DeSantis Is Serious About Ending Property Taxes in FL—but Will It Work and Who Will Pay the $40 Billion Difference?

[CFordUNC]

I think the notion that our highest tax rate kicks in at $625K/$750K is ridiculous when we have so many people in this country making 7+ figures annually.

Completely agree with you.

I also think that the SS cap is nuts comparatively.

 

[gtyellowjacket]

I’m definitely someone who simultaneously believes in lower taxes and broadening the tax base, but also that it’s patriotic and a good thing to pay taxes. The biggest issue that I have as a taxpayer is that W-2 earned income is treated most the punitively. That has never made sense to me, and especially now as a high income earning household. My household W-2 will range from mid-six-figures to upper six-figures over the next three years, and once my spouse makes partner in her practice, it could likely be even higher. Yet even through taking advantage of maximizing every single available tax advantage retirement and savings account, I’ll still pay at the highest possible marginal rate. That’s totally fine, I consider it an immense blessing to be in a position to be able to do so. But the idea that someone in my situation who pays the maximum possible tax on earned income- even after taking advantage of every single possible legal tax reduction strategy- will still pay a higher percentage of my income in taxes then someone like Elon Musk or Jeff Bezos, is highly irritating.

This is also my biggest issue. If you are paid on a W2 for your work, its pretty progressive, and you aren't dodging too many taxes. If you make most of your income from leveraging your wealth, you pay at less than half the tax rate of someone who could earn 100 times less than you did. That makes zero sense to me.

 

[UNCMSinLS]

How about this? NO taxes EXCEPT one: a 100% You-Can't-Take-It-With-You tax (a.k.a., Estate Tax). Maybe throw in a modest homestead exemption for the surviving spouse. But otherwise, everything gets sold at auction and deposited into state coffers.

I wonder if one of the incubators of public policy would ever try such a thing?

 

[HeelYeah2012]

No sir. I think its sensible to tax both. If you ask Elon how much he made last year in my example he would say 100 billion, I would say 50,000 .We should both pay some taxes

Taxing unrealized gains is not only unconstitutional and completely unfair, but also would be a massive administrative burden. Do people have to get all of their investment properties appraised and such every year to determine their annual tax burden?

 

[wmheel1287]

Taxing unrealized gains is not only unconstitutional and completely unfair, but also would be a massive administrative burden. Do people have to get all of their investment properties appraised and such every year to determine their annual tax burden?

Just tax any loans taken against the value of the investment or any collateralization of it.

 

[finesse]

How about this? NO taxes EXCEPT one: a 100% You-Can't-Take-It-With-You tax (a.k.a., Estate Tax). Maybe throw in a modest homestead exemption for the surviving spouse. But otherwise, everything gets sold at auction and deposited into state coffers.

I wonder if one of the incubators of public policy would ever try such a thing?

Sounds like some of these liberals might.



“A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural.” — Thomas Jefferson

“There is no point more difficult to account for than the right we conceive men to have to dispose of their goods after death.” — Adam Smith (not a founding father, but an inspiration to them)

“The great object [of political parties] should be to combat [this] evil: . . . by withholding unnecessary opportunities from a few, to increase the inequality of property, by an immoderate, and especially an unmerited, accumulation of riches . . .” — James Madison

“[America] will not be less advantageous to the happiness of the lowest class of people, because of the equal distribution of property.” — George Washington

“I am conscious that an equal division of property is impracticable. But the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise. Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labour and live on. If, for the encouragement of industry we allow it to be appropriated, we must take care that other employment be furnished to those excluded from the appropriation. . . . t is not too soon to provide by every possible means that as few as possible shall be without a little portion of land.” — Thomas Jefferson (in reaction to the evils observed in

 

[Healing]

Taxing unrealized gains is not only unconstitutional and completely unfair, but also would be a massive administrative burden. Do people have to get all of their investment properties appraised and such every year to determine their annual tax burden?

The people with the power to keep unrealized gains untaxed pay a tiny fraction of their accumulated wealth gains. We’re not talking about heelyeah buying a rental condo, we’re talking about bezos realizing true wealth explosion because he, like the mass of billionaires, live their lives on credit lines backed by their massive wealth increases. That needs to be taxed.

 

[Healing]

Just tax any loans taken against the value of the investment or any collateralization of it.

Ding ding ding

 

[mpaer]

Taxing unrealized gains is not only unconstitutional and completely unfair, but also would be a massive administrative burden. Do people have to get all of their investment properties appraised and such every year to determine their annual tax burden?

