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I've been enjoying asking basic math questions to destroy dearly held beliefs and I would like to continue. This one requires more intuition than cold basic math though, but it's in the same ballpark.
Let's talk about housing. Housing's so fucking expensive. Especially in desirable places! YIMBYs (or maybe abundance democrats) argue we should build more housing. A lot more. But what kind of housing? Who are we trying to help?
Well. Take a town of 150k people. A one bedroom in a decent part of mine is approaching $1600 a month and inventory is also frustratingly low across the board. Before we get to my actual point lets focus on an absurd toy non-solution first. Let's build 1,000,000 Connestoga huts across town and charge $450 a month in rent. This eliminates a lot of housing pressure but anyone but the most hardcore libertarian would recoil in horror at the thought because it would mean the town would be flooded with poor single people. Per capita tax revenue would plummet while per capita demand on public services would likely increase. Traffic would explode. Parks would be overrun with trash. Police would respond to calls by lottery. This would turn the town into a nightmare.
But we don't have to get this absurd! My contention is, because of progressive taxation, public services are diminished even if you build housing that the median income family can afford!
Looking at federal income tax, the top 1% pay almost 50% in federal income tax. The top 10% pay about 75%. State and local income taxes are structured in similar progressive style. What about sales tax? More tax is paid by people who spend more, and things that are considered essential (like food and cheaper clothes) are usually exempt. Property tax? Lots with higher assessed value and luxuries are taxed at higher rates. Public service spending is carried by the affluent.
For another intuitive look at this, a family with two kids in public school will consume $3000-7500 per month(!) in state expenditure. Public education costs alone dwarf the entirety of taxes most families pay (of which only a small amount is even earmarked for education).
Not just education. The Medicare and Medicaid we all know kicks in at the federal poverty line, but the thresholds for some kind of subsidies are high enough that a family can earn as much as $85,000 in a city like NYC and still qualify for some assistance.
This means every municipality has an economic incentive to refuse newcomers that aren't making potentially 90%ile household income. This means sure, build housing, but only 90%ile housing, or become poorer.
I would like to be wrong about this! It's frightening to think of every newcomer to your town as making it per capita poorer unless they're very affluent!
One weakness in this rationale is we don't have a solid accounting of all of the transfers. E.g. if 90% of education was funded through federal and state revenues, you could imagine purpose building a town just to have a lot of schools so that people with small kids move to it and pull funds from the rest of the country and state. But I think that number is more like 60% and a lot of the "state" funds are likely a matter of appropriation and will be distributed ~right back to where they came from.
I'm kind of surprised nobody else is pointing this out! Am I hitting on some truth neither side really cares to acknowledge because it doesn't support their favorite platitudes or am I just smart enough at economics to twist myself into a gnarly retarded knot?
EDIT: oh! one argument that I've heard from a grimacing YIMBY is that he is forced to admit I am correct, but that's why we can't do this on a local level. Instead we must mandate more housing be built on a nationwide basis (e.g. a federal #NoZoneZone authoritarian order) so any one town or city would be protected from all of the
poornot affluent people rushing to it at once and ruining it. This seems like a solution but I am still not convinced I am describing a true real and local deficiency.For what it's worth, as a renter I didn't pay property tax, whereas as an owner, I have to. If you count people who are renting as residents of the area, per capita tax income (at least on the local level) has to increase. Note that I'm in Canada, so it may not work the exact same way as it does in the states.
You also have the option of...not building 1,000,000 homes, and instead building a much smaller number. There are certain phenomenon that only occur when the number gets super large. Imagine, for example, that the town has a university that admits around 30,000 students at a given time. Instead of having them all as renters, you could build student housing for cheap up to say 15,000 units, and capture the value of people who would be there anyways. Regardless of what you think about universities, the modal university attendee is probably better behaved than the modal low income newcomer (and they would have a lot of incentive to capture those properties, as they are there anyways).
Now, if you're willing to use #unethicalLifeHacks (which as a government, you always are), you can pull some whacky shenanigans to capture extra value out of 'low income' housing. A very simple approach would be to make the 'market value' of the house be much greater than the value that it was sold for (for example, the government offers the house for sale at $100,000, which comes out to roughly a $600 monthly payment at 5% interest. After a year, the property assessment claims that it would be worth $600,000, which at a tax rate of 1% would be $6000 a year, or $500 a month. $600 + $500 < $1600 for rent, so you've managed to transform the rent seeking behaviour of the landlord into rent seeking for yourself, instead - and if there's one thing a government loves, it's more money.)
Yes you do, abstractly via your rent price
The Ontario Trillium tax benefit even pays you back for some of it
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