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Comment by lotsofpulp | Hacker News Reader

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Edit: The report does not include tolls, but I would incorporate tolls into taxes also, especially for lower income groups. One can easily spend $1k to $2k per year in tolls in the Northeast, and I know Texas is quite heavily tolled in some areas as well.

Edit 2: The ITEP report also does not incorporate the effects of property tax laws in CA which give people who purchased land earlier and their descendants a much lower property tax liability (proportionally) than people who purchase land later.

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>PROPERTY TAXES, INCLUDING BOTH TAXES ON INDIVIDUALS AND BUSINESS TAXES, ARE USUALLY SOMEWHAT REGRESSIVE. On average, poor homeowners and renters pay more of their incomes in property taxes than do any other income group

They are very wrong about property taxes, which calls their entire analysis into question. Renters aren't the ones paying property tax, especially for expensive areas like SF. The savings property taxes from prop 13 absolutely does not get passed to the renters. If anything, it does the opposite because it disincentivises home sales.

Aren't rental prices influenced in part by property taxes. Surely the owner would want rent to cover both their mortgage and their tax.

In general yes, but I think Prop 13 complicates matters, because it's not just a lower tax rate, but rather applies unequally to different properties based on their transaction history. (e.g. a property built or sold recently gets high taxes, while one that's been unchanged remains low)

So we can divide the rental market into high-tax and low-tax properties. The landlords of high-tax properties must incorporate the tax into the rent. Meanwhile, the landlords of low-tax properties can set their rents just as high, since they compete in the same market, and pocket the tax difference.

In contrast, a flat property tax reduction would increase the profit margins of all landlords equally, and any one of them could start undercutting the others and be undercut in return, which over time in an efficient market will tend to lower prices back to a similar margin before the tax reduction.

It's primarily an indirect effect. Landlords won't buy/build new houses if the expenses would be too high relative to the rent the market is willing to pay. That lowers the supply and raises the rents in the long term. However, if you have an existing property, there are no guarantees that you can find a tenant who is willing to pay enough to cover your interest, taxes, and other expenses.

There's good empirical evidence that the portion of property taxes that falls on the unimproved value of the land (ie, the location's value minus the value of the building), is not passed on to the renter:

http://gameofrent.com/content/can-lvt-be-passed-on-to-tenant...

Renters pay property tax indirectly because most landlords select rents high enough to cover their mortgage, insurance, maintenance, and property tax.

Not if the tax is specifically on the unimproved value of land (i.e. property value minus buildings or other improvements). Landlords are already charging as much in rent as they can get away with; raising rent even further would increase vacancies - and a land value tax would directly penalize keeping units vacant.

Sure if we change the way that property tax is assessed then it’ll no longer be true that renters are indirectly paying property tax. But that’s not relevant to the thread topic.

It's very relevant to the thread topic. If the goal is to minimize the regressiveness of our tax system, then a land value tax is very hard to beat. The only one better from a wealth redistribution standpoint is maybe a wealth tax, but unlike other forms of wealth you can't exactly move land to an offshore account.

Some percentage of property taxes (and the savings from lower property taxes) will be passed through to the renter in the form of higher (lower) rent. That percentage will be between zero and one. What is your justification for asserting that percentage is exactly zero?

I'd argue that this percentage is near-zero in high-demand places like NYC and the bay area. Rent is simply set at what the market will bear. For example, during the height of the pandemic, landlords had no choice, but to significantly lower their rents in NYC even if they had to do so at a loss.

> REGRESSIVE FEATURES: Imposes a gross receipts tax in lieu of a corporate profits tax

Similarly, how is a corporate profit tax less regressive than a sales tax? Won't the price be passed on to consumers all the same?

Sales taxes usually are not applied on some items like food. Corporate taxes are usually on all corporations regardless of their industry (excluding charities).

Only unprepared foods are exempt from sales tax when there are exemptions.

Good point about the tolls.

So in Northern California, if you cross the Bay Bridge or the Golden Gate Bridge as part of your daily commute—assuming a 5 day/week workweek in the office for historical purposes but as a caveat, this may be inaccurate in the present—you can easily spend between $1500 and $2K/year in bridge tolls.

BART is also an option, but is in the same ballpark at about $1500-1700 depending on how many days of the year you work and that’s assuming a West Oakland to Embarcadero commute so it only goes up from there if you live and work further from those stations. Maybe you end up not having to pay for parking on the other side though if you live near the station, although some people end up having to pay for parking at a BART garage.

Transportation is expensive.

Yes but you don't pay for gas/maintenance/depreciation/accident risk you take BART. At the IRS rate that works out to about $5/day just for the length of the Bay Bridge, not including any extra driving on either side. Driving is expensive.

Well yeah, like I said:

> Transportation is expensive.

I originally thought the cause of this would be a principle akin to how the U.S. spends more per capita on healthcare compared to countries with socialized systems, but looks like the study says the reason is regressive tax systems focused on consumption (sales and excise) taxes.

So does it just average property taxes? That would mean it underestimates the tax burden of a new homeowner in CA relative to TX, but after 8 or 10 or 15 years, overstates the property tax burden of a CA homeowner relative to TX.

Prop 13 would probably keep the CA property tax burden understated.

Yes, it's easy to spend $10 a day on tolls just driving around Houston unless you're intentional about avoiding them.

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