Why Completley unfair?? It may be unconstitutional and an administrative burden. But back to my example-Elon "made" 100 Billion and I "made" 50,000

 

[HeelYeah2012]

Why Completley unfair?? It may be unconstitutional and an administrative burden. But back to my example-Elon "made" 100 Billion and I "made" 50,000

An unrealized gain is not liquid. If you generate $100k in unrealized gains and then you get a $30k tax bill as a result of it, which liquid cash are you using to pay the tax bill?

The investments could also just as easily go down by $100k next year if they went up by $100k this year.

 

[superrific]

Taxing unrealized gains is not only unconstitutional and completely unfair, but also would be a massive administrative burden. Do people have to get all of their investment properties appraised and such every year to determine their annual tax burden?

1. It is not unconstitutional. I'm not going to talk about that with you. You don't know any relevant law, and your legal opinions have no basis at all.
2. What about pledged assets? What if I have a billion in unrecognized gains, and then I borrow money based on that billion -- i.e. putting it up as collateral to get a low interest rate, close to RFR? That should, in my view, absolutely be a realization event and there's no cogent counter-argument to the contrary.
3. There is absolutely nothing unfair about it.
4. The administrative burden is real. That's the best argument against it. Of course, it's not a burden to do it for publicly traded securities, and not much of a burden to do it even for privately held companies. FWIW, we could use conservative valuation methods for non-traded equities, along the lines of "this method is probably going to come out at 20-30% lower than the actual value but it's better than nothing."

The hard part really comes in when talking about assets such as art, jewelry, real estate, etc. Those assets tend to require individualized assessments. But everything other than real estate is economically insignificant and we wouldn't lose much revenue by excluding them. Real estate tax is already wonky. For these assets, we could just tax them at 50% when sold. Actually, we should do that anyway because these are, in general, not economically productive "assets."

 

[superrific]

An unrealized gain is not liquid. If you generate $100k in unrealized gains and then you get a $30k tax bill as a result of it, which liquid cash are you using to pay the tax bill?

The investments could also just as easily go down by $100k next year if they went up by $100k this year.

Unrealized gains don't have to be taxed at the first dollar. In fact, nobody wants to do that. How about taxing unrealized gains at 7 figures? If your stock portfolio goes up by $1M, and you don't have liquidity to cover it -- then borrow! Or sell some of the securities!

Liquidity is not normally a barrier to taxation. Corporate mergers today tend to use stock and cash as compensation, but it wasn't always that way. In the 80s, buyers would pay for companies with some cash, some debt, some weird knick-knacks on occasion (I saw one where factory equipment was dividended out as part of the transaction), etc. If you get debt out of a merger in exchange for your stock, you have no liquidity (in fact, the debt is likely to be less liquid than the original stock, and it might even have transfer restrictions) but the transaction is still taxable for you.

 

[mpaer]

An unrealized gain is not liquid. If you generate 100 billion in unrealized gains and then you get some massive tax bill for tens of billions of dollars, which liquid cash are you using to pay the tax bill?

The investments could also just as easily go down by 100 billion next year if it went up by 100 billion this year.

Thanks for the answer
But you tax plan I guess . Wake County told me the house I ilve in is now worthy of an extra 1500 in taxes this year-but having the house offers me no liquid cash to pay that tax.
The Investments tanking next year is certainly an interesting question in my goofball "Tax unrealized gains" suggestion. But back to my Wake County ex-next valuation might say my house is worth less. I would likely then pay less taxes. So if the stocks tank-well next year no taxes -no gains

 

[CFordUNC]

How about this? NO taxes EXCEPT one: a 100% You-Can't-Take-It-With-You tax (a.k.a., Estate Tax). Maybe throw in a modest homestead exemption for the surviving spouse. But otherwise, everything gets sold at auction and deposited into state coffers.

I wonder if one of the incubators of public policy would ever try such a thing?

Even as a Republican at the time I was not fond of the TCJA, but one aspect of it that I do like- and the one aspect about which I’m happy to see extended- is the significantly higher estate tax exemption threshold (~$14 million single/$~$28 million household vs. $~7 million pre-TJCA). The majority of the clientele with whom I work personally are well above the household estate tax threshold, and I think that where it’s set currently nicely incentivizes things like transformative philanthropy to get the final amount that goes through probate lower while also being able to ensure that any surviving spouse and/or children and grandchildren heirs are well provided for.

 

[superrific]

Even as a Republican at the time I was not fond of the TCJA, but one aspect of it that I do like- and the one aspect about which I’m happy to see extended- is the significantly higher estate tax exemption threshold (~$14 million single/$~$28 million household vs. $~7 million pre-TJCA). The majority of the clientele with whom I work personally are well above the household estate tax threshold, and I think that where it’s set currently nicely incentivizes things like transformative philanthropy to get the final amount that goes through probate lower while also being able to ensure that any surviving spouse and/or children and grandchildren heirs are well provided for.

