Re: Salon: SS Reform: "Bush's Dirty Little Secret"

royls_at_telus.net
Date: 02/08/05 

Date: Tue, 08 Feb 2005 06:29:50 GMT

On Mon, 07 Feb 2005 16:38:25 -0800, Courageous <dontwant@spam.com>
wrote:

>>I didn't think comparison with other countries was the point.
>
>Well it's about finding a representative figure. Removing immigrants
>is useful, because we have a disproportionate number of fledgling
>cultural elements, as it were.

IMO it's a completely different subject.

>>No, the more real estate increases in value, the more likely it is
>>that that increase is keyed to overall inflation, which is compensated
>>by higher mortgage interest rates.
>
>I'd think you have to be right about that; I would suppose that the
>calculus has to be fairly constant: at some point there is a spread
>between what the "appreciation, greater than inflation" point is on
>the investment, and the amount of interest paid on the original purchase
>amount. I suppose I could fiddle with this in Excel.

There is another factor in play here: timing. In the early phase of
the inflation cycle (think of the early 1960s), money supply is
increasing more than prices, and interest rates are consequently low
-- real rates may even be negative. This is the time to buy real
estate on time and lock in the rate. But late in the inflation cycle
(the early 80s), money supply growth is choked down, and interest
rates far exceed the inflation rate. Inflation does drive interest
rates, but they are typically out of phase by a few years.

>I should say, though,
>that I've made this calculation before, and the "other people's money
>factor" along with the not-to-be-overestimated "government tax break
>factor" make real estate investment, even with a mortgage, comparable
>to long term investments in mutual funds.

I am aware that land is the most profitable investment of any large
class of asset, and that homeowner tax breaks make the land under
one's own dwelling a far superior investment still.

>>>only
>>>about a quarter of all land value is owned by working people, but they
>>>pay about 90% of the taxes)
>
>Rereading this, where do you draw this fact from? I'm assuming when you
>say "90% of all taxes", you must be including SS, registration, property
>tax, sales tax, so on and so on. I know you can't be talking about
>federal income tax, right?

Right. All taxes, because the government spending that increases land
value is financed by all taxes. The 90% figure is just my estimate,
based on the fact that total tax burden is a remarkably consistent
fraction of total income, but earned income is taxed at a higher true
effective rate than unearned income.

-- Roy L

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