104. What If We Eliminated Property Taxes?

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
My first ever
visit to New York.
First time
was ever in New York.
I went with Ashley.
She's like,
you've never been in
New York?
I was like,
I've never been in New York.
She took me to New York
and she's like,
what do you want to do?
I'm like,
I want to go
see The Colbert Report.
So she literally like,
we stood outside,
got tickets,
went into the
Colbert Report.
We gave them
because I was playing
the NHL at the time.
We gave
like a them a jersey.

(00:20):
Like, oh, here,
like you could
have a jersey.
And he gave me like a
big swag bag and everything.
It was like
one of the best night ever.
But anyway,
he was my favorite show.
Welcome to Drink
real estate.
Grab a drink
and enjoy the show.

(00:41):
Hey there.
Welcome to episode
104 of Drunk Real Estate.
I am Kyle Wilson,
Ashley Wilson husband.
We got the whole gang
together. Mauricio. You're.
You're members
looking a lot better.
You figured your ...
out over there.
It looks. It looks good.
I plugged him,
I plugged in my laptop.
For some reason,
when you put plot
power into it,
it makes it better.
I think he was
being sarcastic.
No, I literally like it.

(01:02):
I think I think he's
I think that's actually
what solved it.
He plugged in his laptop,
plugged in my laptop
is now what?
Mauricio still on location
at the Goat Ranch
using Starlink
on his little mini laptop.
But you, you still found
you had to drive
the six miles
down the winding road
and you found some wine.
I'm guessing I did.
I actually have no.
Dude, I'm up here
in the middle of nowhere.

(01:22):
I gotta
I gotta stock up for the
for the month or whatever.
I'm actually still
drinking the Sonoma.
But you know why?
I mean, it's actually,
I like I like Sonoma color.
It's it's a nice,
refreshing drink,
but it's a screw screw cap.
But I can't find
my bottle opener.
So I'm like, let's
go with this one.
And, yeah.
Enjoying a nice,
nice Tuesday
afternoon here at the ranch.
Nice J what's going on, man?
I'm good.

(01:42):
It's been a crazy
couple weeks.
We finished our race
for our latest investment
today. Literally.
So, so gradually.
Agents,
phase one of the race,
we hit our target.
And so this is this is,
my celebration night and,
going to sleep in tomorrow.
So if you're celebrating,
you must be drinking, right?

(02:03):
I yeah, I'm
going with coffee.
So my wife went.
She got me a coffee
at racetrac,
our local, like, 7-Eleven.
And I'm throwing in
a bunch of Kahlua
into this thing.
Did you just equate
what you're drinking
to 7-Eleven coffee
like that?
That's the level
that you're at right now.

(02:24):
What do you mean?
What's wrong?
7-Eleven coffee.
7-Eleven coffee.
You mean the stuff
that, like,
they brew a pot,
and then it just sits there
for 3 or 4 hours,
and I don't know, about 711,
but it racetrac
they actually
have the grounds.
And you hit a button
and the grounds come down,
they grind them right there
and they pour over.
So it's like
completely fresh.
Yeah.
I mean race,

(02:45):
if it's called
race track coffee,
it must be good. Yeah.
But you know, what's
really good
about all the mold
in that coffee
filter is really,
really good for you.
Yeah, I'm sure it's great.
It's awesome.
AJ, what's up,
my sober friend?
You silver sober?
Sober with a car. Sober?
Yeah. I was like, silver.
Are you
saying I'm going gray.

(03:05):
What's up with that?
Yeah. Like it's good, right?
It's the
black collared shirt
I like I like your look.
Thank you.
Jason Pepper
I had to
my beard
was getting a little long.
I had to shave it off
because it was.
It was definitely
getting salt and pepper.
As you get longer, like
the gray
just starts to come out
and I don't have a knife.
Way more evident.
Yours. Yours actually.

(03:25):
Like,
at least it's a uniform gray
where it's kind of like
nice, like mine.
It's just like random gray,
like one here, one there.
And it just looks
it starts to look awful.
So I've realized that
I can't grow it a long beard
for at least a little while
until I get a
little bit more gray.
I'm going back with the
Chalamet

(03:46):
Chalamet, small batch.
I just noticed
this is actually a blend
of a 15
and an eight year old,
but even an eight year
old would be good
to talking about
whiskey, right?
Well, yeah, it's bourbon.
So bourbon is
when you
talk about
an eight year old,
I just wanted to make sure
you talked about the drink.
Yes. Yeah.
I'm, I don't, I don't
I don't even know how
to make a joke for that.

(04:06):
I have an eight year
old daughter.
So, Yeah.
You guys ready
to get into this?
Then we got,
We've been into it
for the last 30 minutes,
so let's get this through.
We we just
we had a 20 minute preamble
where we all argued
about Stephen Colbert,
and The Colbert Show
getting canceled.
So that was a fun one,
to the point
where Mauricio had to leave,

(04:27):
come back when we were done.
He's not Mr.
Trump derangement syndrome.
I just leave
for political discussions.
But we will
save you guys from that,
because this podcast
is called Drunk Real Estate.
Even though we get off
topic every once in a while.
So we are going to do
both tonight.
We're going to talk drunk
and we only have one topic
and it is real estate.

(04:48):
This topic.
So the topic came about
when it was first
announced that,
the governor of Florida,
Ron DeSantis,
was considering getting rid
of property
taxes in Florida,
which I thought
was ridiculous.
And I didn't think
it was worth talking about.
Until Mauricio,
because I thought
we were all going to agree.
Honestly,
I thought we were just

(05:09):
he was just
going to be like,
this is ridiculous.
There's there's no reason
that we should talk
about this.
And so Mauricio
actually took
the other side of it
and said, hey,
there should be no property
taxes.
We should have an
alternate system now.
Go ahead,
go ahead, go ahead.
We should have an
alternate system
to the traditional yearly
property taxes
where this is

(05:29):
how I interpreted it.
And then I'll
let you take off
and expand on what,
what you said.
You basically think
there should be a higher
one time
transfer tax
when you purchase it,
and that could be
spread out over,
I don't know
what'd you say,
eight years or something.
And that would be in place
of a yearly property tax.
So that just got me

(05:50):
think, well,
maybe this is an
interesting discussion.
If we don't all agree
that getting rid of property
taxes is just a nonstarter.
I just thought
this is a really
interesting
thought experiment
because I actually,
I honestly
just heard about
this last week
and I thought it
was a new thing.
And I just realized
as I was just digging
a little bit
into it, that actually,
this is something Ron
DeSantis floated out
a couple months
ago, back in May,
when, you know,
they're in

(06:10):
the middle of that
and they just
literally passed
their new bill.
And it's not part
of the new bill.
But he was kind of
floating these ideas.
And a lot of the stuff
he was talking about
made a ton of sense.
And so it just
got me thinking.
His end result,
I don't think, works.
That's why I never came out
and said
we shouldn't
have property tax.
That's not that thing.
But but let me just tell you
what his, his rationale was.
And then I
this is the part
I think makes total sense

(06:32):
when you just
think through it.
And then I
thought the solution
that I kind of proposed,
which is not get rid
of property taxes,
but was just
made a little bit
more sense.
And so
here's his main point,
which I think makes
no sense.
He thinks it's ridiculous.
We're talking about
homestead here.
We're talking about people's
homes.
We're not talking
about investment properties.
We're not talking
about your second,
you know, rent
or your vacation home

(06:53):
or whatever.
We're talking about
your primary residence,
where people own their home
outright, right?
They pay down their mortgage
over 15, 30 years.
They're retired.
They're on fixed income.
This really affects
a lot of the lower
middle class
and lower income.
And I've got a great example
because I think that's
what happened to the house
that I bought.
And you paid off
the entire house,
and yet you still have

(07:14):
this obligation
to pay property
taxes 30 years later. Right.
And property taxes have
two very unique features
that I don't know.
You correct me if I'm wrong.
I don't know
if there's any other
product or service
that has this
type of feature,
which is number one.
It's it's a tax that you pay
when you buy the property
that's paid in perpetuity.

