Ethics of Real Estate Investment, NIMYism and the Housing Crisis

In reply to frenchyd :

First, the money won't go back to where it came from (a citizen), it'll go to the government.  Additionally, we already have an estate tax which for 2022 was 12.06M...most people have two kids so that's only 6.03M for each of them before the government starts siphoning off up to 40%.

Do you know what's going to happen if I'm not allowed to give my estate to my children...I, and millions of others, are going to aim for running out of money right as we die.  50% of us will come up short which will force the government to be paying our late life expenses which are often huuuge.

Change the tax from an estate tax to an inheritance tax and if you think 6.03M is too much per child, propose a lower number.

Right now, it sounds like you want a 100% tax on every dollar...really bad idea IMHO.

Edit, I believe the 12.06M is scheduled to be cut in half (after adjusting for inflation) on January 1st, 2026 so we're looking at only 3.015M per child if you have two.

frenchyd said:

Duke said:

frenchyd said:

    My concern is about those  in the 1%  who have access to wealth privilege and power they haven't earned.  

Why?  Did they steal it from you personally?

 

Duke; 

 Do you even understand why America declared its independence?  It's because a King who was king not for his merit but because of his bloodline and time of birth. ( oldest son) tried to tell America what to do.  

I have no problem with people earning  wealth.   Good for them.  My problem is those who got powerful because of their bloodlines.  
    If daddy paid the same percentage of taxes that his employees do.  Fair enough. Teach your children as well as you can.   Let them start from where you started from.  Wish them well and the rest goes back where it came from.  ( this country) 

     I think it's cruel to raise kids to feel entitled to something they didn't earn.  
   How many rich kids wind up wasting their lives on drink, drugs, and frivolities? Knowing they aren't expected to do what their parents did and they can't spend what they have in their lifetimes.  
     
     My standards of conduct are Americans Like George Washington Thomas Jefferson, John Adams.   

I almost didn't reply to this.  And maybe I shouldn't.

Frenchy, you're out there at the best of times, but these statements are just so chock full of E36 M3 I have to say something about it.

First off, do you understand what a king is?  Someone with absolute political power that is passed on by law from generation to generation.  You're really stretching it if you are trying to equate a prince or princess inheriting an absolute monarchy to a child of a rich family inheriting some wealth.

Second off, understand that I went to school with some very rich kids.  Children of governors, congresspeople, senators.  Some were easily 1%ers.  Lots of direct-line DuPonts and related families who have been very rich for a very long time.  Some of whose familiies got rich selling gunpowder to the very revolutionaries you keep talking about. 

Out of this cohort, NONE of these old-money kids was a problem.  None.  These people were polite, kind, friendly to everyone, trustworthy.  What anyone would call "good kids".  To look at any of them you never would have suspected they were more than comfortably middle-class (unless you visited their houses).

Some of them took up the family business(es) and grew them.  Some became artists or took up hand-building wooden boats or restoring antique cars, because they could afford to.  Some of them became politicians (a person from the class ahead of me is a current US senator), doctors, surgeons, lawyers, more traditional careers, whatever.  One guy coaches and promotes all manner of youth sports because he feels it's important, he loves to do it, and he can afford to.

There was absolutely no reason to set any of these people back to Ground Zero.  They wre absolutely ready, willing, and able to make constructive use of their inherited wealth.

You know who was a problem?  Some of the second-generation, new-money kids who thought they were rich.  The ones who were spolied because their parents made some money and wanted to prove it to the world.  And not even that many of them.

So resetting those people was not going to help either, because the problem was that they didn't understand what money was about yet.  They thought it was about looking rich and throwing their privelege around.  That takes a couple generations to unlearn.  Sending them back to Start doesn't help with that.

You talk about the "standards of conduct" set by George Washington, Thomas Jefferson, and John Adams as your ideal:

George Washington left his estate to his and Martha's extended families (they had no kids of their own), including the Mount Vernon property among several others.

Thomas Jefferson was deeply in debt when he died.  He left his estate to his daughter, who promptly had to start selling it off to pay her father's debts.  How about that standard of conduct.

