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Comment by fallingknife | Hacker News Reader

Renters do not pay property tax in the US. That liability is entirely on the owner.

Your statement is technically correct. It's also technically correct to say that diners, not restaurant owners, pay sales taxes.

The reality is more nuanced. Introducing a sales tax on restaurant meals affects both diners and restaurant owners: restaurant owners can't pass on the whole increase to diners, and diners cannot afford to go out as much.

Similarly, property tax levels influence landlords' decisions to enter or exit the rental market, impacting housing supply and, consequently, tenant rents. 'Paying' a tax has two distinct meanings:

- Who bears the economic burden after the tax is introduced

- Who is legally responsible for paying the tax

These two concepts are not always aligned.

This is a silly distinction because by that standard you could equally say that my employer pays my rent because they are the source of income which I use to pay it.

Property tax in the US is a liability of the owner. This is in contrast to other systems like the UK where it is a liability of the occupant.

The incidence of taxation is a well-studied concept in economics, with a solid theoretical foundation and empirical evidence backing it.

You dismiss its application as a 'silly distinction' and repeat the fallacy that the incidence of taxation falls on the party who is legally liable.

If you don't believe me, and don't want to read up on 'tax incidence', consider what would happen if sales tax were paid by retailers instead of customers. Would the flow of money change at all? Would any party be worse off or better off?

This is an entirely ridiculous argument. Who actually ‘writes the check’ is actually important in a discussion about who writes the check, despite the fungibility of money. Renters don’t pay the owners property taxes in the US, even if they pay rent. Full stop.

Why this matters is because in some cases, owners can end up ‘under water’ with even rent not covering property taxes in the US.

In other places, that may not be possible.

No, really, it has been studied, taxes affects both supply and demand. It’s one of the first chapters of any microeconomics book.

you might want to actually read my comment. the details matter.

Well, I get charged sales tax when I buy something at a store, itemized on my receipt. But the store writes the check to the state, and I write the check to the store. Did I pay or did the store? And why does it differ from a renter? Are we splitting hairs over itemized vs unitemized receipts?

And what about a retail store in England where the VAT isn’t itemized? Did I pay or did the store?

No landlord in the US itemizes, or even lets you see the property tax they are paying anywhere they can control. You can dig it up if you know where to look though, usually, from public sources. Same with the landlords financing costs.

And it varies between much lower than you would expect, to much higher - and doesn’t generally change the amount they can charge in rent between the two scenarios. Though of course, landlords will go broke eventually if on average rent doesn’t exceed property taxes, finance costs, and other costs they pay on average.

Competitiveness/survival between landlords over time will often hinge on their ability to pick the best options and structure/time this well to minimize their costs while maximizing their returns. A much harder problem than I think anyone who isn’t in that game realizes.

Which is why successful property management and investment strategies vary quite a bit depending on these specific details, like who pays what, when, and under what circumstances.

So all I’m getting from what you’re saying is you don’t actually understand what you’re talking about concretely, and you’re going off a first year economics textbook instead of actual experience.

Am I correct, or not?

Could you answer my question about itemized vs unitemized sales taxes in the US vs UK and whether you think it relevant?

Of course it’s relevant to the business models, specific prices charged, marketing, and general economics.

In a way that means the details matter and you’ll get different end prices, even for the same nominal tax rate, depending on how it is applied.

For instance, when sales taxes are not shown at point of choice (on the shelves) they tend to not impact consumer behavior (US), where when they are (most of Europe), they do.

Which is also why in the US, retailers tend to fight efforts to include sales taxes into on-the-shelf prices. Because they know it will impact sales.

Just like in jurisdictions where renters pay/see property taxes, that impacts their choices, where in places they don’t, it doesn’t. At least in any specific, individual way.

My question was about whether an itemized receipt changes who pays

Not having an itemized receipt certainly changes who people think is paying, and for what, eh? And making decisions when there is no ‘itemized receipt’ matters too, doesn’t it?

That is my point.

I appreciate your nuance, as mixing up economic burden and legal responsibility for taxes is a common fallacy in discussions. But specifically for rents in supply-constrained cities, i would guess that supply is highly inelastic, therefore market rate of rents is already as high as acceptable by renters (i.e. determined by demand curve) and therefore property tax would not affect it much.

Some say that the owners should be permitted to pass that tax bill along to the renter in the form of increased rent. Can't someone think of the poor starving landlords?

Seriously though. Renters pay the property tax, even if they don't get to see the bill.

> Renters do not pay property tax in the US.

There's a simple way to visualize why is not true:

You're renting a property for $1000/mo. Whatever the owner is paying for property taxes, you don't know.

Then, property taxes go up by $200/mo. Do you think your rent won't go up by at least $200/mo as a direct consequence of the tax increase? Because it will. Because the renter is of course paying for all costs, including those taxes.

No it won't. The rent will not go up until the lease is up. And at that point it still won't necessarily go up by 200 bucks because that's just not how markets work.

> Then, property taxes go up by $200/mo. Do you think your rent won't go up by at least $200/mo as a direct consequence of the tax increase? Because it will. Because the renter is of course paying for all costs, including those taxes.

So, before property taxes went up, the landlord could have raised rents by $200/month, but hadn't because..?

Could he have?

> So, before property taxes went up, the landlord could have raised rents by $200/month, but hadn't because..?

Because you don't pre-date inflation.

It is the same as asking why the supermarket doesn't raise the price of milk to what inflation estimates say it'll probably be next year.

>So, before property taxes went up, the landlord could have raised rents by $200/month, but hadn't because..?

Look at it a different way. If the $200/month was a new tax that all renters had to pay, what would happen?

Rent does not go up because your landlord has to compete with a landlord one town over where the tax didn't go up and so if your rent goes up you will just move.

Your landlord knows moving is a hassle that you'll avoid if it means paying a little more. So he raises it just enough that you won't just pack up the Uhaul and go live there. Then over the next few years, he does the same again, when he can, until he recoups the property tax, or near enough of it.

Some landlords are bad at guessing the correct numbers. Others are savants. In aggregate, renters end up paying almost all of it over time if not immediately, and those that don't end up suffering in other ways (when the landlord just stops paying the tax entirely, but taking your rent, the building gets sold, and you don't get to renew the lease because they're going to knock it down and build luxury condos).

That requires getting a different job, my friend. Vendor lock-in with housing is real.

In Singapore and a few other places. However in the US housing is not a government monopoly (sometimes low income housing is). You can always find a landlord in a different town. No need for a new job as you still live in the same metropolitan area.

Ok but what if the landlord raises rent by $200, while commuting would cost me an extra $250. Or what if I move from a town with good public transit to one where I have to drive by your own admission, several towns over.

What if moving costs $1000, which is another $83 per month over a year.

Commuting will not cost you an extra $250 in any world I know of. You are typically only moving a biking distance here.

Note that it doesn't need to you personally that moves. Even people who would move anyway will force lower rents just to attract new renters. It takes longer this way but renters typically search a large area when looking for a new place and they care about their costs vs ammentities.

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