(07:35):
It's paid
every single year,
no matter
how long you own it for.
You pay that property tax
every single year.
Number one.
And number two,
not only do you pay
the property tax
every year, it's
not actually based
on the price.
The tax percentage
is not based on
the price of acquisition.
But it's it's
based on a recurring,
reassessment of
the property.
Probably not as high as fair
market value of whatever,

(07:55):
but it continues
to go up and up.
And so you have
these scenarios
where these, these,
these fixed income folks.
And obviously
Florida has a lot of elderly
and fixed income folks,
you know,
they bought their property,
you know, 20 years ago,
30 years ago.
And thinking about
this made me old.
Two guys
30 years ago
now is 1995, right?
So we're not talking
about the 60s
or the 70s like 1995 is.

(08:16):
30 years ago,
you bought your home
for like a couple
hundred grand
or maybe 150
grand or whatever.
And you pay that
here in California,
we pay 1% property tax.
You're paying
1% of $150,000,
which is like
1500 bucks a year.
And then 30 years from now,
that property is
now skyrocketed
because inflation's
going
getting out of control.
And that property
has increased not in value
but of nominal terms.

(08:37):
Now worth
a couple million dollars.
And now I've paid off
my home.
I'm on a fixed income.
I make 30 40,000.
I'm Social security,
I'm pension or whatever.
I've paid off my home,
which I bought for 150 to
do on a grand,
and I've got to pay property
taxes on a $2
million property,
because again,
I'm paying property
as it goes up and up and up.
So that's kind of
what happened to my neighbor
in ten years.
Mauricio,

(08:57):
my neighbor,
bought a property
next to us in 2009.
It was their dream home.
They bought it during.
Prices were really recessed
and it was like $200,000.
Within ten years
their property
tax had gone up so much.
He's talking to me
basically crying.

(09:18):
We have to sell our property
because I can't afford
the property taxes anymore.
But presumably
if they're if they're
if their property taxes
went up, it's
because the value
of the property went up.
And I'm not saying this
is there's no judgment here.
But presumably
if that happened,
they've got a lot of equity
in their house
because the value went up
that they could

(09:38):
potentially tap
and pay the property taxes,
but then they'd have to
pay dad,
because I got
to pay down the lady
I bought this
house from here
was on a reverse mortgage
because she didn't
have enough money.
First of all, it's
a it's a place.
There's a lot of upkeep
in this place too.
But between the
and she was like,
she's in her 80s probably,
and bought this property 30,
40 years ago
and literally
was probably worth
less than a hundred grand.

(09:59):
And she had to start
doing a reverse mortgage
because she's like, I can't,
I can't afford
all this stuff.
I'm like,
she basically got
a reverse mortgage
from the bank
and racked up
$600,000 in debt
just to
to maintain
the property, to live
and just to kind
of to survive.
And so
it just made me realize,
you know,
like if you back, obviously,
if you buy a car, which is,
you know,
a substantial it's
not it's something more
than your usual everyday,

(10:20):
purchase it.
But when you buy a vehicle,
even if it's
$100,000 vehicle,
if you're buying a
vehicle and you're paying,
you're sorry, you just.
You just broke up there.
Yo, I'm so sorry.
Sorry. Yeah. I'm sorry.
I apologize
for this, darling.
So if you buy a
even $100,000 car,
which probably just Adrian
in this room does that.
But when you buy
a $100,000 car,
you're paying 8%
sales tax or whatever,

(10:40):
and you pay it once,
and you pay it
at the, at the at the,
at the point of sale.
And so my thought was,
I think one of the reasons
that doesn't work
in property
is because obviously
8% of 1 million
or 2 million,
that's that's a big number.
And so now it's like,
I'm not expecting
people to pay.
Let's just
for math purposes, to say
it's a 10%
sales tax or whatever,
and you're buying a $2
million home

(11:01):
or $1 million home,
that's $100,000.
That's a lot.
So my idea was, hey,
why don't you pay that tax
or you get
assessed that tax
at purchase?
So it's 8% of whatever
the purchase price was.
But it's saying paying it
all upfront.
You paid over
eight years or ten years
or whatever the term was.
And so that way
you're basically paying
about 1% per year.
But it's only because you're

(11:22):
you don't want to pay it
all advance.
So you're kind
of amortizing it
over the next eight years.
And so after eight years
you're done.
And if you sell the property
before eight years,
then you got to pay
the rest of your tax
that you owed, you know,
when you purchased it.
I thought that
made a ton of sense
from a, from a,
you know, from a fairness
standpoint from, from,
especially for the,
for the fixed income people.
Now of course,
that's going
to reduce revenues.
And Kyle,

(11:42):
you mentioned the thing.
Well are you going
to pay for roads.
Yeah of course.
And I'm not saying
that that's.
Well so let me,
let me don't make my points
for me.
You don't don't be rabbit me
where are you going to say
oh, like
I know
you're going to pay this.
No,
it just wasn't a good point.
Well, let me make my point
and then I'll let
I'll let Jake,
because I think
Jake is going to
do the counterpoint
for investors.
I'm going to do it
from a personal standpoint.

(12:03):
So we did go back
and forth on this
on the on the chat
and immediately I thought,
this is a stupid idea.
But but
then you thought about it
and realized you were right.
Then I well,
I went through it and I
but what I did realize
actually, is
it's very different
from state to state
property taxes.
And I didn't
realize how different.

(12:24):
So I was thinking of it.
This is being done
based on the States
that I,
I have experience with.
So I live in Pennsylvania
and when I pay property tax,
my property
tax goes
to the school district.
It goes to the township
and then it goes
to the county.
My property
tax goes directly
to my school district.
And that's like 80%

(12:47):
of their total revenue
for the school district
comes directly
from my property taxes.
And so basically but
what I realized
is a state like Vermont,
Vermont actually,
your property taxes
go to the state first
and the state disperses it
to the schools.
So what actually,
as far as
considering school systems

(13:08):
and the
equity in school systems
and like,
sorry, equality
or like whatever
you want to call it
between schools.
Like that's
actually a much
better system
because what happens in
Pennsylvania
is someone like me,
I'm like,
I want my kids
to go to the best school
this school.
So I literally just moved
to the school district.
That makes the most money.
And it
it creates this inequality

(13:29):
between schools.
And that's an issue.
So immediately that
was like, first of all,
the schools,
the way my property
tax is determined
is this school
that's a budget
for their year
and what they need,
the amount of money.
And then that's
how they determine
how much tax
they're going to tax.
The, the the people.

