Is America Built on a House of Cards?
By Richard Colman, in response to the material that appeared in The Economist on Jan. 18, 2020, titled “Home ownership is the West’s biggest economic-policy mistake”
In addition, The Economist (same issue) also provided a very long article on housing.
Basically, The Economist argued that America’s gross domestic product (the total output of good and services) would be higher if housing were not given such favorable treatment by government.
The Economist gave examples of housing policies in Germany, Singapore, and Switzerland. The magazine wrote favorably of the housing policies in these nations.
The Economist argued that an individual could earn more income by investing in stocks than in home ownership.
In America, the problem is this: A renter is subject to the whims of a landlord.
We have seen too many Americans lose their places to live because of landlords and other eviction-related factors.
Personally, I know of too many Americans who became homeless or almost homeless because they were renters, not owners.
The property tax in America is really a wealth tax. Normally, there is no tax on an asset unless and until the asset is sold. However, in America, the property tax is levied on residential property (and commercial property) while the property is still in the owner’s possession.
Presidential candidate Sen. Elizabeth Warren (D-Massachusetts) has called for a wealth on high-income people. Sen. Warren has not acknowledged that existing American property taxes are a wealth tax.
Sen. Warren has proposed a two percent tax on household net worth between $50 million and $1 billion. She has also proposed a four percent tax (a six percent tax overall) on households net worth above $1 billion.
Here is a key question: If Sen. Warren’s plans become law, how much time will elapse before her wealth tax is applied to lower levels of income?
In 1913, the United States adopted the personal income tax. Initially, the rates were very low. Now, more than 100 years later, the income-tax rates are much higher.
Perhaps the time has come to eliminate the property tax and replace it with some other form of taxation (or no taxation at all).
If you want my personal opinion, I feel better about Sen. Amy Klobuchar (D-Minnesota) and former Vice President Joe Biden (D-Delaware) than I do about Sen. Warren.
I also liked Bill Clinton’s economic policies. Bill Clinton, with help from: Newt Gingrich (R-Georgia), speaker of the House from 1995 to 1998; Trent Lott (R-Mississippi), Senate majority leader; and Alan Greenspan, Chairman of the Federal Reserve, helped produce a strong economy. Gingrich and Lott wanted a balanced budget. Clinton agreed as long as Social Security and Medicare were not touched.
From 1995–1999, Bill Clinton and company produced four consecutive balanced budgets and decreased the national debt. Twenty-two million jobs were created. The Dow Jones Industrial Average went from 3,000 to almost 12,000 during Clinton’s two terms.
In 1837, the national debt was zero. By 1981, the national debt reached $1 trillion. Today, the national debt is $23 trillion. Is a day of reckoning coming?
Government has a tendency to ask taxpayers for more and more money. Over the last 10 years, Californians have seen higher sales taxes, higher gasoline taxes, and higher state income taxes. Currently, California has the nation’s highest state sales tax, the nation’s highest state gasoline tax, and the highest top bracket (13.3 percent) for the state income tax.
At some point, a tax revolt in California may occur. Dan Walters, who was a columnist for the Sacramento Bee for many years and now writes for www.calmatters.org, has a reputation for fairness and objectivity. Walters recently wrote that Californians may be on the verge of “tax exhaustion.”
What do you think?
Richard Colman has lived in Orinda, California, for 20 years and is the president and founder of Biomed Inc., a biotechnology, and publishing company.
