tag:blogger.com,1999:blog-7225373.post4092752582972698726..comments2024-02-29T03:34:23.190-05:00Comments on Who Were the Sea Peoples?: Discounting taxesgcallahhttp://www.blogger.com/profile/10065877215969589482noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-7225373.post-68607895459859378072015-02-03T10:12:23.798-05:002015-02-03T10:12:23.798-05:00I think to the average person “save money with low...I think to the average person “save money with lower property taxes” means something quite different. It is a reminder to take all expenses into account, including property taxes. In an economists’ thought experiment, it is natural to assume that everyone’s doing all the math. Often we also assume that everyone is good at weighing incommensurables against each other. But, of course, the actual property buyer has a lot of potential distractions and is not purchasing a commodity, so they can potentially forget to do all the math.<br /><br />I’m not criticizing the economist thought-experiment here. This post makes perfect sense. From the property-buyer’s perspective, it implies a more general principle, which is “don’t extrapolate that the overall price is a good value simply because one particularly salient expense is a good value.”Greg Pandatshanghttps://www.blogger.com/profile/09319278333140929950noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-20457921264298312812015-02-02T19:28:26.783-05:002015-02-02T19:28:26.783-05:00This comment has been removed by the author.Andyhttps://www.blogger.com/profile/07221537769343338514noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-73670186422691376852015-02-02T19:27:53.921-05:002015-02-02T19:27:53.921-05:00I had the same problems as Samson, and was going t...I had the same problems as Samson, and was going to write something up, but I concur with your new, weaker claim. The original couple you overheard could well have been saving a lot of money by moving.Andyhttps://www.blogger.com/profile/07221537769343338514noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-71391845244541903752015-02-02T19:25:13.579-05:002015-02-02T19:25:13.579-05:00Absolutely Scott: see my subsequent post on models...Absolutely Scott: see my subsequent post on models. We can determine what goes on in a simple model like mine above, but carrying that through to the real world is very, very tricky business!gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-7854852572665483922015-02-02T19:13:43.526-05:002015-02-02T19:13:43.526-05:00I was going to say what rob said, (and speculate t...I was going to say what rob said, (and speculate that people with higher time preference than the market rate, i.e, almost everyone, would actually prefer houses in higher tax areas because it effectively reduces the down payment and increases 'financing' at a rate below the rate implied by their time preference) and also ask about effects on house quality & neighborhood 'evolution' --<br /><br />It seems just from observation that places with higher rates would tend to have lower quality houses, because builders will tend to build only when the cost of construction is less than what they could sell for. Pushing down the house price means they won't build as high quality. On the other hand, it might just be that this gets pushed on to the factors of production. I can't really tell how it plays out, but it does seem to me that the houses are lower quality where taxes are higher.<br /><br />I don't know. I do know that as a landlord, I don't bear much of the burden, if any (as long as I have tenants in my houses). It also seems to me that higher taxes seem to invite people like me and lower income buyers into the market because of the lower down payments, so that over time you wind up with poor(er) people and renters in the high-tax neighborhoods, and the 'top-notch' school districts approach tends to backfire in the long run.<br /><br />But I can't really say for sure. I know incomes are lower here (Texas) than the coastal areas, where you pay more taxes on income. Is it because of property taxes, pushing down the value of means of production (i.e., us)? I completely understand the 'tax-discount' idea, I use it all the time, but I have a hard time thinking about this stuff the further out it plays.Scotthttps://www.blogger.com/profile/12915297057336831151noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-32730555076084242162015-02-02T18:50:59.661-05:002015-02-02T18:50:59.661-05:00Yes, rob, that is absolutely true! But note that t...Yes, rob, that is absolutely true! But note that the current discount rate is the outcome of all of their time preferences, and so is a sort of "average." We can take our model and qualify it in all sorts of ways, and get all sorts of people who might want the lower-taxed house: those with an aversion to taxation for moral reasons, say.<br /><br />But this simple model shows that, for the "representative house buyer," it isn't true that he "saves money" by buying the lower-taxed house.gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-7225373.post-74815615158214363622015-02-02T18:33:55.599-05:002015-02-02T18:33:55.599-05:00' The present value of the tax payments on hom...' The present value of the tax payments on home B for a ten-year period, discounting at 5%, is roughly -$7500, and that on home C roughly -$75,000"<br /><br />Wouldn't people have different rates of time preference, or different expectations about future inflation , and for that reason value different combinations of house price + future tax payments differently ?robhttps://www.blogger.com/profile/04682517711551179057noreply@blogger.com