A current article within the OC Register mentioned a $150 million home on the market in southern Orange County:
A uncommon 42-acre San Juan Capistrano property identified for many years as “Porcupine Hill” has hit the marketplace for the primary time for $150 million. . . .
Marketed as “Casa Grande,” the property contains an present 21,000-square-foot construction comprised of three flats, places of work and space for storing accomplished in 2010 and permitted plans for a 38,000-square-foot major residence on a ridgeline with 360-degree views.
The plans, greater than 40 years within the making, additionally embrace two 10,000-square-foot visitor homes and limitless upkeep quarters for the present agribusiness.
Whereas the long run residences fall underneath Proposition 13, the agribusiness is taxed underneath the Williamson Act, providing diminished property tax financial savings primarily based on manufacturing.
It isn’t in any respect apparent that farms ought to pay a decrease tax price than different companies. Nor does it appear probably that this kind of “gentleman farmer” is what the legislature had in thoughts once they carved out these tax breaks for agriculture. Many younger persons are shifting away from Orange County because of the excessive worth of housing, and but the state presents tax breaks to protect a 42-acre “farm” in an space that’s in determined want of extra housing.
Prior to now, I’ve mentioned the truth that New York Metropolis usually taxes the Manhattan condos owned by billionaires at a lot decrease charges than the homes owned by blue collar employees in Queens. I’ve additionally mentioned the truth that progressive politicians labored onerous to repeal the federal luxurious tax on massive personal yachts. Many of those politicians additionally favor the SALT tax deduction, which overwhelmingly goes to greater earnings folks.
Each New York and California are theoretically “progressive” states, stuffed with politicians that declare to favor a extra egalitarian society. Maybe they might argue that their representatives in Washington favor greater taxes on “firms”, as if non-human entities may really pay taxes. What can we infer a couple of politician’s values once they oppose excessive taxes on the consumption of the wealthy, however favor excessive taxes on investments made by the wealthy?
Some on the left would argue that one of the best ways to tax the wealthy is thru taxes on earnings and wealth. However these taxes could be evaded via intelligent tax avoidance schemes:
Say you personal a profitable enterprise—so profitable that your stake in it’s value $1bn. How do you have to fund your spending? If you happen to pay your self a wage of $20m a yr, the federal authorities will gather 37%, or some $7.4m. So maybe you must take a wage of $1 and promote $20m-worth of shares. If these had been gifted to you upon founding the agency, the whole sum represents capital beneficial properties and can be taxed at 20%, which might imply a $4m hit. What if, as a substitute, you referred to as up your wealth supervisor and agreed to place up $100m-worth of fairness as collateral for a $20m mortgage. In 2021 the rate of interest on the mortgage might need been simply 2% a yr, that means that returns from holding the fairness, quite than promoting it, would simply have lined the price of servicing the borrowing. As a result of the proceeds of loans, which have to be ultimately repaid, usually are not thought of earnings, doing so would have incurred no tax legal responsibility in any respect. . . . When the holder of an asset dies, the worth for capital-gains assessments is “stepped up” from its buy price to its worth on the time of demise. On this manner, “purchase, borrow, die” doesn’t merely defer capital-gains taxes—it may well remove them totally.