California's Wealth Tax Proposal Would Likely Backfire

[pamak]

Until one sells the house the house isn't profit.

And you are paying taxes, repair costs, mortgage, etc.

Money out.

Not money in.

No profit for decades in many cases.

Yes, first you have to sell a house but homeowners( including me) monitor the mostly rising wealth of their house equity. So, it is like having an IRA account which you know that its value increases and can help you get a more comfortable retirement even when you do not cash it .

 

[Fledermaus]

Yes, first you have to sell a house but homeowners( including me) monitor the mostly rising wealth of their house equity. So, it is like having an IRA account which you know that its value increases and can help you get a more comfortable retirement even when you do not cash it .

In other words it is a burden and not a profit until sold.

 

[skeptic llc]

Having a place to live for "free" or rent out for profit is, in and of itself, a benefit and not a burden. You are getting something valuable in exchange for what you pay long before you sell, even ignoring the financial benefits of being able to borrow against rising equity.

 

[pamak]

In other words it is a burden and not a profit until sold.

Now you make no sense....

An IRA is not a burden, It is an investment and like all investments the idea is that you spend money now in order to get a much bigger profit later. So, when people want to mourn about the California homeowners, they must take in consideration the benefits that only California and a few other states offer to people who invest in home equity. That is why international investors from all over the world invest mostly in the housing markers in CA, NY or FL and not in the housing markets in Idaho, Kansas or Alabama. Now, is the above bad for the renters and those who do not have a house? Sure, at least for low to mid wage earners! The influx of money from real estate investors (including international investors) is one of the reasons why demand and housing prices are up which in turn affects also rents. But the homeowners in California are actually benefitted from such activities because the value of their property goes up. The renters, especially in the range of the low to mid wage jobs see a big part of their income going towards paying the rent without getting some long-tern benefit . Only the workers of roughly mid-to up wage (better say salary) jobs earn enough to both pay their rent and get enough money aside to eventually buy a house and join the homeownership class.

 

[Robertinfremont]

"Backfire" generally means "you get the opposite of the results you wanted, because you produced this significant unintended consequence".

Cutting taxes on upper incomes was intended to increase the incentive for people to reach those upper incomes. That seems to be working generally okay.

However, this thread was about the stupid, stupid, (and authoritarian) wealth taxes California is considering, and their likely results.

What better way for Gavin Newsom to evacuate CA than to give the public a tax hell.

 

[pamak]

Actually right now with a record deficit of multi-trillion dollars it is a smart idea to have wealth tax at a federal level to make sure that it will not be the social security and medicare recipients who will be forced to pay the consequences of all these rescue packages. And if the very rich do not like, they will not have man options since other developed economies are actually more wiling to tax the poor.

In any case, a state, including CA can implement a measure and move forward (or even backtrack) based on how things become after the implementation of the measures. I wil remind you that the same suspects (conservatives) were akin the claim against the stupidity of the "socialists" in California who chose to raise significantly the minimum wage. We saw that these warning did not materialize and my area in San Franciso need up with a 2.3 unemployment rate in January 2020 before the coronavirus. In short, it must be obvious to everybody that anybody who tries to establish an economic principle that "high taxes or wages are always bad" or (from the socialist perspective) that "lower taxes or wages are always bad" does not understand the simple truth that the economy is too complicated for such beliefs.

 

[skeptic llc]

It's primarily convincing high income taxpayers to evacuate, since many have seen that they can work remotely while maintaining their California income level. The fallout from that could be nominal like every other time (recall that conservatives are always prematurely declaring that policies they dislike will drive away California's wealth and businesses, yet the state remains an economic powerhouse) ... However, my guess is it is different this time; there is a serious exodus picking up steam right now. And with California so dependent on taxing the highest income residents, that would cause a budget catastrophe soon enough.

 

[pamak]

It's primarily convincing high income taxpayers to evacuate, since many have seen that they can work remotely while maintaining their California income level. The fallout from that could be nominal like every other time (recall that conservatives are always prematurely declaring that policies they dislike will drive away California's wealth and businesses, yet the state remains an economic powerhouse) ... However, my guess is it is different this time; there is a serious exodus picking up steam right now. And with California so dependent on taxing the highest income residents, that would cause a budget catastrophe soon enough.

