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Re:singling out wealth

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  • Roy Langston
    ... It would not have a zero effect. It s just hard to say what the effect would be. Real estate value is about 2/3 capitalized land rent. Unfortunately,
    Message 1 of 2 , Oct 22, 2008
      Bruno Moser wrote:

      >Here is a challenge. Had a tough meeting with my friend the governor.
      >Somehow they got stuck in the woods of laws because apparently the real
      >estate tax is just a subsidiary tax (1.5 per mill) of the more general
      >wealth tax (some percentage point), where it is also taxed like everything
      >else. So, his guys argue that in order to tax real estate more they would
      >have to, in all fairness, lower the general wealth tax and thus would >have a zero effect.

      It would not have a zero effect. It's just hard to say what the effect would be. Real estate value is about 2/3 capitalized land rent. Unfortunately, without knowing where the bulk of the wealth tax falls, it is impossible to say if the other wealth it taxes is less or more than 2/3 capitalized rent (of course, very little will be _land_ rent).

      >I remember your Quantum-Leap- Theorem. *Is there an argument that taxing
      >real estate as a class of capital is more efficient than taxing it as
      >capital among capital?* And could its benefits outweigh losses that incure
      >to the state because it gets a share of the capital wealth tax but none of
      >the (minuscule) real estate tax, this one is to the benefit of the locals
      >only.

      Well, that sounds fair, as land rent is created mainly by the local community.

      >Increasing it should certainly assist municipalites to lower their
      >wage taxes.

      A consummation devoutly to be wished.

      >Could this efficiency gain offset "losses" in the state wealth
      >tax by say increased commerce, labor, capital, and land use.

      Hard to say, as explained above, without knowing the complete tax structure. Because so much asset value is actually capitalized rent while real estate value is definitely about 1/3 physical capital, wealth taxes can be about as fair and efficient as real estate taxes.

      But one benefit of shifting from wealth to real estate taxes is that you can't evade the latter by holding wealth offshore; another might be that foreign real estate owners would pay for the value the community is giving them (making this a big issue might start people thinking, "Hey, wait a minute, if we are giving foreign landowners that value for nothing, aren't we also giving it to domestic ones?").

      Overall, I'd say shifting as much as possible of the wealth tax to real estate would yield definite benefits. Anything that gets people thinking about funding public expenditures by recovering publicly created value rather than stealing privately created value has to be a plus. As this list shows, it is easier to understand how landowning is an unjust privilege than how intellectual property and bank money creation are unjust privileges.

      -- Roy Langston



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