(13:49):
So it's not like
hey, if my property goes up
from 1 million
to $2 million,
that my property tax
is going to go from 16,000
to 32,000,
that's not the way it works.
The way it works
is that the school
has a budget.
And then they say, hey,
our budget went up
5% over the last two years.
We have to increase

(14:10):
how many tax dollars we come
in, come in to pay
for our budget.
This is what
the millage rate.
This is the percentage
that each person has to pay
based
on the value of
their property.
So we see massive
spikes in property
values,
the actual percentage
or the millage rate
that they talk about
goes down.
And we've seen that in Texas
when we were started

(14:30):
buying multifamily in 2019.
And as these property
values went way up,
our millage came came
down, down,
down, down, down.
And so we're
actually percentage
that we're paying.
So that's
what I was saying is
like it's not like
when you use this argument
and it's the
California argument,
obviously from
the California guy
where you have
all these people who bought
these properties
for peanuts,
and then they saw them
go way up

(14:50):
and the property
taxes went way up
because California treats it
a little bit different,
but it's not
across state to state.
And then I'll finish
just my my point
that you were saying
the other 80% of our taxes
go to our schools,
but the other percentage
for the township
that goes directly
towards municipal
like this is funding for,
your public safety,

(15:11):
your planning and zoning,
your parks,
your,
your roads, facilities,
stuff like that.
They need that every year.
They have a budget
every year.
And if you somehow
all of a sudden
we have a real big slowdown
and we don't have
transactions happening
where people are buying
and selling houses.
And it's
very low for a few years.

(15:31):
How are they going
to budget for that
all of a sudden?
Their budgets
just going to go
out the window
because there's
no transactions.
Why are you allocating?
I mean,
there's nothing that says
you have to allocate
that the money comes from
real estate,
has to go to schools.
Why not eliminate
the connection altogether?
Why don't you give 100%
of your sales tax,
go to
goes to schools instead?
That will solve
the problem there.
The problem is

(15:51):
you don't really own it.
Essentially,
you don't own property.
No one owns any property.
No one does.
We all lease it.
I look at it,
I look at it differently.
That property tax
is the one way that you pay
for the use
of your property.
So I have to pay
for the roads.
I have to pay
for the police.
I have to pay
for the schools that I use.

(16:11):
I have to pay
for all those things.
And those are
yearly expenses.
Those are the upkeep.
Why does it have
to be property?
What are you doing
with my sales tax money?
What are you doing
with my gas tax? Be used.
What about a super
small state like Delaware?
Delaware is right
next to Pennsylvania.
In in Delaware,
there's a ton of people
who live
by me in Pennsylvania
and then commute to Delaware

(16:33):
and work in Delaware
and then come right back.
They're probably
not spending
they're spending
most of their money
in Pennsylvania,
but they're coming
into Delaware,
they're commuting,
and they're coming
right back.
So what happens to Delaware
when all of a sudden
they don't have the
same kind of sales?
Like, that's
why each state
has a different system.
That's why Florida,
Texas, Texas
doesn't need to have
income tax

(16:53):
because they get it
through property tax.
They get it through oil
and gas taxes on those.
They get it through
other places.
Each state
has a different system
based on their size,
based on their needs,
based on their
different things.
And that's
how the system has evolved.
And you can't just
all of a sudden
get rid of one
part of the system
and then expect
every single state
to be able to conform to it.
But there's a dual
tax problem

(17:14):
at the end of the day
in the United States,
real estate
taxes, by the way,
that's not like new.
This is like
the oldest thing
ever, right.
So the only problem
that I have
with the real estate tax
is the fact
that we have real
estate taxes.
So you didn't
have income taxes
like that
was the whole point of it.
So when we look at

(17:34):
what's happened
is instead of saying,
oh, we are going
to take out one
right and do another,
they've just continually
added on
and it's hard to even,
I think for a lot of us
to understand
the absolute change in
not only the tax code,

(17:54):
but how large it is.
And so like
I have a visual here
so we can see how
much it's changed.
So when we're talking
about your real estate,
you're talking
about everything
you buy your income.
I mean it goes on and on
and on.
It is
mass of the tax changes
in literally the last
hundred years

(18:14):
on an American system.
American citizen
is so, so big that
this is where these
I think
these problems become.
People start to go,
what am I getting for this?
Right.
And I'm being taxed
astronomical amounts.
So when we had a very stable
tax system

(18:35):
like real estate
taxes, right.
That was very
much state centric
and that was part
of the independence. Okay.
So there was way more
independent states
were more sovereign,
and we funded things
locally.
That makes perfect sense.
Your property
is a local part
and entity of a local thing.

(18:57):
We do all this stuff.
What the change
in the tax system
was, the change
in the federal tax system.
All of a sudden,
then when you're paying
huge amounts
of your property to taxes,
then you're paying
income sales tax, gas tax,
and you're
putting everything else.
So from 1920 it went from,
5% to upwards

(19:17):
of over 30%, on average,
50% of the United States
doesn't pay federal taxes.
That's an average.
And so I think that that's
where I start to go,
hold on here.
I don't own my property.
I don't own anything,
but I
so I kind of agree
with both.
Kyle, I agree with you.
I like the localized

(19:38):
nature of the tax
or everything else,
but all of a sudden
you're taking it
from all sides.
That's
where the issue comes in.
Yeah, I mean, I sorry, Jay,
I'll just make a quick one
and then I know you got,
you got a good point
about investors I think.
But I look at it
more like a membership fee
like you have to
there's certain services
being an American citizen,

(19:58):
living and choosing
to living in a state,
choosing to live
in a township,
to choosing to
live in a county.
There's certain things
that you enjoy
by living there,
and somehow
you have to pay
for those things.
And I look at property tax
as your membership fee
and you could say,
okay, people renting,
they don't have to pay it.
Well,
the owner has to pay it.
And they pass those
those costs
down to the person
who's renting.
I look at it

(20:19):
more as a membership fee
that I'm paying
for living exactly
where I have to live
right now
before I jump into the point
you were making.
Kyle,
here's my
general issue with this.
I'm a free market
kind of guy.
But I also recognize
that taxes
are a necessary evil.
I don't like taxes.
None of us like taxes.
But we all recognize that,

(20:41):
realistically speaking, the,
libertarian utopia of we
we all contribute
to the roads
and the bridges and,
and the infrastructure
is not reality.
But when it comes to taxes,
I think we need
to do our best
to ensure
that taxes
don't change the supply
and demand characteristics
of the market.
Basically,

(21:01):
we want taxes
to kind of exist
as quietly
and subtly as possible,
so as they're not
creating inefficiencies
in the market.
And, to give
Donald Trump props,
he came out today
or yesterday
and made a proposal
that would get rid of the,
the capital gains tax
on, single family housing.
Actually, Jay,

(21:22):
I do have to
correct you on that.
And I think the reason that
it's coming up is Trump.
It was Marjorie
Taylor Greene
who actually proposed that.
And I would have to say
this is the first time
I've ever agree
with Marjorie Taylor
Greene on something,
but that was that.
That law has been in place
since 1997,
and to the point
that AJ and Mauricio

(21:42):
have made
the property
values have changed
drastically since 1997.
So. So she proposed it.
But but Trump
called on and said, yeah,
I like this idea
and I do like this idea
where right now
you exclude the
first 250,000
or 500,000
and MTG
and Trump are saying
exclude it all.
And I love that because it
then makes the market

(22:04):
more efficient.
People don't say,
I'm not going
to sell my house
because I have to do this
math, this calculus
in my head of
is it worth taking the money
and paying the taxes
and buying another house
or not paying?
And it just
it changes
the market dynamics.
We see the same thing
with low interest rates.
And I'm not saying
this is good or bad.
Again, no judgment here.
But we see the same thing
with low interest rates.
If you have a 3%

(22:25):
30 year fixed loan
that you got during Covid,
you're not selling
your house anytime soon
unless you
absolutely have to.
And what we're seeing
is that's kind of just
tamped down
on transactions
over the last couple
of years.
It's destroyed the
the transaction
volume in the market.
And it's it's
really knocked
supply and demand
out of whack since Covid.

