allow us to write-off the decline of real value in the bond principle during the holding period (the CPI is published regularly).

Was actually pointing out that taxes are high for some assets. You can't see how high they are by looking at only the Federal tax level. Another example would be bond income. You get a 2% yield and with 1% inflation. To meet you eye to eye, I'll only discuss the Federal tax this time. It's pretty close to 40% for the top tax bracket. Thant's an 80% tax on your real bond income. 80% is extremely fucking high! I think you get to roughly 100% tax rate if you include the California top tax rate -- may even be over 100%.

Tax rates vary. I was thinking about what the tax rate would be on one of the most common types of investments that ordinary Americans make. Housing. Suppose you rent out a single family home for a 4% gross rental yield in California. That's not all that terribly strange in California. Well, you might get $40,000 in rent for a $1,000,000 home near the coast. Further, let's say you have a 4% loan with a $500,000 mortgage. Okay, now assuming there are no other expenses (fixes to appliances, etc...) then you have a $20,000 mortgage interest expense. So you have $20,000 in profit before taxes. Okay, your first tax is going to be the roughly $12,000 you'll need to pay called a "property tax". So the property tax eliminates 60% of your income. So your tax rate begins at 60%. Now you then pay state Income tax and Federal income tax. Combined, those taxes can easily be 40%. So that leaves you with 24% that you can keep for yourself. You paid out 76% of your pre-tax income in taxes! And that's a relatively common type of investment.

Ummmmm. Okaaaaay. Well, I think he is joking, parodying Trump because Trump is into these conspiracy theories (the Chinese climate change hoax, for example). I think that's why there's the part about Bernanke being a covert CIA operative behind Brexit.

Buffett has figured out a way to keep 99% of his wealth free and clear of a tax return. Even if Buffett were inclined to cheat, there just isn't much temptation in trying to maximize the returns of the final 1% of his assets. Just imagine if you were only taxed on 1% of your net worth each year -- would you really give a shit about any way to reduce your tax bill further? Buffett's tax bill is so inconsequential that... of all the billionaires... he's probably got the least to lose by proposing higher tax rates -- and I don't know if it's a coincidence or not, but that's exactly what he does. Maybe he's completely clear of conflict of interest and so it makes it easier for him. Or maybe it has nothing to do with the matter. Don't know.

I am not sure if you know the meaning of troll - it literally means ugly creature. I hope we can manage better language than that in this forum. And when did it become ugly to quote Buffett articles in this forum? Trolling is putting the bait out out on the hook and dragging it behind the boat until a fish bites. Then it's the sport of fighting the fish. Trolling is a form of fishing, it's done for amusement/entertainment. A troll is somebody who is putting out an argument and waiting for somebody to take them up on it, then enjoying the struggle of the argument/debate.

I've listened to people explain their religion and why they believe in it... I don't write off everything else they say simply because I don't find their religious beliefs to be grounded in reason and logic. I approach political beliefs the same way. I wonder if the brain rewards people to belong to political social groups the same way it rewards people to belong to religious social groups, and if the group aspect of the activity alters their course of thought. I might be tempted to explore "social proof" as one of those potential influences. Dunno. But I think, like religion, I'll still give Trump supporters the time of day on other topics.

It's not terrorism unless it is a deliberate targeting of civilians for political or military gain. So you could correctly label the firebombing of Tokyo a terrorist strike, or the Hiroshiima and Nagasaki attacks... or bombing of London, or bombing of Dresden, etc... But this one you cited looks like the civilians were not the target.

I doubt a street dealer could offer whiskey cheaper than Costco. The problem with Amsterdam as an example is likely that you can't buy weed by the pound from Costco in Amsterdam. They need to fully legalize it before it becomes a viable contemporary example. Bars are always expensive. I bet the coffee you buy in that same coffee shop is significantly more expensive than the coffee you can buy in bulk from the Amsterdam grocery store.

The cost of an ounce of whiskey in a bar is significantly higher than what one would pay at Costco.

Regarding the homicides of the police officers and young black men (mentioned in that link you posted)... Probably what's driving that is the legal code that we have, more than the guns. The legal code says that you can bring a contract dispute to a courtroom if the underlying activity is legal. So in other words, if you are a black market businessman the courts will not help you resolve a contract dispute. So you rely on enforcing the contract yourself. The problem is that we have a huge underground economy -- therefore, a lot of "do it yourself" contract enforcement. Legalizing the underground activity would probably resolve the violence -- the businessmen could instead properly bring their disputes into a court of law. I presume you are speaking of illegal drugs. If marijuana, cocaine, heroine, speed, etc. were legalized, 98% of the dealers today would be out of business in six months. If you could get a prescription for cocaine filled at most pharmacies for $25 who is going to buy it from a "do it yourself" dealer? The power of the Mexican cartels would collapse almost instantly. The Taliban would be hurt also. Certain communities in America would have to adjust, as one of their prime economic engines would be destroyed... It certainly would be a different world! A society in which ALL contract disputes could be resolved in a court of law should tend to be a relatively less violent society. It's sort of like a "Well... Duh" statement. Reducing vigilante violence was likely the original motivation of the contract law.