> Mark Anderson wrote:
> Dan, you can be taxed out of your house just as easily by income taxes or
> sales taxes, or indirect business taxes, as by property taxes. Property
> may be more obvious than the other taxes (especially sales tax and
> taxes), but the other ones come out of the pocket just the same. I say
> better the obvious taxes than those that drain you without you realizing
I agree here. Hidden taxes are contemptable, but while my theoretical wealth
may increase with rising property values, it isn't liquid. I can't spend it
to pay the taxes. It's my home, not a bank account. My property tax bill has
doubled in three years. Property tax is a housing cost. I pay it through
escrow. It's built into my monthly house payment. I saw my payment go down
when I refied, and I saw it go up when taxes increased. Should I have to
sell my house to pay the taxes on it?
Besides, property tax isn't truly a tax on wealth. In my case, it's a tax on
potential wealth, if that. I pay property tax on the full value of the
house. I only have like 10 to 15 thousand in equity, but pay taxes on
> There may be plenty of people like you who have bought more house than
> can afford, but I still think that housing wealth is a better proxy for
> overall wealth than any other measure we've got. Under the more favored
> income tax, those people that earn money pay a lot more tax than those
> don't earn anything but live off their previously acquired wealth. Your
> theory that you'll pay off more wealth than you've earned is impossible
> unless you've received a bunch of your wealth through gifts. It breaks
> laws of physics to send out more of anything than you've received.
First, I didn't buy more house than I could afford. I could aford the
payments, insurance, taxes, utilities, etc. Then, our good and fair
government changed the price. Alot. Luckily, I had refinanced my house to
save a few bucks, so I can afford the increases in property tax, but it's
costing me three more years of house payments for a short term financial
gain. I can't keep doing that (not sustainable, you see) if taxes continue
to rise at the astronomical rates they now are.
Second, just because it's physically impossible to pay more than you take in
doesn't mean it won't be required of you by an irresponsible government. In
a previous post, I demonstrated how a combination of wealth and income taxes
could reduce 12.5 million dollars to a negative number in just one year.
That's the point I was trying to make. It is near to impossible, but our
government is asking (nay, demanding) it of us, and some would push our tax
burden beyond "near impossible" into just plain impossible. As I said before
continued tax increases aren't sustainable. The resources of working
tax-payers aren't inexhaustable.
Look at this simple situation. Say I retire in 30 years. My house will
hopefully be paid off. it will probably be worth around a million dollars at
that time, at the rate things are going with inflation, and crazy property
value increases. Say I manage to save a million dollars (somehow) to live
off for my retirement (I have no expectation that I will ever see one penny
back from my social security so I won't complicate matters with that). My
income is stopped. My taxes have not. Say wealth tax is 10% annually, and
the cost of living is $33,000 a year. Year one: $1,000,000 cash, $2,000,000
total worth. Wealth tax = $200,000. Living expenses = $33,000. Cash left =
Year two (inflation 2%): Wealth Tax =$176,700 Living expenses = $33,660 Cash
left: $556,640. Year three: Wealth Tax = $155,664. Living Expenses =$34,333.
Cash left: $366,643. Year four: Wealth Tax =$136,664. Living Expenses
=$35,019. Cash left: $264,998. Year five: Wealth Tax = $126,499. Living
expenses =$35,719. Cash left: $102,780. Year six: Wealth tax = $110,278.
Well, retirement was nice. Now that I'm seventy, I'd better go find a job to
pay my "wealth" tax, and buy dog-food (but I don't own a dog, if you know
what I mean), or sell my house, so I can live for another 5 years, if I'm
lucky off that revenue, and pay rent at some apartment I hate. I wonder if
Wal-Mart pays it's greeters $150,000 a year. They might by then! If only we
can get the minimum wage up to $72.00 an hour, I might manage my last years
with a full time job.
Finally, what constitutes "wealth?" My Grandmother gave me some heirlooms
which used to belong to my dear departed Grandfather. They are probably
worth a fair amount of money, but I'd never dream of selling them. Should I
pay an annual tax on the inherent value of the items for the privlege of
continuing to own them? Should I be forced to sell them to cover the tax