Hudson: Twilight of the Gods

[doom&gloom]

Re: Hudson: Twilight of the Gods

what seller would burn their money when they (in the past) could waste it on cheap trinkets, EU vacations, foreign cars, and a plethora of other items that sent what is now roughly half of all dollars ever created overseas.

[Polish_Silver]

Hudson's pricing model

given that you will spend $x/mo to pay for that house, would you rather those dollars go in interest payments to the bank or tax payments to the town?

Hudson's idea is that the total ownership cost is fixed, and determined by local incomes. If taxes rise, the price will go down according to the interest rate, so that the annual cost of ownership is constant. However, this only works where supply is constrained and land prices dominate the property value. This is characteristic of silicon valley and Boston.

It is not true where I live and many other places. Our lot is worth $50k, and the house another 170k, total 220k. The rebuild price of the house is about $200k.

So the price of our property is determined mainly be building costs. Raising taxes will not lower the price unless you think the carpenters will take a pay cut, or lumber will get cheaper.

Hudson's price model may be appropriate in some areas. If taxes rise high enough, you are essentially renting the land from the government. Hudson thinks that some or most of the appreciation should be captured by the local government. However,
appreciation does not continue for ever. However, the taxes do continue for ever.
People can and do pay off mortgages, so that they can occupy or use the property henceforth at low cost. Taxes never cease.

A major cause of excess real estate prices is artificially low interest rates. Much of the damage is done by bubble cycles, not gradual appreciation of prices. A lot of the vital infrastructure is paid by user fees: sewage, water supply, garbage.

What should the property tax rate be? 1%/year, 5%/year?

[c1ue]

Re: Hudson's pricing model

this doesn't make sense to me. the money used to acquire the real estate asset doesn't disappear. in fact, since much of it is borrowed, it is added to the money supply and conveyed to the seller, who doesn't burn it.

Correct, except that over time the equity value of the property - as built up by payments over time and with bank payments siphoned off - is effectively sequestered, unless you're willing to pay banks more in order to extract said equity.

Thus the short term dynamic you describe above is correct, but the long term dynamic is that most overall wealth is tied up as equity in property, leaving the generally far more liquid rentiers' money more free rein.

[Polish_Silver]

Entitlements are doomed!

"The ground is being prepared for a neoliberal “cure”: cutting back pensions and health care, defaulting on pension promises to labor, and selling off the public sector, letting the new proprietors put up tollbooths on everything from roads to schools." Hudson

In the US, half the problem is that health care is exhorbitant. The health care market is opaque, uncompetitive, and the incentive structure is perverse, in both public sector and private sectors.

Change is coming at a glacial pace. I recently had my first but-scopy. There was no anesthesiologist, but a lesser person, like a nurse with 3 year specialty training in anesthesia. Since I lived, she must have done a good job. The anesthesia is about 70% or more of procedure cost if you use a full blown anesthesiologist.
Two states have allowed sub-dentists to do fillings and other routine dental work, at a fraction of the price a dentist would charge. The ADA is fighting it tooth and nail of course. It's like reading "wealth of nations" all over again. Same thing in 1700's: guilds conspiring to limit competition.

The existing entitlements were setup when the life expectancy was about 63, and the population was growing rapidly, and oil was cheap. Toto, we are not in Kansas anymore!

[c1ue]

Re: Entitlements are doomed!

Two states have allowed sub-dentists to do fillings and other routine dental work, at a fraction of the price a dentist would charge. The ADA is fighting it tooth and nail of course. It's like reading "wealth of nations" all over again. Same thing in 1700's: guilds conspiring to limit competition.

One key note from "23 Things about Capitalism They Don't Tell You" was exactly in this vein: that the only way to increase service productivity was to decrease service.

In the above case, it is a lesser qualified delivery person.

[jk]

Re: Entitlements are doomed!

One key note from "23 Things about Capitalism They Don't Tell You" was exactly in this vein: that the only way to increase service productivity was to decrease service.

In the above case, it is a lesser qualified delivery person.

not every service needs the most "qualified" service provider. you don't want your neurosurgeons spending their time sewing up cuts in the e.r. the issue is making triage decisions appropriately.

[c1ue]

Re: Entitlements are doomed!

not every service needs the most "qualified" service provider. you don't want your neurosurgeons spending their time sewing up cuts in the e.r. the issue is making triage decisions appropriately.

Your point is fair, but your example is not.

