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I believe a tax system centered on sales tax would be the fairest system of all. It would also motivate the politicians to actually focus on "we the people" instead of selfish or special interests. If the government and the politicians are doing a good job, people will be spending money somewhat liberally. If the government is screwing up, people will hunker down in fear and discontinue as much spending as possible. Big motivation for the politicians to quit destroying this country like they've been doing for the years.
Quote:
Originally Posted by freemkt
Oh. My. God.
This is precisely what I've been complaining about for so long on this forum.
In North America, home ownership is NOT scalable.
500 sq ft home is not affordable because zoning rules require that an unaffordable parcel of land accompany said house.
I have calculated that I can afford a 400 sq ft house on 2,500 sq ft of land. But lots smaller than 2x or greater usually are not allowed.
So your 500 sq ft house is legal on a 10,000 sq ft piece of land, but not on a 2,500 sq ft piece of land.
I tend to agree. I believe the reason such options aren't widely available was because people were bred to believe real estate was the one investment they could not loose on. Therefore, you bought the most house you could possibly afford, and cashed in down the road on the gains from invested money you did not have when you originally purchased the house. Follow me on this... If I was renting and saved 10K every year and earned 5% annually in interest/capital gains, I wouldn't do as well as buying a 1/2 million dollar home and watching it's value increase substantially over the life of the mortgage. With this thought process in mind, the consumer overwhelmingly demanded the most home the bank would allow them to purchase.
Home builders simply built what the consumer demanded, which is how normal free markets work. We don't have a free market though, which is largely where the problem originated. I would love to buy a home to fit my lifestyle and needs, and would enjoy the benefits of owning something outright. The problem is I don't want or need a 5 bedroom Mcmansion. Such an "investment" would be considered risky, while a smaller, more conservative investment is not as widely available (unless you believe a condominium is a suitable alternative).
With a flat-tax, loop holes don't exist, correct? And I apologize for being ignorant to the matter of homes and renting, I've never owned a home and I'm only 21 so can someone explain what you're talking about in respects to taxing homes and renters?
It's relevant mostly to a consumption tax, which was suggested earlier in this thread. Proposed consumption taxes usually tax spending, which (especially in the case of homeowners) can be vastly different from consumption.
Homeowners can enjoy housing consumption without spending, while renters generally cannot.
I tend to agree. I believe the reason such options aren't widely available was because people were bred to believe real estate was the one investment they could not loose on. Therefore, you bought the most house you could possibly afford, and cashed in down the road on the gains from invested money you did not have when you originally purchased the house. Follow me on this... If I was renting and saved 10K every year and earned 5% annually in interest/capital gains, I wouldn't do as well as buying a 1/2 million dollar home and watching it's value increase substantially over the life of the mortgage. With this thought process in mind, the consumer overwhelmingly demanded the most home the bank would allow them to purchase.
Home builders simply built what the consumer demanded, which is how normal free markets work. We don't have a free market though, which is largely where the problem originated. I would love to buy a home to fit my lifestyle and needs, and would enjoy the benefits of owning something outright. The problem is I don't want or need a 5 bedroom Mcmansion. Such an "investment" would be considered risky, while a smaller, more conservative investment is not as widely available (unless you believe a condominium is a suitable alternative).
I'm sorry, but there are very few scenarios in which it makes sense to buy "all the house one can afford" - for instance, MAYBE when one is paying cash or, in the unusual case of a person who is determined to live in that house for the next twenty years (w a twenty year mortgage) - and is certain that their financial situation won't change and they can continue to afford a huge mortgage payment (which is what one gets when one buys "all the house one can afford"). But the average time that people live in a home is five years.
Also, if homes are increasing in value at a higher "interest rate" than your money's making in other investments - it's a "bubble." That means it's got some risk - as we've seen in the past four years.
Let me give you an example - my husband and I qualify for a $750,000 mortgage. There is NO WAY we would ever shop for homes in that price range. Why? Because it's at the very top of our price range for our income and current situation. Things can change - especially over the next twenty years. Sometimes they change for the worse. So...it would be an unwise decision on our part to buy a house at the very top of our price range, in ANY market, unless it was with cash, and was bought with the intent to do a quick turnaround sale - and was listed below market value to begin with - and the market for homes in that range locally was strong...etc etc...
