> The alternative is that we basically force people out of houses they've bought by gouging them with taxes. That seems much more unfair than the alternative.
Oh no! People with a multiple millions in assets have to choose between paying taxes on their immense wealth or selling it!
Sarcasm aside, this is how it's done most places in the US. It works just fine in those places and isn't considered unfair. Why is paying taxes on your wealth considered unreasonable here?
> Why is paying taxes on your wealth considered unreasonable here?
If I buy a painting from a young, unknown artist for $100, for example, and 30 years later the artist is well known and that painting could be sold for $1 million, we don't make me pay taxes on the $999900 my wealth has increased due to owning the painting.
Instead, we keep track of what I paid for the painting, and when I eventually do sell it and so the wealth represented by the painting gets converted into money we tax me on the gain then.
Offhand, real estate is about the only thing I can think of where you can own something, and because someone else would be willing to buy it for a lot more than you paid, you have to pay taxes based on that much higher amount.
Why should real estate wealth be treated different than other forms of wealth?
The difference is that real estate isn't just a financial asset. It's an exclusive claim on a sizable chunk of immobile physical space that potentially has many other uses, none of which can happen when it's full of whatever's there right now. This isn't true of a bond or a painting.
It's in the general interest of society to ensure that land is economically productive because it's central to a great many other aspects of life. This is generally intended to be reasonably in line with what its potential is. This also really isn't true of a bond or painting.
My answer is that real estate wealth is qualitatively different in ways both important and relevant from other forms of wealth.
This is an old old discussion. I'll defer to Churchill who can speak to it far better than I:
> Nothing is more amusing than to watch the efforts of land monopolists to claim that other forms of property and increment are similar in all respects to land and the unearned increment on land.
They talk of the increased profits of a doctor or lawyer from the growth of population in the town in which they live. They talk of the profits of a railway, from the growing wealth and activity in the districts through which it runs. They talk of the profits from a rise in stocks and even the profits derived from the sale of works of art.
> But see how misleading and false all those analogies are. The windfalls from the sale of a picture -- a Van Dyke or a Holbein -- may be very considerable. But pictures do not get in anybody's way. They do not lay a toll on anybody's labor; they do not touch enterprise and production; they do not affect the creative processes on which the material well-being of millions depends.
> If a rise in stocks confers profits on the fortunate holders far beyond what they expected or indeed deserved, nevertheless that profit was not reaped by withholding from the community the land which it needs; on the contrary, it was reaped by supplying industry with the capital without which it could not be carried on.
> If a railway makes greater profits it is usually because it carries more goods and more passengers.
> If a doctor or a lawyer enjoys a better practice, it is because the doctor attends more patients and more exacting patients, and because the lawyer pleads more suits in the courts and more important suits.
> At every stage the doctor or the lawyer is giving service in return for his fees.
> Fancy comparing these healthy processes with the enrichment which comes to the landlord who happens to own a plot of land on the outskirts of a great city, who watches the busy population around him making the city larger, richer, more convenient, more famous every day, and all the while sits still and does nothing.
> Roads are made, streets are made, services are improved, electric light turns night into day, water is brought from reservoirs a hundred miles off in the mountains -- and all the while the landlord sits still. Every one of those improvements is effected by the labor and cost of other people and the taxpayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is enhanced. He renders no service to the community, he contributes nothing to the general welfare, he contributes nothing to the process from which his own enrichment is derived.
Oh no! People with a multiple millions in assets have to choose between paying taxes on their immense wealth or selling it!
Sarcasm aside, this is how it's done most places in the US. It works just fine in those places and isn't considered unfair. Why is paying taxes on your wealth considered unreasonable here?