I have no problem with the claim that especially now with the coronavirus, it is very difficult to make economic predictions and that one has to keep his mind open to all possible outcomes and adjust policies accordingly. I do believe that the voters should pressure politicians and both the state and federal level to establish polices that will shift the biggest burden of recovery to the wealthiest part of the society. Obviously, a state by itself cannot succeed when the game is to have the wealthiest pit one state against the other and
reward the ones that are more subservient to the interests of the top 1-10%. Now some states like CA, NY, FL, etc can afford to be more demanding because most people (including the very rich) value their lifestyle, climate, etc, but it is obvious that there is a threshold over which a person will eventually choose the economic benefit of a much lower tax he can get from another state. That is why I see as more practical to have more strict tax policies at the federal level. Raising taxes at that level does not make the US less attractive than competitors in Europe and Asia where inequality is much more narrow mostly because of the redistribution tax policies they have there.

 

[skeptic llc]

At the federal level, I don't mind taxes. At the state level, though, I can compare my state (CA for a couple more weeks, highest taxes on me in the country) with the one I am moving to (0% state income tax) and ask what the oversized CA tax bill is buying. Both states have decent roads; public schools are better if you just leave CA; etc. Anyway, I agree with you about the threshold concept, and CA has crossed it for me. Moreover, in the high to ultra high net worth category (not me, sadly, but that's who I work with), I'd say about 10% (anecdotal, based only on personal interactions with many) are in the process of relocating. I think Newsome overplayed California's hand, and a lot of frustrated moderates are calling BS and getting out.

 

[Luther]

Sure. If you buy at a high price, your property taxes start correspondingly high. But then they don't get up meaningfully for as long as you own your home (annual increase is capped at around 2%, regardless of how much the value goes up). Many people don't even pay that much, since their property tax basis is inherited from what their parents or even grandparents paid long, long ago. So as a percentage of property values, property taxes in California are relatively low. This is particularly true of commercial properties owned by individuals.

your property taxes start correspondingly high.

So just stop right there

How long has Cailf's Property values been High?

 

[Luther]

Actually right now with a record deficit of multi-trillion dollars it is a smart idea to have wealth tax at a federal level to make sure that it will not be the social security and medicare recipients who will be forced to pay the consequences of all these rescue packages. And if the very rich do not like, they will not have man options since other developed economies are actually more wiling to tax the poor.

In any case, a state, including CA can implement a measure and move forward (or even backtrack) based on how things become after the implementation of the measures. I wil remind you that the same suspects (conservatives) were akin the claim against the stupidity of the "socialists" in California who chose to raise significantly the minimum wage. We saw that these warning did not materialize and my area in San Franciso need up with a 2.3 unemployment rate in January 2020 before the coronavirus. In short, it must be obvious to everybody that anybody who tries to establish an economic principle that "high taxes or wages are always bad" or (from the socialist perspective) that "lower taxes or wages are always bad" does not understand the simple truth that the economy is too complicated for such beliefs.

Actually right now with a record deficit of multi-trillion dollars it is a smart idea to have wealth tax at a federal level

What?

Those people already pay the most Fed income tax as it is

Not to mention you're trusting the same VAIN politicians who got us in the mess to begin with to get us out of it?

Holy ****!

 

[Luther]

In New York, Cuomo is so desperate to get wealthy former New Yorkers back that he's resorted to personally calling them and offering to cook for them.

California - famously - is already seeing a bit of an exodus. Will be interesting to watch the collapse if they really ramp it into high gear.

Why would they do this when they now tax marijuana that was suppose to be the "Savior" of Calif?(LOL)

 

[pamak]

What?

Those people already pay the most Fed income tax as it is

Not to mention you're trusting the same VAIN politicians who got us in the mess to begin with to get us out of it?

Holy ****!

The increasing inequality and the fact that Wall Street obviously does not behave like main street (even obvious during the coronavirus crisis) shows that there is a lot of room of taxing the rich higher across the whole nation. This is an issue related to what each class can afford to pay during the recovery process...
And i am choosing the federal level because at that level the rich do to have an option to pack and go to Europe or the developed economies in Asia where taxation is even higher.

 

[Luther]

The increasing inequality and the fact that Wall Street obviously does not behave like main street (even obvious during the coronavirus crisis) shows that there is a lot of room of taxing the rich higher across the whole nation. This is an issue related to what each class can afford to pay during the recovery process...
And i am choosing the federal level because at that level the rich do to have an option to pack and go to Europe or the developed economies in Asia where taxation is even higher.

The increasing inequality

Just stop.... just stop it!


The Number Of Millionaires Has Boomed—Here’s Where Your Net Worth Ranks Compared To Others

 

[pamak]

Just stop.... just stop it!


