Inheritance, not work, has become the main route to middle-class home ownership

[Frank de Jong]

Good article in Guardian a few days ago. In most of Canada the only route to home ownership is now also through inheritance. The article doesn't suggest any resolution, and while the included video suggests raising interest rates would help, it doesn't mention doing so would put most mortgage holders under water, plus damage businesses by increasing the cost of capital. The only viable fix is to move taxes off jobs, sales and business and onto land value.   Frank

Inheritance, not work, has become the main route to middle-class home ownership

[Polito]

Excellent Frank!

Do you think Hudson's ideas on bolstering Georgist thinking in this paper are good ideas? They seem to help reduce economic rent even more.

http://www.levyinstitute.org/pubs/ppb32.pdf

On Wed, Nov 11, 2020 at 9:27 AM Frank de Jong <fde...@earthsharing.ca> wrote:

Good article in Guardian a few days ago. In most of Canada the only route to home ownership is now also through inheritance. The article doesn't suggest any resolution, and while the included video suggests raising interest rates would help, it doesn't mention doing so would put most mortgage holders under water, plus damage businesses by increasing the cost of capital. The only viable fix is to move taxes off jobs, sales and business and onto land value.   Frank

Inheritance, not work, has become the main route to middle-class home ownership

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[Jassal Devpreet]

Well said....

On Wed, Nov 11, 2020 at 9:27 AM Frank de Jong <fde...@earthsharing.ca> wrote:

Good article in Guardian a few days ago. In most of Canada the only route to home ownership is now also through inheritance. The article doesn't suggest any resolution, and while the included video suggests raising interest rates would help, it doesn't mention doing so would put most mortgage holders under water, plus damage businesses by increasing the cost of capital. The only viable fix is to move taxes off jobs, sales and business and onto land value.   Frank

Inheritance, not work, has become the main route to middle-class home ownership

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[Frank de Jong]

Generally, Hudson and Feder are right on, yes.  The document you attached is excellent with the exception of one point, it calls for reinstate capital gains taxes on buildings."  This is contrary to what virtually all Georgists say. Buildings don't attract rent and should not be taxed. I'll ask Hudson and Feder way they suggest this. f

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[Polito]

I look forward to hearing the result.

One guess is that if regular taxes are applied to the land inflation rather than preferred capital gains rates, and if there is local municipal land value tax, then value of the improvements would in real terms go down as they age and depreciate a few percent a year. Consequently on sale of the property, if the building goes up in value it would really just be the accumulated inflation and not a real gain. The capital gain tax would be a way of recognizing that fact.

best wishes

Joe Polito

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[Frank de Jong]

Joe, I think we have to be careful with terminology. LVT doesn't collect "land inflation", it captures the rental value of land. Even if your community isn't growing, even if land isn't going up in value because of population pressure, all land has a rental value, i..e, the cost of renting it.

Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over some period of time. It is the rise in the general level of prices where a unit of currency effectively buys less than it did in prior periods. Often expressed as a percentage, inflation thus indicates a decrease in the purchasing power of a nation’s currency.

Land prices don't inflate. Land becomes more expensive not because of inflation, but in real dollars, because economic rent capitalizes into the purchase price.

The Georgist idea is to socialize unearned income (economic rent) and privitize earned income, the opposite of the present tax structure. Buildings don't attract unearned income, because they are replicable. Economic rent only accrues to finite assets, like land. 

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[Jassal Devpreet]

I am not sure if land price or house price is included in consumer price index?

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[Polito]

Listening to experts like you, lifts the fog on these matters. You also remind me of the precision that Georgists have in these matters.

Another very capable Georgist was not a fan of any part of Hudson's additions to George's view. However Capital Gains taxes did not exist in his day, so I was surprised at his resistance.

Best wishes.

Joe

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