(22:46):
We run the same
risk of that here.
If you are paying an 8% tax,
whether it's all at once
or over eight years,
you now
have to do the calculus
in your head.
Do I want to sell my house
in the first eight years?
Because then I'm
if I buy a new house, I'm
double paying that tax.
If I buy,
if I sell my house
in exactly eight years.

(23:07):
Well, wait a second.
I'm just getting into the
free portion of this.
I can amortize this
this cost
over a longer
period of time.
So there's more incentive
to say
I just paid an 8% premium
on my premium on my house.
Why should I ever sell?
And just like a 3% mortgage,
people are going
to be incentivized
to stay in
their house longer
and never sell

(23:27):
because they don't
want to sell
and then have to pay another
8% premium
when they buy
the next house.
And so
my biggest
concern about this
is that it's
going to mess up the supply
and demand
characteristics
in the market,
and it's going to change
people's behaviors
in a way
that that makes the market
a whole lot less efficient
than it should be.
Again,
the same exact way that
that we saw with,

(23:48):
that we saw
with lower interest rates
in the same way
we see to a
much lesser degree
with that
whole capital gains tax
on, on the sale of,
of single family
houses ratio.
That's the
compelling arguments
against you.
Yeah.
I mean, you're
calling it a premium,
but I mean, it's really
a it's attach
rates like a sale.
What it is,
is it a sales tax?
What I'm proposing is
just like
you're gonna have
a sales tax
when you
when you buy the car,

(24:09):
you know,
you're going to
pay a sales tax
when you
you don't have to
you don't have time
or time
you could pay to close
if you wanted to.
It's almost like
you're getting a loan.
It's just it's a hard
pill to swallow
to pay the 8% all at once
because it's such a large,
a large, a large, thing.
But,
yeah, I mean,
then maybe
that's the argument
that DeSantis is making,
which is like,
yeah, you're right.
So let's
then we should not have
any taxes on the,

(24:29):
on the properties, tax.
Like there's just no other
there's no other asset class
that we do this one. Right?
I mean, there's
no other asset
class that you pay
instead of paying taxes
at the transaction point
that you pay it
in perpetuity.
My problem is market value.
When you look at
the market value,
this happened after 2008.
Market values
dropped by 60%
by tax system.

(24:50):
But this was just
I know that
this wouldn't cheat.
You would always at the
at the point of
close to eight
what have you paid for.
And that's
that's your price.
Whether you're
making that decision
at that time I can
I that's why I
agree with that.
The idea that I'm buying
and I don't know
what the market will do.
So I have no idea
where my taxes will go,
but they'll go up.
And if the values go down,

(25:12):
they're not going to lower
my taxes.
We have this in
commercial real estate.
We're sitting here
going out.
The taxes are based
upon value,
but the assets value
is based upon income.
But that's not how
the taxes work.
So now all of a sudden
you're saying the assets
worth 5 million,
but it's worth three
on the marketplace.
But I'm be taxed at five.
So now my income is all

(25:33):
screwed up
because the tax obligation
has nothing
to do with the reality.
Not only income cap rates
like we're
we're going through it
right now.
Texas is having
huge property.
We just settled our property
tax protest
on one property from 2023.
And what's it's so backed up

(25:54):
because properties
property values
have come down right.
And what they
how they evaluate these
these property taxes
is they obviously look
at comparable values.
And it's almost like
people are delaying because
the only properties
that are transacting
right now
aren't the flagship
properties.
They're the properties
that are in distress.

(26:15):
So properties
that are in distress.
What is going to happen
to the values?
Well, a property in our area
that's three,
you know,
comparable size
two hours, 300
something units
just like ours.
And that's in distress.
If a bunch
of those transact,
then we're going to go
into the taxing authority
and be like, hey, look,
look at these
comparable sales
that just happened here.

(26:35):
That's the value
of our property.
It's not the value
that you have.
It's value
not it's the value
of these
distressed properties.
And so we're having to like
and obviously
the taxing authority is like
well no like that's
these are distressed.
And you're like
well that's comparables.
These are the only
comparable sales
we have
in the last six months,
in the last year,
are all these ones
that you're
calling distressed.

(26:55):
And so it's
it's a huge fight
that is happening
in some of these states
because the values have gone
down 20% on some of these.
And the taxing authorities
don't want to,
you know,
cut their revenue down
by 20%.
The taxes are going up,
their values are dropping,
and we're getting taxing.
So that happened to us.
We have properties
that I'm like
the values down to

(27:16):
3 million.
And you just gave me
a tax increase
like that
kills the property owner
because the income
is dropping.
And all of a sudden
you're going,
the government is killing
our business
because it's saying
that something is happening
that isn't even happening.
And it's a way
that they can use
to get more money.
They just make it up.

(27:37):
We had to fight
this legal battle
with the state of Idaho,
and we had to get passed
and both the Congress
and the Senate
to have a way
to enforce appraisers,
because when the appraisers
put a property,
a value on a property
and they say it's the value,
there was no way for you to
when you went and argued it,
something like, okay,
even if we're wrong,
what do you do?

(27:57):
Like there was
there's no mechanics.
And the government doesn't
build in mechanics
to make it easy
for you to adjust.
Tax base was downwards.
And so it's completely
artificially skewed
to government entities.
And then they every year
they'll reassess
that thing up.
And then all of a sudden

(28:17):
when it goes down
oh for sure
they gave us a 10% increase
in the one property.
Everything that's
going on a commercial.
They gave us a 10% increase.
So we fought it.
And obviously
like you're
seeing decreases
of what they give
you in your taxes
of like 20, 30%
in some cases
because they have to relent
and say like,
hey, like I can't.
This is not the value.
And but it's

(28:38):
and that's in Texas
where Texas it's
it's like standard practice
to fight your your taxes
because Texas
is in a disclosure state.
Texas is a
non-disclosure state.
So basically the way the
the way
the taxing
authority is like, hey,
we don't know what
these transactions
are going for.
We're going to tax high,
and we're going to
make you prove
that you're
that your value is lower.

