Another Way to Soak The Rich?
Adam Ozimek has one:
Whether it’s expanding educational opportunities, more infrastructure spending, wage subsidies, or tax cuts, many of the plans proposed for improving the country have one thing in common: They cost money. And even if we don’t increase spending or cut taxes, the projected growth of entitlements means we’re probably going to need more revenues in the future anyway. Therefore an important task for economists and policymakers is figuring out the most efficient places to raise tax revenues. One idea that doesn’t get enough discussion is a federal property tax on luxury homes.
Taxing luxury houses has a lot of desirable features. First, many luxury homes are located in areas with highly restrictive zoning. This means the value of the home includes economic rents, which are efficient to tax. In political and fairness terms, taxing wealth that is built on keeping out affordable housing and preventing new development certainly has its appeal.
Taxing housing wealth is also efficient compared with taxing other kinds of wealth because it’s impossible to move and difficult to hide. If you tax financial wealth, you have to worry that wealthy households will park their money in offshore accounts, thereby creating a distortionary cost and also limiting revenues. However, with rare the exception of million-dollar houseboats, you can’t park a mansion overseas. It’s also a lot harder to hide the value of a mansion because house sales data are generally publicly available. Once you know what nearby homes are selling for, combine that with a building square footage and lot size and you can get at least a general idea of what a house is worth. Valuing a home is a much simpler and more transparent task than valuing someone’s financial wealth.
What I like about it is that it’s a way to tax wealth instead of income, and it’s a way to do so where you can specifically target the wealthy. Since it would disproportionately target residents of blue states and blue areas, where real estate costs are higher, you might even get Republicans on board! (Okay, probably not.)
The main area of concern I would have is the camel’s nose. It could become like the AMT where it starts to involve more and more people, or the thresholds could shift downward to where we now have a federal property tax in addition to a income taxes and others.