This guys has been saying this for ages
Here's how I would sum up his main argument: Ordinary people have less money and can no longer afford to buy property. Governments have less money, infrastructure everywhere is eroding. So where does all the wealth go? The only possible answer is to the very rich, who are doing better than ever, while everyone else is down financially.
To be clear, this is not about the entrepreneur who made a couple million bucks and has three houses. It's about the top 0.1 % who are sucking everyone else dry, permanently: The poor, the middle class, and the government.
We need to do something to reverse this trend. And soon.
How specifically doesn’t matter as long as it’s enough. The way I see it, the best ideas, other than all out socialism, is to have progressive taxes that start low and have extremely steep curves.
Just one example, we could have a progressive property tax. For people who own a single reasonably sized home that they actually live in, the property tax would be very low and reasonable. However, if people own multiple properties, properties they don’t live in, or extremely large properties, the tax rate would increase and then skyrocket to the point where a wealthy person has no choice but to sell those properties or lose money. All that selling will bring down the price of real estate. At the same time, nobody will be in a position to buy that real estate except for those who don’t already have much, because for anyone else the tax will be too high for it to work out. If they don’t sell, they pay enormous tax, which is also acceptable. Either way we reverse the transfer of wealth.
Apply this same progressive scale to capital gains tax and estate tax. Also income tax, but less so. Effectively this puts a cap on wealth. If a person tries to own more than their fair share of things, they won’t make more money. Of course you still allow people to be quite rich. There will be multi-millionaires with fancy cars and mansions. There will still be movie stars, sports team owners, and bankers. They will still live lives of luxury and want for nothing. They just won’t control our entire society.
How do you spend it? You spend it on anything that benefits labor and makes everyone’s lives better. You don’t use it on a fossil fuel subsidy. You don’t use it on defense contracts. You use it on universal health care, social security, education, FEMA, infrastructure. Pretty much you do the exact opposite of whatever DOGE is doing.
But say you succeed. The wealthy sell their second homes with only a small impact on house pieces. Now your tax raises nothing (everyone sold) and the wealthy invest in something else. It's a marginal improvement in housing affordability but not a solution to societies problems.
Or maybe the housing market collapsed under all these forced sales and the wealth is gone, and a load of normal people are in negative equity and your tax still doesn't raise anything. You've made life better for non homeowners but you've also trapped a bunch of mortgage holders with expensive unsecured debt. That's not exactly perfect either.
It's not simple and I'm a bit tired of pretending it is.
This isn't me saying we shouldn't be trying to tax the wealthy, it's just that I'd really like to see a specific workable plan rather than hand waving.
This loophole only works if you don't tax large company real estate holdings. Which would be dumb.
Of course this scheme would require for real estate taxes to also be applied to companies holding real estate. And why wouldn't they?
>The wealthy sell their second homes with only a small impact on house pieces.
This is not only about second homes. It is also about tens of thousands of rental properties. It is about commercial properties that are useful investment vehicles and thus get preference during rezoning, but which push housing further and further from the city center (except for exclusive luxury apartments). etc. etc. If the top 10% own close to 50% of the real estate, there are a lot of potential taxable assets if you target the super rich.
>Or maybe the housing market collapsed under all these forced sales and the wealth is gone
That doesn't make any sense. For the person living in it, a house does not become less useful if its nominal value drops by 50%. But it makes that house much more accessible to people looking for a new home.
>a load of normal people are in negative equity
How would that work? If I force a billionaire to either pay 8% p.a. tax on his real estate holdings or sell it, how exactly does this impact "normal" people? A "normal" homeowner would maybe have to mark down the theoretical value of his house, but he'd still have the same income with which to pay down his mortgage. And if he is forced to sell for whatever reason, potentially even at a loss, he'd still not suffer tremendously, because he'd pay much less for his next home.
>but you've also trapped a bunch of mortgage holders with expensive unsecured debt.
This can be solved through banking regulations, i.e. by forcing banks to offer repayment moratoriums if the equity of a normal home owner goes down without any fault of their own (i.e. because of market turbulence). At the same time you can force banks to hold more capital in reserve to reduce the chance of this kind of regulation leading to a banking crisis.
>It's not simple and I'm a bit tired of pretending it is.
Of course the solutions are not "simple", but the root problem certainly is (wealth inequality) and there are some clear guiding principles that you can use to develop new approaches.