The Number Of Millionaires Has Boomed—Here’s Where Your Net Worth Ranks Compared To Others

Forbes says it... okay! Of course Forbes and WSJ want to see the same remain the same. It does not change the fact that we increasingly see an economic system where even a 10% unemployment during a pandemic does not affect the stock market because we essentially have two different worlds inside the US. And yes, I know many Americans have 401Ks and investments but this still does not change the fact that roughly the botom 50% has very low investments in the stock market.

Middle-Class Americans’ Big Stake in Social Security | Center on Budget and Policy Priorities

Social Security is the main source of retirement income — providing more than half of total income — for 69 percent of middle-class beneficiaries (defined here as those in the middle 60 percent of the income scale).
Almost half (48 percent) of middle-class married couples rely on Social Security benefits as their main source of income. For more than 1 in 10 middle-class couples, Social Security benefits are at least 90 percent of their total income.

People who have SS as their main source of income are obviously people who have very little investments in the stock market!

Also,

Trends in U.S. income and wealth inequality | Pew Research Center

The growth in income in recent decades has tilted to upper-income households. At the same time, the U.S. middle class, which once comprised the clear majority of Americans, is shrinking. Thus, a greater share of the nation’s aggregate income is now going to upper-income households and the share going to middle- and lower-income households is falling.9

And the above does not even account for factors like the increasing working hours, the increasing participation in the workforce of both spouses
And we do know that during recessions the people at the bottom are the ones who are the first to lose their jobs and the last to recover them. I see no reason to expect from the guy who has just SS as the main source of his retirement assume the burden of paying off for the rescue package.

 

[Luther]

Forbes says it... okay! Of course Forbes and WSJ want to see the same remain the same. It does not change the fact that we increasingly see an economic system where even a 10% unemployment during a pandemic does not affect the stock market.

Meanwhile

Trends in U.S. income and wealth inequality | Pew Research Center

The growth in income in recent decades has tilted to upper-income households. At the same time, the U.S. middle class, which once comprised the clear majority of Americans, is shrinking. Thus, a greater share of the nation’s aggregate income is now going to upper-income households and the share going to middle- and lower-income households is falling.9

And the above does not even account for factors like the increasing working hours, the increasing participation in the workforce of both spouses
And we do know that during recessions the people at the bottom are the ones who are the first to lose their jobs and the last to recover them. I see no reason to expect from the guy who has just SS as the main source of his retirement (IIRC about 30-40% of Americans) assume the burden of paying off for the rescue package.

okay! Of course Forbes and WSJ want to see the same remain the same

.

The number of MILLIONAIRES has only increased(Things are not the same)

10% unemployment during a pandemic

Updatemore like 8%)

At the same time, the U.S. middle class, which once comprised the clear majority of Americans, is shrinking.

yes, because people are getting richer

 

[pamak]

.

The number of MILLIONAIRES has only increased(Things are not the same)



Updatemore like 8%)



yes, because people are getting richer

My comment regarding WSJ and Forbes wanting things to remain the same is about the function of the economic system.As I noted, inequality increases, so I do understand that some things do change . Among those are population and inflation effect , so the fact that there are more millionaires today is not revealing. And I do not get how the number of millionaires changes what I say about the effects of the pandemic and the resources that different people have to pay off the muti-trillion rescue package. By the way, there are more millionaires in Europe today too. Also, many Californian homeowners are millionaires too but for some reason this does not mean that there is no poverty problem in California!

 

[Luther]

Population and inflation has also increased, so this tells me nothing. And I do not see how the number of millionaires changes what I say about the effects of the pandemic and the resources that different people have to pay off the muti-trillion rescue package.

Population and inflation has also increased

Yes, and who is increasing this population?

IMMIGRANTS(POOR)

the effects of the pandemic

The "pandemic" is relatively a new Phenomenon

 

[pamak]

Yes, and who is increasing this population?

IMMIGRANTS(POOR)



The "pandemic" is relatively a new Phenomenon

The population increase was meant as a point that the number of millionaires today is not directly comparable to the number of millionaires in the past. Notice also what I said about the Californian homeowners. My condo (not house) was bought at the price (cash) of 1.4 million. Most homeowners in San Fransisco and nearby area are millionaires just because of the value of their home. And California in general still has a large part of millionaires and billionaires,

CA Millionaires: Where We Rank With The Rest Of The US | Hollywood, CA Patch

The 7% rise in millionaire households in 2018 is the strongest rate of growth in that market since the financial downturn ten years ago," David M. Thompson, the managing director of the Phoenix Affluent Practice, said in a statement.

