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Comment by r00fus | Hacker News Reader

And... this is what happens when you don't tax foreign cash infusions.

For those who think we should get rid of taxes on cash repatriations - this is likely an outcome.

This is what happens when Russian Oligarchs make undisclosed income and need to was their rubles into Euros and Dollars.

Foreign capital investment is great, so beneficial to the economy.

The problem is with the housing market. Perverse subsidies, out of date zoning laws, and a lot of nimby based lobbying. Fix these things and I doubt anyone, including foreign investors, would be parking capital in property and just leaving it unused.

And that's why you use a tool like taxation to modify behavior to encourage positive outcomes.

Taxation shouldn't be used as a tool to modify behavior. That's actually the exact opposite of good tax policy. Taxes should be broad based, with few exemptions, to raise the needed revenue while minimizing side effects.

The distortions in housing markets are often partially caused by tax policy, and those areas should be addressed (tax deductions for mortgage interest for example). Other than that, it's best to actually deal with the root problem: outdated zoning laws.

Taxation is a great tool for changing behaviour in many places.

That's a very parochial view. Foreign capital investment is just a form of economic colonialism, unless properly managed to mitigate the risks it introduces.

Building more houses is great. Buying the same houses for increasingly higher prices is not that great.

> And... this is what happens when you don't tax foreign cash infusions.

Why would you do that?! It's basically free cash flowing into the local economy, it would be absurd to "tax it". Am I missing something?

Plenty that you're missing:

1. At some point it's foreign money buying from other foreign owners who don't live there, and who use the proceeds to buy an even more costly money box/laundery

2. It reduces rental supply and prices out locals who then have to spend money on commuter expenses

3. Even if the above weren't true it's debatable how much of the purchase price actually flows into the local economy

They are purchasing land. Increases in land value tend be due to public investment. Much of the value created is captured by someone overseas (i.e. leaves the local economy).

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