(28:59):
So Texas has become
like a very
litigious state
as far as
taxes are concerned.
But I can't even imagine
some of these other states
that are like,
not really
used to having to,
you know,
litigate these,
these taxes every year.
That's like states and Idaho
and other ones out West.
If you
if you see a value
decrease in 20%,
like you're going
to get your next tax bill

(29:20):
and they're going to
say, hey,
your value went up 5%
and you're
looking at all the sales.
You're like,
my value went down 20
and I
don't have three
years to do it.
That's the problem.
You pay them
the increase tax
for the years
until it's resolved.
So it's better
and you better
have the reserves
to cover that
or have the reserves
or you think
you better have the reserves
to cover the overpayment
in taxes.
You better have the reserves

(29:41):
to cover your escrows
for your,
your interest rate caps.
And you better
have you better
have the reserves to pay
for your insurance
on those values.
And like, we're,
we're
we're having to set aside
million dollars
for all those
different things and then,
you know,
like then you're like, okay,
well investors
why aren't they getting
they're hitting
their preferred terms.
Why are they getting there.

(30:01):
Well,
because we're
having to set aside
all this money for them.
It's we're don't even know
it.
Let's get back on
topic though,
because we're talking about
you guys got off
on your commercial.
You're a little commercial.
Oh, sorry.
Did we
talk too much
about actionable stuff
that's happening
in real estate market?
My mistake.
I want to
let's go back
to your fantasy scenario.
Let's
go back to your

(30:22):
fantasy scenario,
which, by the way,
I did want to point out,
as much as I act like
your scenario is crazy,
Canada does charge tax.
So it's like it's not
like any other state.
Now Canada
only does it on new sales
or significant.
So what is the what
can you do?
I didn't know that. What is.
So what is Canada
do then for home sales.
So so

(30:42):
Canada it's more complicated
because you know
they're it's
well it's the same.
Each state
has their own tax
and each in each
province has their own tax.
But
Canada designates new
and resale homes
as different things.
If you are selling
a new construction home
you are subject to tax,
at the same rate.
To your point, eyes,

(31:03):
normal sales taxes.
In addition to that,
in addition
to an
annual 1 or 2%
or this in lieu of yes,
in addition
to there's a lot of that.
I mean, I guess I'm
I'm just saying
it's not crazy.
Your idea of
of implementing a,
you know,
I guess we have it.
Every state has some sort of
I shouldn't say every state.
Texas doesn't.
But like, how do you
I mean, I guess
I just going

(31:23):
to bring it back to the,
to the mythical caller.
I mean, again,
DeSantis is from Florida,
so he's got a lot of older
folks in his, in his state.
But like
you're talking to the fixed
income person, right?
They're making $30,000
a year, $40,000
a year on their fixed
pension, Social Security,
whatever it is.
And to your point,
they moved into
a neighborhood.
They bought a house
for a couple hundred grand.

(31:44):
They are paying
for the roads
at the time of sale.
And now fast
forward 30 years.
They can't afford
to pay the taxes
because the taxes
for some reason
have been going up
as the property value,
which is just
they're not selling.
So it's not like
they're getting it.
I mean, to your point,
Jay, they could,
I guess, refinance
or get some cash for it,
but the whole point is
that they didn't
wanna have any debt.
They wanted to be like, hey,
I'm going to pay

(32:04):
off my home,
and then I can
just, you know,
I just need enough
money to to live.
So what do you tell
that person then?
Like, just, hey,
you got to move. Sorry.
Tough ...
You got to go move to to,
Arkansas.
No offense, I agree.
I think
I think that's
a big problem.
I it's
and it's going to become
a bigger problem
with the baby boomers.
But we still have to solve

(32:24):
the problem of
where does the money
come from.
And yeah,
we've got that utopia
of let's spend less money
and let's balance the budget
without property taxes,
blah, blah, blah, blah.
38% of Florida's
income
comes from property tax.
So I don't know
where they were next.
I heard it was one fifth,
but yeah, it's it's
like 20% of the it's
what I heard.
But yeah,

(32:45):
just to put things
into perspective in Florida,
let's say
we wanted to collect
the same amount of tax.
And we took all of
the property tax
and we moved it
over into sales tax.
So we wanted to offset
no property tax.
What which is what
the state legislature is.
Yeah.
And I'm not proposing that.
I'm not proposing that.
Just to be clear.
Well,
but but DeSantis
is proposing
that and the Florida state

(33:05):
legislature is I'm
not I'm not proposing that.
I'm not proposing that.
I know that,
but it's the starting point.
So in Florida,
if we did do that,
I think there's something
like 30,
43 billion in property taxes
collected every year, 36
billion in sales taxes.
So basically,
we would have to increase
sales taxes

(33:25):
by about
one point double
plus another 10%.
So basically
we're taking sales tax from
I think it's
dropping to 5.5%,
but at 6% where it is today
and raising it
up to 13 or 14%.
And so we can get
rid of property taxes
if we raise sales
tax to 14%.
But then there's
the second order effects.

(33:46):
You raise sales tax to 14%.
And now you're going
to slow the economy down
because people aren't
going to consume as much.
They're not going to buy
as much.
People aren't
going to go out
and buy a new car.
They're not going to go out
and buy a gold
watch, a Rolex,
because I mean,
I guess
by the by
by the same argument,
though, people's net income
should go up, right?
Because they're not paying

(34:07):
as much in property tax
or even renters.
The people who
they're renting from
is aren't paying as much
so they can lower the rents.
And so theoretically,
by the free market argument,
they're going to
have more money
to spend
at lower rates,
substantially
if we didn't have to pay.
Taxes are massive.
Yeah.
And so, yeah, again, I
think there are a
lot of second and third

(34:27):
order effects in there.
You're
picking on the sales tax.
But you know, again,
not to California's
obviously the extreme,
but like we pay a 10%
gasoline tax.
How much is your gasoline
I think you could
bump it up to
for whatever you're paying
4% bump it up to 6%.
You could tax this.
You could tax that.
I mean,
you could have
an income tax.
You don't have an income.
You have an income
tax of 2% or 3%.
I mean there's that's

(34:48):
another thing. Yeah.
So so this is
this is national
or state averages
across the nation.
Looks like a 2020 chart.
For those
that are are listening
and not watching,
basically 32%,
of all taxes come from,
state and local taxes
come from property
tax, 23 or 24% come from,

(35:10):
sales tax.
So basically property tax,
sales taxes would
have to go up about
2.4% in 1 or 2.4 times
to cover property taxes,
but then you could take it
from higher
income tax,
state income taxes,
you can take it from higher
corporate income taxes.
And then there's things
like the gasoline tax
and all the other taxes.