A neurosurgeon is not in any way *more* qualified to sew a cut than most any other surgeon, thus it cannot be said that a neurosurgeon is providing the highest service quality.

[jk]

Re: Entitlements are doomed!

Your point is fair, but your example is not.

A neurosurgeon is not in any way *more* qualified to sew a cut than most any other surgeon, thus it cannot be said that a neurosurgeon is providing the highest service quality.

fine. you don't want your plastic surgeons to be sewing up routine cuts in the e.r.
feel better? ;-)

[flintlock]

Re: Hudson: Twilight of the Gods

I have a friend who sold a house in the NW 'burbs and took a roughly $50k loss to get out of it, but his taxes were $12k/yr. In roughly 4 years he is even again. He downsized to a townhome in a different burb with more commercial tax base than where he had been, but his taxes are close to $5k on a townhome no less. Another couple we know out there are paying almost 13K on a house that realistically has not gone up in value in over a decade or more. I always question how they get out of it when the monthly tax nut is over $1k/mo. Thats a damn lot of money to pay in taxes. Of course much of that goes down the rathole of the Forest Preserve District. Whoever would have thought letting a bunch of trees grow could cost so much, huh?

I pity you CB. I suggest you try to get out now while rates are low and there may still be suckers to get you out. A jump in rates and you may never get out.

I pay $2400 year on a fairly new 3300 sq ft home in a relatively affluent and thriving suburban area. Excellent schools, police, and fire. Why can't other jurisdictions make due with 3x the property taxes? Just wondering. Do these areas in question have sales tax also? State income taxes?

[charliebrown]

Re: Hudson: Twilight of the Gods

I have excellent police fire and schools.
I am paying 8000 on a 2300 sq ft 20 yr old house in a mixed neighborhood of single family homes. Some small 1500 sq ft post war, some 2000 sq ft 70's homes, some 3500+ McMansions. I hate to see what the McMansion bills are probably around 15K.

I have 8% sales tax, 5% state income tax.

[flintlock]

Re: Hudson: Twilight of the Gods

All the more reson that if you are not "set", it pays to own your own business so you are not beholden to some other persons idea of an 'ideal' employee.

Very true! Another reason I held out from getting a "real job" when some pretty lucrative ones were offered. None of those companies are still around today btw.

[flintlock]

Re: Hudson: Twilight of the Gods

I have excellent police fire and schools.
I am paying 8000 on a 2300 sq ft 20 yr old house in a mixed neighborhood of single family homes. Some small 1500 sq ft post war, some 2000 sq ft 70's homes, some 3500+ McMansions. I hate to see what the McMansion bills are probably around 15K.

I have 8% sales tax, 5% state income tax.

We have 7% sales tax. 6% state income, so pretty fair comparison. Now move into the next county closer to the city and property taxes do get higher. I guess higher costs just go along with city problems? I know Atlanta is famous for how badly it is run.

[Polish_Silver]

Re: Entitlements are doomed!

the only way to increase service productivity was to decrease service.

I don't agree at all. It depends how you define "service". If service means 1:1 face time, that may be true.

But if "service" means cleaning a floor, delivering packages, processing paperwork, there can be many productivity gains without decreasing quality.

Even teaching could become more efficient. If we think american schools are inefficient, then there must be others which are more efficient.
(they are not underfunded, relative to schools in other countries)

[doom&gloom]

Re: Hudson: Twilight of the Gods

I have excellent police fire and schools.
I am paying 8000 on a 2300 sq ft 20 yr old house in a mixed neighborhood of single family homes. Some small 1500 sq ft post war, some 2000 sq ft 70's homes, some 3500+ McMansions. I hate to see what the McMansion bills are probably around 15K.

I have 8% sales tax, 5% state income tax.

Hah!

roughly $4500 on a 2400 sq foot 1967 split level boring house in an affluent community.

10% sales tax, no income tax.

Excellent school district, no fire or police issues either.


oh yeah, and my friend tells me his taxes got reduced to $11.3k/yr and he got his assessed value down to around $425k.

[doom&gloom]

Re: Hudson: Twilight of the Gods

Very true! Another reason I held out from getting a "real job" when some pretty lucrative ones were offered. None of those companies are still around today btw.

sometimes it depends on what you can learn and 'take away' from those jobs. I had to work for a guy who could have been Mike Ditka's brother -- calm and fun one day, psycho off-his-lithium the next. did that for over 7 years until I learned enough and saved enough to open my own shop.