John Adams was also deeply in debt.  His son John Quincy Adams actually bailed him out before his death, so he was able to retain some part of his holdings.  What was left was bequeathed to John and Abigail's surviving children, mostly JQA.

So... how exactly did these three "standards of conduct" NOT pass whatever wealth and resources they had on to their children?

In reply to Duke :

I too grew up with some 1%ers.  Although I was middle class.  
     Please don't tell me teenagers were saints. Even if they straightened out all teenagers push the envelope. Yes even I. It's how we rebel against our parents and get out of that soft cushy nest.

Not all wealthy kids turn out bad. Not by any means.    Some underperformed ( drink, drugs, etc. ) but grew out of it. But a few just abused their position. But the damage was big.  
What was the most disappointing  was those who simply coasted enjoying life without working for it.  Maybe taking extended vacations in Europe/Canada/etc  until they didn't have to worry about the draft. Then hired the right money managers  to grow their wealth.  
Some of that 
     

There shouldn't be an inheritance tax, that income has already been taxed once.  Double jeopardy isn't ok, I don't care how much is passed on.

frenchyd said:

What was the most disappointing  was those who simply coasted enjoying life without working for it.  Maybe taking extended vacations in Europe/Canada/etc  until they didn't have to worry about the draft. Then hired the right money managers  to grow their wealth.  
Some of that 
     

Sounds like jealousy to me. Why are you so worried about what others have? Worry about yourself, let others worry about themselves. 
 

Steve_Jones said:

frenchyd said:

What was the most disappointing  was those who simply coasted enjoying life without working for it.  Maybe taking extended vacations in Europe/Canada/etc  until they didn't have to worry about the draft. Then hired the right money managers  to grow their wealth.  
Some of that 
     

Sounds like jealousy to me. Why are you so worried about what others have? Worry about yourself, let others worry about themselves. 

Nope!  Somebody is getting what they didn't earn and shouldn't have...

...but I bet the tune changes when it's time to pass on that big fancy house to his kids.

[edit]  And, for what it's worth:

George Washington made most of his money as a land speculator.

Thomas Jefferson inherited a whole bunch of his money from his parents, who held huge tracts of land.

John Adams's parents were upper middle class, though not exceptionally wealthy like Jefferson's parents were.  But Adams's father made him go to college, and paid for it.

In reply to frenchyd :

I'm sincerely sorry I offended you.

I said "it sounds like you want a 100% tax on every dollar" based on the following quote you made on page 56...

"Let them start from where you started from.  Wish them well and the rest goes back where it came from.  ( this country)"

I, and many others, started with nothing so, again, it sounds like you believe people like me shouldn't be allowed to give anything to our children.

If I'm missing something, please correct me.

If you want to increase tax revenue and get rid of unfair tax sheltering/income for the top 1% (or 20% or 50% or whatever), replace capital gains tax with standard income tax.

To me this is the biggest loophole that nobody at the bottom can benefit from and nearly everyone at the top benefits from... and its huge.

ProDarwin said:

If you want to increase tax revenue and get rid of unfair tax sheltering/income for the top 1% (or 20% or 50% or whatever), replace capital gains tax with standard income tax.

To me this is the biggest loophole that nobody at the bottom can benefit from and nearly everyone at the top benefits from... and its huge.

 

Excellent, I hadn't considered that.  
 What are the negative ramifications?  

In reply to ProDarwin :

They tried that and the commercial real estate market came to a screeching halt. What property didn't get sat on until the tax laws changed was run through a 1031 exchange and the gov't ended up with less tax dollars.

In reply to frenchyd :

Well, the negative ramifications for YOU are that you (or your estate or heirs) will one day owe a butt load of taxes on the capital gains for that multi-million dollar place you call home....

ProDarwin said:

If you want to increase tax revenue and get rid of unfair tax sheltering/income for the top 1% (or 20% or 50% or whatever), replace capital gains tax with standard income tax.

To me this is the biggest loophole that nobody at the bottom can benefit from and nearly everyone at the top benefits from... and its huge.

 

A wide range of middle class people have an effective tax rate of ~25% on their earned income.