The problem I see is that many people in our current culture buy EVERYTHING at the top of their price range, rather than being willing to live frugally, pay cash, make wise investments over the long haul, save money, etc.
Then when their property taxes go up, or one of the wage earners loses their job - they suddenly can't afford their house payments, because they're living that close to the line.
No income based taxing, that punishes you for being prosperous, no matter how you make a living.
No flat tax. Flat taxes hurt the impoverished that are barely making ends meet.
Abolish the 16th amendment, with an Amendment. I bet you could do that very easy today.
A flat VAT only! Flat..... everything but food and water is taxed at the same percent.
The rich will pay more taxes than the poor. The rich will not hoard their cash.
No income based taxing, that punishes you for being prosperous, no matter how you make a living.
No flat tax. Flat taxes hurt the impoverished that are barely making ends meet.
Abolish the 16th amendment, with an Amendment. I bet you could do that very easy today.
A flat VAT only! Flat..... everything but food and water is taxed at the same percent.
The rich will pay more taxes than the poor. The rich will not hoard their cash.
A flat VAT hurts the impoverished that are barely making ends meet.
And when inflation increases prices, where is the additional "value" added? (If my rent goes up $50, am I getting increased value? If I am getting increased value, so is the homeowner next door so shouldn't he pay more VAT as well?)
Let me give you an example - my husband and I qualify for a $750,000 mortgage. There is NO WAY we would ever shop for homes in that price range. Why? Because it's at the very top of our price range for our income and current situation. Things can change
The problem I see is that many people in our current culture buy EVERYTHING at the top of their price range, rather than being willing to live frugally, pay cash, make wise investments over the long haul, save money, etc.
Then when their property taxes go up, or one of the wage earners loses their job - they suddenly can't afford their house payments, because they're living that close to the line.
I agree, we also bought below what we qualified for and put 20% down. Our mortgage payments do not stress us and we were able to put extra on it paying it off in full in a very short time.
People think the tax code benefits us but it doesn't. AMT makes sure of that and it is ridiculous to justify a bigger mortgage using a tax deduction in mind. I have no problem with it if they do away with the mortgage deduction but I do think that if they take it away they will only hurt people who justified a larger mortgage with the mortgage deduction in mind. Poor financial decisions will always hurt people no matter what income level you are.
I'm sorry, but there are very few scenarios in which it makes sense to buy "all the house one can afford" - for instance, MAYBE when one is paying cash or, in the unusual case of a person who is determined to live in that house for the next twenty years (w a twenty year mortgage) - and is certain that their financial situation won't change and they can continue to afford a huge mortgage payment (which is what one gets when one buys "all the house one can afford"). But the average time that people live in a home is five years.
Also, if homes are increasing in value at a higher "interest rate" than your money's making in other investments - it's a "bubble." That means it's got some risk - as we've seen in the past four years.
Let me give you an example - my husband and I qualify for a $750,000 mortgage. There is NO WAY we would ever shop for homes in that price range. Why? Because it's at the very top of our price range for our income and current situation. Things can change - especially over the next twenty years. Sometimes they change for the worse. So...it would be an unwise decision on our part to buy a house at the very top of our price range, in ANY market, unless it was with cash, and was bought with the intent to do a quick turnaround sale - and was listed below market value to begin with - and the market for homes in that range locally was strong...etc etc...
The problem I see is that many people in our current culture buy EVERYTHING at the top of their price range, rather than being willing to live frugally, pay cash, make wise investments over the long haul, save money, etc.
Then when their property taxes go up, or one of the wage earners loses their job - they suddenly can't afford their house payments, because they're living that close to the line.
It's not necessarily a bubble. You are allowed to utilize more leverage in real estate transactions than in stock transactions. It does seem as if too many people look at their personal residence as an investment instead of a place to live.
For example, if we ignore transaction and interest costs we get the following.
Someone buys a $250K house and puts down $50K.
The house goes up by 5%
The house is now worth $262,500
You now have a paper gain of 25%
Someone buys $50K of an index fund and it goes up by 10%
The investment is now worth $55K.
You have a paper gain of 10%.
And for an apples to apples comparison.
Someone buys $100K worth of stock and puts down $50K (the max stock leverage allowed)
The stock/market/portfolio goes up by 10%.
You have a paper gain of 20%.
In this case you would have to highly leverage yourself in the market to come close to the real estate returning half what the market did.
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