Taxing the rich is good for us whatever happens, mostly because it will collapse the sky-high cost of property (and consequently rents).
Your market analysis is incomplete. For example, http://www.theguardian.com/business/2014/feb/01/rich-oversea... says "only 27% of new homes in central London went to UK buyers, while more than half were sold to residents of Singapore, Hong Kong, China, Malaysia and Russia." These are not people who live there, but want to invest in the London real estate market. By taking housing out of the market, they also increase the market rates through artificial scarcity.
> if not price then what
Different taxation for residents vs. non-residents. Rich people tend to have large places, so taxation based on square footage per resident. Set up building requirements that give preference to low-cost housing. There are many ways to tweak the economic landscape.
> If you set up your lifestyle ..
You make it sound so easy. Why not just set up your life to earn another $100K/year?
> you must be doing something fantastically productive
Why does that follow? If I inherited my $1 billion, I'm certainly able to afford a quaint $10 million penthouse in San Francisco even if just leave the money in an index fund. If I am a dictator who funneled money out of the country into my personal foreign bank account, leaving the country in poverty, would you say I was productive? Or if someone discovers oil on my land, and I exchange the drilling rights in exchange for 1% of the extracted revenue, making me rich enough to, say, move to Beverley Hills, was I really doing something fantastically productive?
I agree that allowing low cost, high density housing would be great in many cities. But the people living there don't generally agree, and they have more power. If we're stuck with a finite supply of property, then market prices are a reasonable way of allocating that to people.
As I mentioned, without high rents, how else would houses be allocated to residents? More people will want them than can get them. Would you prefer a waiting list? Or only allow ownership transfer by inheritance - excluding newcomers entirely?
I am personally not a fan of paying 40% of my income as taxes to Russian oligarchs.
When property taxes are lower than the value of the land (and in London they are virtually nil), you effectively have a privatized land tax.
The proceeds of those taxes tend to fund kleptocratic billionaires.
To be fair, Jed did discover the oil himself, so he could be said to have contributed productively to the economy. We'd have to subtract the contribution the missed rabbit would have made though.
So your theory is that people have gotten more and more desperate over the last 35 years to live near each other?
What?
>Property that people want is a scarce resource
Is exactly why the ultra wealthy have been buying it all with their tax free profits and using it as a savings account. Guess what happens to prices when that 'demand' increases?
People buy houses as an investment which can very quickly raise the price while rents depend on housing demand which depends on different factors.
I did this analysis for where I live (Pune, India) where the house prices are ridiculous and, after adjusting for inflation, found that house prices have doubled in 10 years while rents have stayed flat.
This 'demand' for property raises the price of it.
Since rents track property prices, rents go up too.
As soon as the ultra wealthy have a fat tax bill due all that property comes on the market again. Together. Crash time. Sane prices once again.