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Comment by dpc_pw | Hacker News Reader

"The program would be paid for with a state value-added tax of 10 percent on goods and services, with exemptions for (...)"

VAT is such a PITA (I'm originally European, so I know a thing or two about it). Tons of additional paperwork, plenty of room for fraud and cheating (like https://en.wikipedia.org/wiki/Missing_trader_fraud ).

Just be honest about it, increase existing property taxes, which people already pay anyway and are naturally progressive and avoid creating complications.

Also, I would start with lower amounts, and see what actually happens.

And ... Why wouldn't every capable homeless person from all over US move to California if they would be paid to do it (and I can't imagine more forgiving weather for homelessness, anyway)?

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How about repealing Prop 13 and using the proceeds to fund UBI? The landlords essentially get their money back through increased rents.

>And ... Why wouldn't every capable homeless person from all over US move to California if they would be paid to do it (and I can't imagine more forgiving weather for homelessness, anyway)?

As someone from a non-CA city overrun with homeless, what's the problem here?

Property tax would just be passed on to the renters wouldnt it?

Renters pay market rate for rent. If the landlords can pass on 100% of the property tax, then the supply is way out of sync with the demand.

> “Supply is way out of sync with the demand”

Welcome to California.

What? How? If the renter is paying less than the property tax, then the owner is losing money just on the property alone and not accounting for the likely mortgage payments. Nobody would ever rent out a place if that was the case.

First of all, no one said renters are paying less than property tax? But even if they were, it's still the same logic.

That's just the law of supply and demand. Renters pay the market rate. If an owner can't afford to rent at that market rate, then as you noted, they go out of the renting business. You'll find if you run the numbers on properties in SF, landlords are banking on property appreciation. The market rents don't pay the ownership costs, usually by a huge margin.

> First of all, no one said renters are paying less than property tax?

You just said "If the landlords can pass on 100% of the property tax, then the supply is way out of sync with the demand". For growing areas, why would any investor develop any land to increase housing supply to rent out if the property tax alone would cause them to lose money based on the money they could make renting out places?

The economic term is "deadweight loss" and the most ideal scenario (outside of not having it) is to have both the supply and demand side share the deadweight loss equally. However, if either curve is out of sync with the other, then the portion of the deadweight loss paid shifts. So if a landlord can pass on 100% of the property tax, then demand is dramatically and catastrophically way outpacing supply. This is a bad situation to have if you want an efficient market where buyers have lots of choices and options.

Edit: I see where you might be confused - I'm talking about passing on 100% of the property tax. In an ideal scenario, landlords would have to cut into their profits to pay for the property tax that tenants wouldn't. But in California, we obviously don't want a market where buyers have lots of options, so apparently everyone is ok with landlords passing along 100% of the property tax cost to the tenants.

Maybe not all of it everywhere, but yes. Any tax is always passed on to the "end users" to certain extent (-/+ elasticity and competitiveness) - something that a lot of people don't understand. If you tax 50% income of people who make a lot of money (like CEOs), with time they just demand about 2x more than before to compensate and the tax is being paid by the consumer anyway. If you tax all surgeons, regular people will pay in insurance, and so on.

They already demand what they think they can get. Taxing CEOs at 50% doesn't magically double what their labour is worth.

In the American model, yes.

I live in Tel Aviv, where property tax is paid by occupants, not by owners. On the upside, this allows the government to give tax breaks to protected classes (e.g. the elderly, so that they're not kicked out of the apartment they've lived in and owned for decades just because property tax became unaffordable) directly. On the other hand, the carrying cost for owning real estate in a highly desirable market that you rent out is practically zero, so most apartments are owned by people who inherited them and are uninterested in selling, because a) urban renewal plans will eventually give owners a big financial windfall when their older buildings are chosen to be replaced with subsidized new construction, and the replacement apartment they will receive in the future is worth far more, b) people have children, and there is a huge value to being able to provide your children with housing in a desirable market when they get older, so owners rent their properties out in the interim.

Ironically, property taxes paid by renters creates a landed class.

That 10%, plus more. Owners will be eager to increase profits, not just tread water. This could be used as an excuse to hike rates far beyond the 'break even' 10%.

Agreed, but sadly, I would expect a meaningful property tax increase to met with impenetrable resistance in CA. Property owners have a very large influence in the state.

I realize that, but it's still stupid. It's a tax. We'll pay it one way or another. I am planing to buy a house in CA, and it doesn't really matter to me that much if it's taken from me at the register, in the property tax or from my salary. So if you have take our money, just don't waste our time with VAT paperwork.

The coming decade is truly going to be a shitshow. Redistribution pressions will grow as wealth inequality increases, and pension crisis is getting closer and closer.

There are people who own property in California but don't live in California (and not even in the US sometimes).

They wouldn't pay California VAT because they need not buy anything there.

The people most affected by a California VAT would be California residents who can't afford to shop elsewhere... ie. the poor.

Fortunately some necessities like food seem to be excluded from the VAT (at least in this iteration of the bill), but I'm still concerned that the poor will be unduly burdened by it, and not even get to benefit because they're probably already on Medi-Cal (California's Medicaid program) so they won't be eligible for the UBI unless they give up Medi-Cal.

Supposedly, unless you pay more than 10k in VAT per year, you would come out ahead

I'm against Prop 13 more than anyone I know, but property tax (at least the way it is normally set up) is a regressive form of taxation. It's a flat rate regardless of circumstances, which is pretty much the definition of a regressive tax.

Shouldn't some things not be adjusted for "circumstances"? Adjusting everything to individual ability to pay is tantamount to paying everyone the same amount. Why shouldn't you be able to pay for a more valuable parcel of land only if you earn more?

> Shouldn't some things not be adjusted for "circumstances"?

Yes, lots of things. But taxes aren't one of them.

Why not property taxes in particular? Disincentivising land ownership would promote growth and lead more people to population centers, which seems like one of the only effective ways to solve many of the world's problems, from climate change to lack of opportunity. Not snark, I'm really curious as to your view.

I'm not really advocating one way or the other, just pointing out that property taxes are usually constructed such that the owner pays a flat rate based on an assessed value. There is no tiered increases in rates as the value goes up, so it's pretty much a classic example of a regressive tax.

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