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The Government Passes A Renters Tax! Time To Pay Up



In good old fashion political jockeying, the House finally agreed to a budget and unknown to many, they also passed a Renters Tax!  The idea is for all Americans to participate in our simple tax system and shore up our huge deficit.  The new law states that starting October 1, 2011 all renters shall pay a Renters Tax equal to half the value of their rented home as determined by the government every year.  Landlords equally pay the other half.

Example: A nice 3 bedroom, 2.5 bath property is assessed at $500,000.  A taxation of 1.2% = $6,000 must be paid once a year.  Since the renter benefits from living in the home as well as the public parks, roads, libraries, and schools, the renter writes a check for $3,000 to the local state county tax board.  Meanwhile, even though the landlord does not enjoy any of the benefits of living in the home, s/he receives rental income, potential long term asset appreciation, and the option to move back in at his or her choosing.  As a result, the owner pays for half the annual property tax by sending in a check as well.  Perfect equality.  Both renter and owner have “skin in the game” and look to better their surrounding community.



THE GOVERNMENT BELIEVES WE SHOULD ALL PITCH IN TOGETHER

Are all renters pissed and shocked for having to chip in and help out our debt-laden economy yet?  Well don’t be, this is my April Fool’s post!  One of my most unpopular posts, “Renters Should Pay More Tax” engendered a lot of criticism from renters who say they already pay taxes.  My response was of consistent stubbornness to not recognize that landlords charge a rental price that bakes in all costs, or at least tries to.

One could argue that renters pay more than their fair share of property taxes because landlords pass their entire costs to tenants if they are at least cash flow break even. Although I physically write the check to California for my rental property taxes, I definitely charge a rent that covers all costs and then some to reward me for the trouble of landlording. Otherwise, I might as well put all my money in CDs in kick back.

I’m sure I got many of you riled up due to my stubbornness.  I have to admit, that was kind of the point.  I aimed to create an understanding, and perhaps an empathy that singling out any particular group to pay more taxes than they already are is a very offensive and annoying thing to do.  To vote to raise taxes on individuals in the 33% and 35% tax bracket, while you yourself aren’t willing to pay more taxes is wrong. It’s especially wrong since the top 25% of earners pay 87% of all taxes already!



A GOOD PERSPECTIVE

Jason from My Money Minute had a great comment which cuts to the point:

Stop calling it a Renters Tax, and just label it an Occupancy Tax, like governments do on hotels. Hotels factor in their property tax into how much to charge to rent a room for the night, then the government tacks on 10% or more to the renter to occupy the space.

So if you want a “Renters Tax”, then charge 1% of rent and have it collected by the landlord each month.

I don’t even think Sam is for a Renters Tax. What he’s probably for, is all citizens feeling the hurt of paying taxes. When we buy goods at a store, we physically SEE the added sales tax. When we register a car, we FEEL it when we write a check each year. But when taxes are “included” in a cost (rent, for example), that ‘hurt’ is absent, making it easier to blame or pass responsibility for taxes on to another subset of people (the “rich”, property owners, etc.).

If renters had to physically SEE property taxes they are paying each year separated from their rent, they have that proverbial “skin in the game” mentality, and would be less apt to endorse raising taxes on property owners, the ‘rich’, and any other group of people they feel can afford paying more taxes.

I think Sam’s point is the “skin in the game” argument — More people who have to contribute to each type of tax (sales, income, property, use, vehicle, etc.) = Less class warfare, less nanny-state reliance, less pass-the-buck mentality, and greater empowerment of the individual.

The bigger the government, the smaller the individual. “Skin in the game” empowers individuals while decreasing the role of government.

Am I on to something here, Sam?

Very good perspective Jason!  It’s about everybody pitching in and visibly seeing where their money is wasted.  It’s also a lot of semantics. In the end, know that it is ludicrous to try make others pay more to the government when you aren’t contributing more yourself.  Stop finger pointing at others, and just focus on what you can do to contribute more.

Sorry for winding you guys up!  I’m against tax increases in general, except for those who consistently make money and don’t have to pay anything.  That’s just ridiculous.  Just think though, you can always argue whichever way you want.  That’s why there’s always so much gridlock in the government!



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Best,

Sam



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