For the record, the tax policy preferences you've stated on this thread also happen to be ones that seem optimal or close to it for you.

That's not disqualifying -- it doesn't mean that you're just talking up your book -- but it's not the best optics.

 

[CFordUNC]

For the record, the tax policy preferences you've stated on this thread also happen to be ones that seem optimal or close to it for you.

That's not disqualifying -- it doesn't mean that you're just talking up your book -- but it's not the best optics.

Yeah. I did think about that as I was typing and debated how to articulate it better but didn’t. You’re exactly right. Not the best optics, I do acknowledge.

 

[wmheel1287]

An unrealized gain is not liquid. If you generate $100k in unrealized gains and then you get a $30k tax bill as a result of it, which liquid cash are you using to pay the tax bill?

The investments could also just as easily go down by $100k next year if they went up by $100k this year.

But unrealized gains which are used to generate liquidity such as loans are not truly unrealized. That is a huge problem. Borrowing against an asset is turning the asset into liquidity.

 

[4heels4evr]

I haven't seen this discussed elsewhere. More magic accounting by Republicans designed to give massive tax breaks to the wealthiest among us while hoodwinking the working class fools who support them. Link

"Florida Gov. Ron DeSantis is doubling down on his push to eliminate property taxes in the state, raising questions about how key services would be funded if the effort is successful.

At a press conference on Monday, DeSantis reiterated his support for measures to limit or ban the collection of property taxes at the local level in Florida, which bring in more than $40 billion for the state each year.

"Just for being on your property, you’ve got to write a check to the government every year, so you're basically paying rent to the government to live on your own property," he said. "We're going to be really looking at ways to bring people relief from that, because I think it's been really something that's pinching a lot of homeowners, particularly seniors on fixed income."
........
Numerous economic studies have found that property taxes are among the least damaging forms of taxation—in other words, taxes on real property have less of a negative impact on economic growth when compared to the same revenue raised by sales or income taxes.

Florida is one of seven states that has no income tax, meaning that if property taxes were eliminated, sales taxes, fines, and fees would be the main ways to make up the difference. Florida already has a 6% general sales tax, and the Florida Policy Institute estimates that it would have to be doubled to 12% to make up the revenue shortfall from eliminating property taxes.

A 12% sales tax would be the highest in the nation, and FPI argues that such a high tax on basic goods and services would “disproportionately and negatively” impact households with low to moderate incomes. Tourists, who contribute 14% of all sales tax revenue, and businesses, who pay 20%, would also be hard-hit by the increase, the think tank said.

However, DeSantis responded to the FPI report by insisting that he would not raise sales taxes. "I’m pretty sure the Legislature would not raise the sales tax and I’m quite certain I'd veto any increase," DeSantis commented on X."

easy answer, become a billionaire or die

 

[HeelYeah2012]

But unrealized gains which are used to generate liquidity such as loans are not truly unrealized. That is a huge problem. Borrowing against an asset is turning the asset into liquidity.

I don’t disagree with you there.

There are lots of ways to tax rich people more besides just trying to tax their unrealized gains, which has all kinds of pitfalls involved. I’m unclear if you even think taxing unrealized gains is a good idea or not, so I’m not saying you advocated for it.

 

[superrific]

But unrealized gains which are used to generate liquidity such as loans are not truly unrealized. That is a huge problem. Borrowing against an asset is turning the asset into liquidity.

FTR: I'm pretty sure that making collateralization a realization event originated with me. It was definitely my idea on the ZZL. Surprisingly, it was sort of my idea among law professors as well. I attended a talk given by one of these two authors below, and my question sparked about 20 minutes of commentary and then there was some email/listserv activity after that. I very much doubt that I was the first to think of it or talk about it (it's not a complicated idea), but the attendees at that talk seemed surprised by it. I was surprised that it was a surprise.

I only say that because the idea has not really picked up steam outside of some academic circles, to the best of my knowledge. It's possible that's because the idea has problems associated with it that I haven't seen. I didn't actually write in this area, and I didn't read broadly -- I'm not a tax guy, so it was never more than an idle interest. So there might be some literature that casts some amount of cold water on the idea.

From my perspective, it seems perfectly intuitive.

No More Tax-Free Lunch for Billionaires: Closing the Borrowing Loophole

In this article, Fox and Liscow propose a tax on billionaires that would impose a tax on borrowing against assets and explain how it could be designed and how i

papers.ssrn.com