With a handful of exceptions, the top 10 states for millionaires were in the Northeast and the Beltway region, but Hawaii, California and Alaska also made the list.

The top 10 states for millionaires in 2018 were:

New Jersey
District of Columbia
Connecticut
Maryland
Massachusetts
Hawaii
New Hampshire
California
Alaska
Virginia



This does not mean that the middle-to low class in California has a good time.

Blue states are also among those with the highest inequality.....

 

[Luther]

The population increase was meant as a point that the number of millionaires today is not directly comparable to the number of millionaires in the past. Notice also what I said about the Californian homeowners. My condo (not house) was bought at the price (cash) of 1.4 million. Most homeowners in San Fransisco and nearby area are millionaires just because of the value of their home. And California in general still has a large part of millionaires and billionaires,

CA Millionaires: Where We Rank With The Rest Of The US | Hollywood, CA Patch

The 7% rise in millionaire households in 2018 is the strongest rate of growth in that market since the financial downturn ten years ago," David M. Thompson, the managing director of the Phoenix Affluent Practice, said in a statement.

With a handful of exceptions, the top 10 states for millionaires were in the Northeast and the Beltway region, but Hawaii, California and Alaska also made the list.

The top 10 states for millionaires in 2018 were:

New Jersey
District of Columbia
Connecticut
Maryland
Massachusetts
Hawaii
New Hampshire
California
Alaska
Virginia



This does not mean that the middle-to low class in California has a good time.

Blue states are also among those with the highest inequality.....

This does not mean that the middle-to low class in California has a good time.

Nope, especially due to California's Over regulation and taxation(wink)

 

[Luther]

The population increase was meant as a point that the number of millionaires today is not directly comparable to the number of millionaires in the past. Notice also what I said about the Californian homeowners. My condo (not house) was bought at the price (cash) of 1.4 million. Most homeowners in San Fransisco and nearby area are millionaires just because of the value of their home. And California in general still has a large part of millionaires and billionaires,

CA Millionaires: Where We Rank With The Rest Of The US | Hollywood, CA Patch

The 7% rise in millionaire households in 2018 is the strongest rate of growth in that market since the financial downturn ten years ago," David M. Thompson, the managing director of the Phoenix Affluent Practice, said in a statement.

With a handful of exceptions, the top 10 states for millionaires were in the Northeast and the Beltway region, but Hawaii, California and Alaska also made the list.

The top 10 states for millionaires in 2018 were:

New Jersey
District of Columbia
Connecticut
Maryland
Massachusetts
Hawaii
New Hampshire
California
Alaska
Virginia



This does not mean that the middle-to low class in California has a good time.

Blue states are also among those with the highest inequality.....

. My condo (not house) was bought at the price (cash) of 1.4 million.

You poor soul!

You ought to see what I bought here in Idaho with just $200,000?

 

[pamak]

You poor soul!

You ought to see what I bought here in Idaho with just $200,000?

I believe you...which is why I have said in previous posts that when it is my time to retire, I and my wife will be certainly open to retire to other places. And this includes also the option of leaving the US and retiring to my birthplace.

Anyway, because I come from Europe where regulations and "socialism" are stronger, I blame mostly inequality and the US economic system for the challenges faced by those at the bottom to mid economic ladder.

 

[Luther]

I believe you...which is why I have said in previous posts that when it is my time to retire, I and my wife will be certainly open to retire to other places. And this includes also the option of leaving the US and retiring to my birthplace.

Anyway, because I come from Europe where regulations and "socialism" are stronger, I blame mostly inequality and the US economic system for the challenges faced by those at the bottom to mid economic ladder.

Anyway, because I come from Europe where regulations and "socialism" are stronger,

Perhaps that's why none of the European countries can hold our Jock strap with our GDP?

 

[pamak]

Perhaps that's why none of the European countries can hold our Jock strap with our GDP?

which again is no different from hearing the argument of how California's GDP per capita is so high.

List of U.S. states and territories by GDP per capita - Wikipedia

Such metrics do not capture the full picture of who actually gets the most benefits from such GDP. which is also linked to the level of economic inequality

 

[Luther]

which again is no different from hearing the argument of how California's GDP per capita is so high.

Such metrics do not capture the full picture of who actually gets the most benefits from such GDP. which is also linked to the level of economic inequality

which again is no different from hearing the argument of how California's GDP per capita is so high.

Yes, Calif BLESSED in Natural resources, ports, weather etc....

Again, Rome was once a power house too(wink)