California has by far the highest long term capital gains tax in the country but here's an image of the calculator I built for retirement planning:

So, if we start treating long term capital gains tax the same as earned income tax, even in super high tax California, my annual taxes will increase by 79.6% ($43,750 vs $24,359).

If you think it's fair to change the rules on retired or soon to be retired people mid-game, so be it but just be aware of what the impact would be.

In reply to RX Reven' :

I'm interested in that graph, but can't quite figure it out...

Is the $175,000 you have listed as "Income" actually "Capital Gain"?  What's the $517K?

Did 2 columns get smooshed into 1?

SV reX said:

In reply to frenchyd :

Well, the negative ramifications for YOU are that you (or your estate or heirs) will one day owe a butt load of taxes on the capital gains for that multi-million dollar place you call home....

Hmmm,  either you or I have a different definition of Capitol gains.   See I don't think anything you pay property tax on meets that definition. At least not homesteaded roperty tax. 

SV reX said:

In reply to RX Reven' :

I'm interested in that graph, but can't quite figure it out...

Is the $175,000 you have listed as "Income" actually "Capital Gain"?  What's the $517K?

Yes, the 175K is my budgeted retirement income from capital gains and the second and fifth columns are the tax brackets for Fed & California.

Basically, my calculator is built in Excel with "if" statements to work out how much tax I'll owe from each tax bracket.

Feel free to PM me and I'll send the calculator.  Of course, you'll need to change the values in the fifth and sixth columns to reflect the brackets and percents for your state or just tell me what state you're (SC???) and I'll fix it for you.

FWIW, I don't live large...the 175K annual budget is because I started my family late so I'll be paying for college well into retirement.

In reply to frenchyd :

It's definitely not my definition (or yours)

Look up "capital gains exemption on primary home"

In reply to RX Reven' :

Well, it's livin' larger than me! Haha!

But yes, I'd appreciate the spreadsheet. I'll PM you

In reply to frenchyd :

1). Where did I talk about either you or I being 1%ers?  I didn't because it's not relevant.

2). Where did I talk about either you or I not paying taxes?  I didn't because it's not relevant.

3). So... Washington, Jefferson, and Adams risked something and deserved to be rewarded for it?  Hmmmmm.  Not sure how that is relevant to your point about inheritance, but it does seems to bear on the previous 30 pages of discussion in a way you probably didn't intend.

RX Reven' said:

If you think it's fair to change the rules on retired or soon to be retired people mid-game, so be it but just be aware of what the impact would be.

I think (like all of our systems that people depend on/plan around for decades) that it would need to be a gradual phase-out.

I benefit from it greatly, but its also a huge loophole to compensate the wealthy while dropping their tax rate a ton.

frenchyd said:

In reply to RX Reven' :

A parent can provide tax free something like 5-6 million. He can also gift $10,000 a year without the recipient owing  any tax. 2 parents $20,000 over their life. Assume 80 year life. 1.6 million.

I've never met anyone that had kids at 1 year old, have you? Can you please show me someone that gives their kids money every year for 80 years?  How old are these parents if the kid is 80? As far as people you seem to think are not paying their share being cheats, if the rules allow deductions/shelters/loopholes change the rules.  Playing by the rules is not cheating.

I propose the rules unfairly benefit one group more than the other, more needy group.

You disagree, because you are in the unfairly benefited group. 

If you fight the rule change using all the resources at your disposal, what does that make you?  

From a historical perspective, the American colonies tried at length to change the rules. When the King refused again and again, they were left with only one option. How would history have played out if the American Revolution never used violence to achieve its goals? 

It's interesting how some in this thread propose that "change" can be too hastey, and lead to unintended consquences, but I'd argue that violence has far more unpredictable outcomes. 

In reply to pheller :

Except you're not proposing changing the rules to make things more fair.

You're proposing to change the rules to force people to do what you think they should do with their private property.

You want to talk about income tax v capital gains tax v inheritance tax?  We can have that discussion.

But you're insisting that undeveloped property is a serious issue and proposing a change that discourages conservation of open space and forces liquidation or hasty, ill-advised development.