I actually enjoy a lot of the data you put on your site, but I 100% disagree with your assessment on depreciation. The idea behind depreciation is that the assets wear out over time, not that they go down in value. Plus it’s offset anyway when you sell the asset as you need to recapture the depreciation...it’s a temporary write off while you own it. This does become a bigger issue if Biden gets his tax plan through and takes away 1031 exchanges...now you add a huge burden and increase that “hesitation to sell” as there are less options to continue to defer gains, so they’re even more likely to continue to hold onto it vs selling. Many start out with single family homes and then sell those and exchange into larger buildings later. Without exchanges that option changes dramatically.
How do you propose assessing an annual tax on appreciation when markets are continually moving? Who determines the asset value every year? Investments are already taxed at disposition when the gains are realized, so essentially you’re proposing taxing every year as values increase, plus when the asset is sold. Taxing at sale makes sense as that’s when you’ve realized your gains, and you have a real dollar figure on gains to work with.
You’re also completely missing the point that the tax code is there to incentivize behavior. Yes, it benefits landlords...who are providing much needed housing. Remove the incentives, the behavior goes away and we have an even greater problem with our housing shortage as investor developers have even less incentive to build and the gap between housing units needed and actual units delivered continues to grow.
I actually enjoy a lot of the data you put on your site, but I 100% disagree with your assessment on depreciation. The idea behind depreciation is that the assets wear out over time, not that they go down in value. Plus it’s offset anyway when you sell the asset as you need to recapture the depreciation...it’s a temporary write off while you own it. This does become a bigger issue if Biden gets his tax plan through and takes away 1031 exchanges...now you add a huge burden and increase that “hesitation to sell” as there are less options to continue to defer gains, so they’re even more likely to continue to hold onto it vs selling. Many start out with single family homes and then sell those and exchange into larger buildings later. Without exchanges that option changes dramatically.
How do you propose assessing an annual tax on appreciation when markets are continually moving? Who determines the asset value every year? Investments are already taxed at disposition when the gains are realized, so essentially you’re proposing taxing every year as values increase, plus when the asset is sold. Taxing at sale makes sense as that’s when you’ve realized your gains, and you have a real dollar figure on gains to work with.
You’re also completely missing the point that the tax code is there to incentivize behavior. Yes, it benefits landlords...who are providing much needed housing. Remove the incentives, the behavior goes away and we have an even greater problem with our housing shortage as investor developers have even less incentive to build and the gap between housing units needed and actual units delivered continues to grow.
Ben Nelson
www.benjacobnelson.com