(35:31):
So there are a lot of places
for it to come from.
But let's keep in mind
property tax across
the country accounts
for almost a third
of all state
and local taxes.
So other taxes
are going to have to go up
considerably.
It's not a small percentage
of the total tax per pack.
Well,
but I think
this is one of the problems
that we have.
Do you look at these taxes
when we go okay,
I think

(35:51):
first of all there's
this idea
what we just can't do
without them.
And then there's
this other idea,
like where
we, the United States,
for almost
its entire history,
we did not have the vast
majority of the taxes
that we have
in the last 50 years.
We have
doubled our taxation like

(36:12):
we are
taxing because we can.
They find new places,
attack, tax.
It trickles down.
Think about
is that really true?
Because you showed
a chart earlier
that basically showed
that the bulk of growth
in taxes
was from 1920 to 1960,
and it's basically plateaued
after the last few years.
No, it's it's spike.
Even in the last four years,

(36:34):
it's gone up
two, three percentage points
in the last four years.
That and that's on
that's the average
on the individual.
Once again,
50% of the United States
doesn't even pay
federal taxes.
Yeah, but but if you know,
if taxes double
but the cost of
everything has doubled,
then that makes sense.
The problem isn't the taxes.
The problem
is that the cost

(36:54):
of everything doubled.
So like it's no hold on.
But when you say
when you are taxing
goods services
when you're taxing income,
why do you think
the taxes that I have to pay
employees, that
I have to pay
on my products,
the taxes that I have to pay
on the gas
to get my product?
Why do you think
costs go up?
This idea that oh products
go up or tax,

(37:15):
that's not it's all cost.
We all have to pay cost.
The point is like that
cost structure that we have
and that tax basis
when you're doubling
the taxes,
I don't think
there's any person
that would think
we get double.
If I'm reading
between the lines here,
I don't think your problem
is the tax system.
I think your problem

(37:36):
is government spending,
because those taxes
have increased this much
because of how much money
is required
to run these governments
local, state,
and even federal.
And they've
found different ways.
It doesn't matter.
Like there's
there's a million ways
to skin a cat. Right.
And if you look at a state
like Florida has
no income tax,
but they have to offset that

(37:56):
their expenses some way.
So they,
you know, they pay property
taxes and sales tax.
The taxes that we pay
are to justify the spending.
And this is the problem
that we don't need
the taxes,
the problem is they spent
and now they've got
to figure out ways to get it
because they spent it.
And most of the stuff
they spend on are not
we don't
get it in the future.

(38:16):
So what we're doing
now is we're increasing
tax load property,
every other kind of tax
to pay for spending
that's already happened,
that we get nothing from
that system.
Right is not sustainable.
So you can't get
rid of property taxes.
We now have to
have income taxes.
We have to have sales tax.
We got
you get taxed
on your income.

(38:37):
How many times like it's.
And not only now we need
now we need tariffs.
So like we're
we're coming up
with just
more different ways
that we can.
And we used to have tariffs
to avoid doing the sales
tax those point tariff.
And now we have the moral.
That's your point.
So now we need them all.
We can't get rid
of any of them
because we spend
too much money. Right.

(38:57):
But one of the things
I would point out,
your graph
who I know,
who put up the graph
that showed that
32% of our revenue
came from again,
I'm not proposing
getting rid
of the property tax.
I'm just
proposing the change
in how you do it.
I would argue that
you may not lose
that many taxes
by changing this
because, you know,
you guys know this
better than anyone.
The average
it's granted it's

(39:17):
a mortgage,
but the average mortgage,
even though
people get 30 year mortgage,
the average mortgage
is like 7 or 8 years, right?
So maybe you incorporate
some thing
of a mortgage thing as well.
But it
if every year,
if every eight years
you're moving,
then you're
going to be paying
basically the same
amount of tax
because you're
paying the 8% now
and you're
paying the 8% later.
Which is it
for the record, Mauricio,
what you're

(39:38):
what you're
proposing already exists.
Like we already have
many states,
if not most states
have transfer taxes.
And so all you're saying
is getting get rid
of property taxes
and increase
the transfer taxes.
Well yeah.
Well yes or no
I mean that's right.
You're in Pennsylvania
and Pennsylvania
is a very unique.
They have like a 4%
transfer tax.
It's ridiculous.
I'm in California.
We have 1 in 1

(39:59):
one on either side.
The seller pays one.
The other is
there's their state
their state and fed.
I mean I
you know, as an asset
protection guy
trying to transfer,
you know, properties
into LLCs.
I always run
into this transfer
tax problem
because they want
a transcript
from their personal name
into an LLC
for asset
protection purposes.
And depending
on the particular county,
you get hit with state,
county and then local

(40:20):
transfer taxes
that it could
add up to like 4%,
which is a huge, huge.
Yeah.
If you're
if you're in the borough of
Philadelphia, can add up.
But yeah you're right.
So that to that point
I it's not a transfer tax
I'm talking about dude
all I'm doing all I'm
saying I don't
I don't understand why
this this seems like
an out of the whack.
And this is kind of the
thought experiment
because what
DeSantis was saying
seemed very logical to me,

(40:40):
which is
we have a sales tax
for every other sales
and product out there, like,
why don't
we just have the same system
that we have
for 99.9999%
of the other products
have it on real estate
charge,
whatever your state
income tax
we're at like fricking
I don't even know
what I'm like
nine and a quarter, ten,
whatever you might be 4%.
Some of the state might be
six is charge.

(41:00):
Whatever your state income,
your sales
tax is charged
that on the sale
of the property.
But because it's
a huge number,
give him the option
to amortize it over
eight years.
They're probably going
to move
within eight years anyway.
So then they got to
pay the same amount
that they would
have paid anyway.
Except it does
protect the fixed
income individual
who says, look,
I bought my property
30 years ago.
I was paying this much money

(41:22):
and property
taxes at the time.
Now, not only do
I have to continue
to pay it in perpetuity,
but the price goes up
and I bought my house
at 200 grant my my book
value is 200 grand,
not 2 million.
Why am I paying
taxes on 2 million?
When I bought this thing
for 200 grand 30 years ago?
To Jay's point,
that's a deterrent to
to move.
And what if people
just like transaction
volume just keeps going

(41:43):
down, down, down, down.
And then all of a sudden
you have a bunch of people
sitting in their homes
not paying any
property taxes
so that
the government
is not collecting
that money,
but they still have
to pay their police.
They still have
to pave the roads.
They still have to
run their schools.
They have to
do all those things
which are yearly expenses,
which is why
it makes sense for me,
for people
to pay yearly for things

(42:03):
that that are
they enjoy in their area,
just kind of like
a membership fee
for living in that area.
And I know
there are certain states
because as I looked up,
they certain states
treat these property taxes
and how they're used
very differently.
So there's certain states
we're going to have
big problems
like California,
which is why California
had to change their laws
to to limit the property

(42:24):
taxes,
especially on elderly.
But at the same point,
I look at it
that, like you,
I enjoy a lot of things
like if
if my daughter gets sick,
I call 911
and they show up to my door
and take her to
the hospital.
Like that's something that
that that's something
that has to get paid for.
And so like to me,

(42:46):
I don't have to get paid
for that
from the property taxes
I can get tax
payer paid from.
It's got to get paid
some way though.
So why do we why
we just because there are
there's always going
to be cases
where certain taxes
disproportionately affect
certain people.
You can't like
every single system
is not perfect
and the system of owning
something that you've
already paid for

(43:07):
and then losing it
because the government
is wrong,
that is, that is different
than every other tax
we have other taxes.
Your income goes down
or you already
bought something.
The government's
not coming back.
That even car though
like every year
a car
you got to register
registered.
You got to pay that and to
to Mauritshuis point
when you pay gas
you got to pay

(43:28):
tax on the gas.
It's a 10% gas tax.
You got to pay
like it's
a state requirement
that you have insurance.
There's there's
a lot of requirements
you have to do
these things for your home
okay.
So so let's let's
look at the math.
Let's look
at the math side
of this again.
So one of the advantages
to the government.
And I'm going to take
the government side
for a second.
Pretending
like the government