>it's just that I'd really like to see a specific workable plan rather than hand waving.
Here in Germany, I know of at least three different NGOs that have been pointing to this problem for more than a decade now and have developed detailed policy recommendations, both on a national and E.U. level. I'd be astonished if there aren't similar proposals being offered in the U.S. The "how" is almost never the problem. It's more the commitment to actually go through with this. Usually this lack of commitment is covered up by (falsely) claiming that there is no workable solution.
What are the NGOs? I'd be interested to read what they recommend. I also appreciate your efforts to explain how this might work but there are still some big gaps (you may well have answers too but I think your can't fairly deal with a topic this complicated in an HN comment)
Das "Netzwerk Steuergerechtigkeit" has detailed concepts for a broad range of taxation schemes. This is a working paper on taxing wealth that was first published in 2021, I think: https://www.netzwerk-steuergerechtigkeit.de/infothek/vermoeg...
They also published some thoughts and ideas for a global tax on Billionaires: https://library.fes.de/pdf-files/international/21426.pdf
The political party "Die Linke" has long demanded a wealth tax: https://www.die-linke.de/themen/steuern/vermoegensteuer/
Thomas Piketty (a quite famous and well respected French economist) has proposed a global progressive wealth tax: https://www.cadtm.org/thomas-piketty-a-progressive-global-ta...
There is tons more out there if you are willing to look for it. Economists, politicians and activists have thought about the taxation of wealth for as long as modern economics exist as a concept. Wealth taxation was the original form of taxation, because it turns out that property can be hidden from the authorities much less effectively than income and you can be very rich (and have a corresponding lifestyle) with a nominally very low income. Which might be a reason that rich people love income taxes and spend a lot of money on convincing the general public that wealth taxes are the devil's own work ;-).
My concern is that if middle/upper income groups believe that a wealth tax will reduce asset prices through forced selling by the ultra wealthy, and they think that affects assets in their pensions/home/savings then they will not vote for it and therefore it won't happen. I'm looking for something which tackles this concern head on.
I'm not an economist. But from my point of view and based on what I've read about this the argument is relatively straightforward:
- Yes, if you tax the assets of the ultra-rich, the prices of those asset classes will tend to fall.
- That is the whole point of the exercise (in addition to maybe raising government revenues). You tax real estate held be the ultra-rich, because you want real estate to be affordable by normal people. But yes, it is likely that also the house or apartment of a "normal" home owner will decrease in value.
- This decrease will not be drastic or sudden, though. It might also simply come in the form of less value appreciation over time. If (like in the U.S.) the top 10% hold 50% of the real estate (presumably measured in value, not square footage) and increased taxes would lead to those ultra-rich to divest of half of that over the span of a few years, the effect on individual home owners would probably be negligible in practically all cases.
- You can minimize or outright eliminate downside risk for "normal" people with regulation: limits on foreclosures, direct subsidies for middle-class homeowners, etc.
- At the same time, if you succeed in lowering real estate prices, the upside is clear: For poor and middle class people, both renting and acquiring real estate becomes more affordable. If this policy pushes you above the wealth threshold required for home ownership, it makes a strong contribution to building intergenerational wealth. And if you remain a renter, it makes moving (and thus maximizing your income potential) much more accessible, because you are not bound to your existing lease (which is much cheaper than having to sign a new rental agreement).
His theory (which sounds plausible to me) is that a lot of the wealth of the ultra rich is actually bound up or linked to immovable assets. At the same time, investments in these assets is what makes them unaffordable for everyone else (i.e. your kids won't be able to buy a house anywhere in the country, despite them earning more after adjusting for consumer goods inflation).
By taxing large real estate wealth accumulation (think personal wealth in the tens or hundreds of millions and up), you get the best of both worlds: The (ultra) rich who want to stay invested have to pay your taxes (they can't move real estate to a tax haven) and thus transfer part of their wealth back to society. And if they divest from real estate, it puts downward pressure on real estate prices, thus making it more affordable for the rest of us. Win-win, from a society's perspective.
It’s the absolutely most valuable thing in the world. It increases in value constantly due to finite supply.
Yet you are allowed to buy it for a one time cost and own it FOREVER.
And there’s zero cost to owning it. Only upside of charging rent.
All the taxes we pay are for buying land or earning money. If you just already own everything, you pay nothing at all.