My Tao - The Real-Estate Trap

The taxman has it easy these days. With everything registered and reported into him, a few keystrokes on his computer is all he has to invest of effort to check on us. However, this has made him lazy. If it isn't in the computer, he won't check on it. Barter and savings in tools, furniture and precious metals will not be taxed unless we report this ourselves.

This has not gone unnoticed. People are increasingly turning to the parallel economy for their livelihood. The less we register with the taxman, the better off we are, and a point is rapidly approaching where taxation becomes close to impossible. The taxman is therefore forced to revert to earlier practices, less reliant on voluntary reporting by his subjects. The trend is towards taxing that which is visually apparent rather than that which is reported.

The easiest thing to tax is real-estate because it's impossible to hide. It's physically anchored to the ground. It cannot be moved out of the taxman's reach, and can therefore be confiscated if need be. This is why the default target of any tax-regime is real-estate, and we're about to see this come back in a big way. Most states and local governments already tax real-estate, but there is a long way to go yet. There are all sorts of improvements that can be made in the tax-code. A second home can naturally be taxed more than a permanent dwelling, a luxurious house more than a modest one. Windows and chimneys can be counted. The possibilities are endless, and they will increasingly come into effect as other tax-revenues dry up.

Those who have invested heavily in real-estate are likely setting themselves up for a shock as they will be the prime target for the taxman in coming years. They will be hit by a double whammy as they find themselves hit by higher taxes and lower real-estate prices. With a lot of people finding themselves forced to sell real-estate in order to avoid the constant drain of taxation, prices for certain pieces of property may even go negative.

People will much prefer to save in precious metals which is close to impossible to tax. If used directly in commerce it cannot even be taxed at point of transaction. It will evade taxation in the same way other kinds of barter evade taxation. A piece of real-estate can be transacted for an official amount close to zero, combined with an unofficial amount of gold. But the amount of gold required may be negligible because the main attraction for the seller may be the lower tax burden rather than the gold.

As things stand, the trend is towards heavier taxes on real-estate. We should therefore be careful, and not invest too much in it. A modest house with a garden in a rural area, or a small flat in a town, are our best options because there are limits to how much the taxman can take from the lower end of the wealth spectrum. However, renting a house may not work out very well because landlords are likely to pass the cost of taxation onto their tenants.

As with all things related to the Tao, we should seek balance and modesty. A debt free barter based economy is more likely to provide us with the balance and harmony that we crave than leveraged investments in a highly regulated and taxed economy.

By User:Brendel at en.wikipedia.org - Own work, CC BY-SA 3.0, Link