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The Masked Tulip

An "Audible Gasp" Was Heard When The Chicago Fed Unveiled Its "Solution" To The Pension Problem

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Illinois has a huge public sector problem.... so naturally every attempt to bail out the public sector pensions and no one gives a feck about private workers.... ditto here in the UK....

Basically they intend to dramatically increase the annual taxes on houses - I like the bit where they think more people will move to Illinois because house prices will now go down... ignoring that they have shafted all those who already have bought houses....

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n audible gasp went out in the breakout room I was in at last month’s pension event cosponsored by The Civic Federation and the Federal Reserve Bank of Chicago. That was when a speaker from the Chicago Fed proposed levying, across the state and in addition to current property taxes, a special property assessment they estimate would be about 1% of actual property value each year for 30 years.

Evidently, that wasn’t reality-shock enough. This week the Chicago Fed published that proposal formally. It’s linked here.

It surely ranks among the most blatantly inhumane and foolish ideas we’ve seen yet.

Homeowners with houses worth $250,000 would pay an additional $2,500 per year in property taxes, those with homes worth $500,000 would pay an additional $5,000, and those with homes worth $1 million would pay an additional $10,000.

 

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Don’t they understand that people won’t build on or improve property when property taxes are that high? When taxes are 3 percent to 6 percent, any value you add to your home is going to be taxed at that high rate forever. Have they never been to our communities with countless disrepaired, abandoned homes and commercial properties, which are the result?

Get this, which is part of the Fed’s reasoning:

“New taxes wouldn’t affect people thinking of moving to Illinois. While they would have to pay higher property taxes, that would be offset by not having to pay as much for their new homes. In addition, current homeowners would not be able to avoid the new tax by selling their homes and moving because home prices should reflect the new tax burden quickly.”

 

https://www.zerohedge.com/news/2018-05-12/audible-gasp-was-heard-when-chicago-fed-unveiled-its-solution-pension-problem

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Posted (edited)
57 minutes ago, The Masked Tulip said:

Illinois has a huge public sector problem.... so naturally every attempt to bail out the public sector pensions and no one gives a feck about private workers.... ditto here in the UK....

Basically they intend to dramatically increase the annual taxes on houses - I like the bit where they think more people will move to Illinois because house prices will now go down... ignoring that they have shafted all those who already have bought houses....

 

 

https://www.zerohedge.com/news/2018-05-12/audible-gasp-was-heard-when-chicago-fed-unveiled-its-solution-pension-problem

What starts in the US tends eventually to cross the Atlantic to Britain. 

Some people have been advocating extra taxes on land and property as a way of helping to reduce house prices and to help to rebalance the economy but I don't think they thought it would be used to effectively boost public sector living standards at the expense of the private sector.  No rebalancing there although I don't think the US economy needs rebalancing quite as much as Britain's.

Edited by twocents

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Whilst I don't like the motivation surely this kind of property tax is exactly what we should have in the UK.

1% seems rather high but half a percent across everybody - great.  So if you have a £1m home you pay £5k council tax annually and if you have a £100k home you pay £500.

As it stands (this is for Conrwall) the person with the £100k home would be paying £1.2k and the person with the £1m home would be paying £3.5k.

The reformed version seems ideal - a struggling low paid worker renting a sub £100k home would benefit hugely from a £700 reduction whilst the person in the £1m home has to find another £1.5k a year which they probably won't notice.

Introduce it next year please.

 

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4 minutes ago, Cunning Plan said:

I'm confused.

A $1m home in Illinois will already attract an annual property tax of $22,000. 

Is this an additional tax?

https://smartasset.com/taxes/illinois-property-tax-calculator

Yes.  But it's only for thirty years.

Like the introduction of income tax was a temporary measure.

In the US these local variations have a big effect; lots of people living just over the border in one state and working in the next one.

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27 minutes ago, Frank Hovis said:

Surveyors; they are pretty good these days in this country at least.

Based on low IRs/QE fuelled prices or 3x wage prices ?

 

Lot of scope for a lot of tax !!!

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Just now, TheCountOfNowhere said:

Based on low IRs/QE fuelled prices or 3x wage prices ?

 

Lot of scope for a lot of tax !!!

Based upon recent sales values of comparable properties.

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1 hour ago, Frank Hovis said:

Based upon recent sales values of comparable properties.

Im with the Count.

The low transaction rates mean they cannot be valued. For every house that sells there's 5 stuck.

Surveyors opinions are useless now.

Basically, you need to value housing by the median wage x 2 x 4.5.

The incomes - and ability to borrow of the under 50s, the driver of 80% of housing transaction - are very different to what the 50s experienced.

 

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2 hours ago, spygirl said:

Im with the Count.

The low transaction rates mean they cannot be valued. For every house that sells there's 5 stuck.

Surveyors opinions are useless now.

Basically, you need to value housing by the median wage x 2 x 4.5.

The incomes - and ability to borrow of the under 50s, the driver of 80% of housing transaction - are very different to what the 50s experienced.

 

Actual valuation is a straightforward and evidenced process.  Look at sales of similar properties in the area over the last one or two years and adjust for any other factors such as anything intrinsic to the house or local indices if the last sale was a year or more ago.

What you are both saying is that the market as a whole is over valued and I don't disagree; but valuation by a surveyor (as opposed to an Estate Agent taking a wild punt to win the business) follows a clear methodology.

If the surveyor I know valued my house I would be confident that it was the current market price and if I put it on the market for that it would sell within a reasonable time.

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We are way ahead.

£1 out of every £5 paid as Council Tax is solely for LGPS and other pension schemes for 'council workers'.  

That figure from Tax Payers Alliance some time ago.

Must be at least £1.50 now or maybe more.  

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