(43:48):
like actually needs to
collect this money,
which obviously
we can all argue
that if they spent
our money,
we're assuming that
the government is,
efficiently
using these things
and we're happy with them.
We're happy paying taxes
because there's no money.
Suspend your disbelief.
Here's a real
thought experiment. Yes.
So so
to take the government side,

(44:09):
one of the benefits
of property
tax over sales tax is,
sales tax requires,
a legislative
overhaul to change.
So you're not going to see
sales tax
go from 6% to 6.5% to 7%
to 9%.
Like it's
not going to change
every year
based on inflation
or based on other
economic factors.
Property taxes,
on the other hand,

(44:29):
can change on
an annual basis.
In some places.
I think they change
on semiannual basis. And so,
basically, if the value of
property is going up,
if people are from
the government standpoint,
again, I'm not making
this argument.
The government can be
making this argument
if people are benefiting
from the value
of their property going up,
okay, now
they're going to pay more

(44:50):
for schools,
for roads,
for bridges
and all this infrastructure
or that,
or just the cost
of everything's going up
or the cost of
everything is going
up, basically.
But from a math standpoint,
if I buy a house today
and I lock in this
8% on today's value,
I'm a fan of saying,
if you buy real estate today

(45:12):
in ten years, it's
almost certain
that that property
is going to be worth
more than it was
when you bought it,
because historically,
in any ten year period,
real estate only goes up.
So one of the downsides for
the government
is I'm locking in this
8% rate
based on the purchase
price today, 1%
based on today's price.
But in eight years,
I would likely be paying

(45:33):
more in property taxes
because the value
would have gone up
in that period of time.
So even if
if magically that 8%
or that eight years
is exactly
the length of time
people own a house.
So it seems like
we break even.
We're not really breaking
even because people
are paying
that 8% on the eight year
previous purchase price.
Is that makes sense?

(45:53):
It's about but the value.
It's only a nominal value
because the value
to the person
who's not planning
on selling the home,
the value is still the same.
It's a three bedroom house.
It's in this neighborhood.
It's like it hasn't.
The value
hasn't really changed.
The price is changed.
The assumption is wrong
with how we value.
The assumption
is that real estate
prices are going up.
The economy is doing good.
That is not true.

(46:14):
Real estate prices
go up to the supply
and demand. Look at today.
If real estate prices rise
because we don't
have inventory,
your dollar is losing
purchasing power.
That's a big piece of it.
Not necessarily
supply and demand.
Yeah well but supply
and demand is driving
massive amounts
in the contraction.
That's not going to be
fixed for decades.
So when you look at it

(46:34):
the assumption is real
estate prices go up.
It means we're
all prosperous.
But that's actually
not true.
And we've seen this
in countries
all over the world.
Look at Australia.
Look at New Zealand, Canada,
look at I mean,
you know,
they say
real estate prices increase.
Does not correlate
to prosperity.

(46:55):
And so all of a sudden now
you have a tax basis
that is
incrementally increasing
that is completely hurting
the people
that can't afford it
that need shelter
somewhere to leave,
and to
the idea
that they could sell
and go down and afford it,
that actually

(47:15):
doesn't exist today.
So now what you've done
is you've
made it unaffordable
for them
to live in their home.
They can't move
because it's unaffordable
for them to move
because interest rates
are now up.
So you've created a system
where the government
gets theirs
and it gets there's
increasingly more,
regardless of anything.
And regardless

(47:36):
of the individuals,
regardless of prosperity.
And that that
that makes sense as long as
there is a correlation
to everything,
as long as Social Security's
going up, as long as.
But that doesn't happen
for the record.
But that's also
only very local
because like,
I'll just use an example
because we have a
bunch of properties
in Houston,
like the property values

(47:58):
from 2020 to 2023
kept going up.
And Houston
for the school
district has a budget
that they have to
they collect taxes
on property taxes
to to for their budget,
and they have a set budget.
And so if properties
keep the values
keep going up,
they reduce the amount

(48:19):
of the tax percentage
that they they, they put in.
So just as an example
on our one property.
So the 2020
tax millage rate.
So this is the adopted
tax rate per $100
2020 was 1.13.
And then 2021 it was 1.09.
Then it was 1.03.
In 2022
and then 2023, it was 0.86.

(48:42):
So the point is, is
that they were
only collecting
the amount of money
that they needed
to run their schools,
and it was the value of
the actual properties
was irrelevant
because if
as long as every single
if you just assume
that every single property,
you know, all
the ships are rising
at the same rate,
then the the tax rates
are actually coming down.

(49:03):
So the amount of property
taxes aren't
disproportionately raising
according to
the actual value, the homes.
It's just the
the amount of tax
that people are paying
is just going up
as the cost of raising
to run this school
or run the
the municipality
for the social services
and stuff like that.
Okay.
I poured like a half

(49:23):
a bottle of clue
into this coffee
and I've been chugging it.
So let me
let me get this point out
before,
before I get too buzzed to
to say it. Yeah, I'm.
I'm already done.
My bourbon.
Yeah.
So, so
a lot of real estate
investors listening
to this podcast, I presume.
And so there's
another aspect to
this whole thing
is, is
the impact on
us as investors.

(49:44):
And I think this is
kind of important
if we are in
an investing business
that is based
on transactions.
So maybe it's
flipping houses
where you're going
to perform a transaction,
every 6 or 12 months,
or even the business
that AJ and Kyle and I are
in where we buy a property
and we sell it in
some period of time,

(50:05):
that is probably
and I assume this is for AJ.
Maybe I'm wrong,
but we're selling
in some period of time
that's less
than eight years.
Basically, we're being hit
with this tax
that's going to
hit our margin.
So to
or if you're a
a legal services
that you are
transaction based
and you create
legal documents
for every single transaction
that happens
that could hit you as well.

(50:26):
Yeah.
So, so let's let's imagine
a situation
where I'm flipping a house.
In my experience,
the typical margin
on on a house
flip, is about 15%.
Now, let's say
we incur an 8% tax in there
because I'm paying 8%,
even though
I'm only holding
the property for three
4 or 5, six months.
It's not a homestead.
I'm talking about homestead,
not investment property.

(50:47):
So investment
property
would not
be subject to this tax.
Correct.
Well the system yeah.
It's a different investment
property.
It's a reverse homestead.
Homestead
usually gets a break
on their taxes.
Mauricio isn't proposing
that a homestead pays
more revenue.
Everybody's
going to be arguing.
I'm not living there.
This is an investment
property.
No, no, no,
the investment property

(51:08):
can continue with its one,
whatever its annual tax,
like it is right now.
I'm just saying
that for a homestead
this is a specific
just like you have homestead
asset protection.
This is a specific tax
on the homestead.
This is a taxing system
on homestead
versus investment
investments
a completely
different thing.
It doesn't affect
the fixed income person
who bought their house
and owned their house
outright over 30 years.
Basically, he's

(51:29):
saying you cap
your total property taxes
at some level.
I yeah, I mean, it
I mean,
as we've been I'm
not generally huge,
but like your argument
of the membership,
you know, that
resonates with me.
We're like, okay, look,
you've got
your neighborhood.
But but I guess my point
there is if you
if you need a membership,
why is it based on
your property values
versus your income.
So that should just be
an income tax.
Like,
I know Florida doesn't

(51:49):
have an income tax,
but guess what?
Maybe that's not the great
the way to go.
It's just a marketing thing.
But I mean, guess
theoretically
they should be
the correlated.
I'm not talking about
a state income tax.
I'm talking about you're
talking
about your local county
or even city,
like your city tax or county
tax should be paying
for the schools.
And so
you're or a neighborhood tax
or whatever,

(52:09):
because we're paying
for that specific.
You're talking about the
I don't know
about the roads.
I think the roads
should be a gasoline taxes.
The people who
who use the roads
the most
would use the most gas,
and they should be paying.
That's becoming an issue.
Electric is a by the way,
because the people
are fighting electric cars
don't pay for gas at all.
And they're like
a lot of these
these state taxes
are collected

(52:29):
through gasoline taxes.
And the
none of the electric cars
are having to pay for it.
So that's become an issue.
But yeah.
Although
how do you make electricity?
Most people don't
realize this,
but you need gas
or some kind of
some gasoline of.
But there's no
tax on gas to my house,
and my house
charges my Tesla.
So yeah, use electricity.
And how does electricity
get made anyway?
That's a
that's a different topic.
My point is it's just it

(52:50):
just again
going full circle.
We've been
we've been this today.
I think we should
probably wrap it up here.
But my point is simply
that you're asking somebody
to pay taxes
that is based on an asset
that's going
they have no control
over this asset
going up and up
versus like it
like an income
tax would be great
because I think it's
I look,
I make 30 grand
a year, 40 grand a year.
Sure.
Tax me
or whatever
you need to do on my 40
grand versus me

(53:10):
or somebody else.
You're,
you know,
you're taxing on $3 million
in income versus,
you know,
anybody else is a 30
granted, 32 you say asset.
I want to make
this very clear.
We keep things like asset.
These are homes
like these are homes
that people spent
their entire lives
raise their children in.
These are homes

(53:30):
that they've been
budgeting forever.
And they had no idea
that home prices
would triple in ten years
prints $30 trillion.
Like these are homes
that people
can't afford,
yet they have to
live in them,
and they have to leave
their community,
their church, their schools.

(53:51):
They have to leave
where they live
because they can't afford
to pay the government
because their home
went up four times in value,
which they don't get.
That doesn't
do anything for them.
I think it's
fundamentally different.
This isn't right.
I mean, when you're
talking about income tax,
it fluctuates.
I mean, I guess
I'm going to I'm going

(54:12):
to sound
like an asshole here, but I
that's okay. Sometimes I do.
Yeah, that's free
market happening.
And their area whether it's
not free. No no whether
that's
government intervention
that's government
no prevention.
But but the mechanism
of what's happening
is basically
their area is
becoming more expensive.
So if,
if it was one
of those things

(54:32):
where their grocery prices
tripled or their
other things that are
their cost of living
is going way up
because their area
was too expensive,
we wouldn't have
an issue with it.
The point is, is that
their area
is becoming in demand
for some reason,
or the
area has become
more expensive
than it should.
That's every place
in America

(54:53):
that that's you're
talking about.
Two you're talking
what groceries
cost of living.
Okay, well,
I can first of all,
I can choose.
That's one time taxes
and two,
most of those things.
As long as I have a home,
I'm not required to
I don't need.
So it could be more
expensive went up, but I
this is where I live.
I've got to the
you know, the alternative
that we're arguing
is basically that same area.

(55:15):
Who's
collecting those taxes
to pay
for their government
expenditures.
The the issue isn't
that the taxes
the properties are taxes
going up.
It's that that area
is spending too much money.
And the
the way
they're choosing to get it
from is property taxes.
So if we switch
that to income taxes
or we switch that
some other tax,
the same thing would happen

(55:35):
to that area.
That area would have to pay
more in taxes
some other way.
And yes,
there might be some people
who are sitting
in their houses
who wouldn't
have that run up,
but it would also
that would be
if you change that,
it would also change
other people's situations
where they would
have to move out of the area
because it's too expensive
for them,
or there's lower
income people
who would have to move
out of the area.

(55:56):
Whatever the solution
that you come up with, it's
going to create problems
for Aaron marginalized
some group of people.
And so to me,
you can't just pick,
okay, there's here's
these poor one
single group insert group.
Now we have to
change the whole system
when what happens
is that changing
the system becomes
just as bad.
That is the tax code
you just defined.
You're picking

(56:16):
subgroups of people
and charging what,
50% of America pays
no federal taxes,
but 1% pays 50.
Well, 40.
The top 10%
pay 65% of all taxes.
You are literally I'm
not I'm not arguing
that they're
picking and choosing
who's
the people
who are benefiting
and who's getting affected.
But I'm saying
by changing it,

(56:37):
by changing it,
all you're doing
is changing that variable.
All you're doing is changing
who's who's benefiting
and who's
getting marginally affected.
Because if you change it
to income tax,
somebody who's
rich and figured out a way
to not pay income tax
or is going to have
the high priced, accountants
to figure out, hey,
I the property tax went up
or the
income tax
went up by this much.

(56:58):
How do we restructure
our businesses and,
and move them
to different areas
and do that stuff
to pay less?
They're going to be
the ones who benefit
and who's
going to get screwed.
It's probably going to be
the people
who spend all their money
on groceries and
and rent every month,
and they're paying
more in the sales tax.
So someone's
going to get screwed
no matter what.
So like
the point is we're talking
about variable taxes,

(57:19):
based
upon how much you make,
how much you consume
everything else
as opposed to you
fix increasing
that has nothing to do
with what you get.
Nothing.
In fact, you already own it.
You already paid for it.
You get nothing more.
But it's
a requirement to live
like that.
That's the
equivalent of saying,
as it's
a requirement to live
but not live

(57:39):
in that house there.
The point is that you
own it.
You you raise your kids
there, you've got
like government of eviction.
It's government
mandated eviction
kicking you out.
I mean,
but if you increase
the sales tax,
then food is a requirement
to live stream.

(58:01):
If there is a difference
between the forced
a forced tax,
I there's nothing I can do
about myself. My property.
I got to pay it.
Otherwise I'm
going to lose my house
consumption tax.
Sales tax
I can choose to buy,
to consume
or choose to not eat.
Well, no, but I can consume.
You
know, I only
about 30% a year.
I'm not going to send food

(58:21):
prices have gone down
in like half
like the cost expenditure
for the average
American on food has gone
way down,
so we consume more
at a cheaper price.
Home prices,
it's gone the opposite.
So now we can
actually consume
way more food.
Way more food.
We could pay
more taxes on it.
It's gone down
substantially
when houses have gone,
but taxes on

(58:41):
everything though
there's there's way
more requirements to survive
and live than just shelter.
And it's one of the top two.
I know
it's one of the top two,
but the all of the others,
if you increase sales tax,
then all of the others
are going to go up
and there's it's
going to marginalize
and it's going to screw
over a different
group of people.
And that's all I'm saying
is, is

(59:01):
the government
has to get their money.
They are spending
X amount of dollars,
and they need
Y amount of dollars
to pay for it,
and they're going to get it
some way
and someone's
no matter what.
And this is just
the current people
who are getting
screwed by it.
And what I'm saying is,
I'm not saying it's right.
I'm just saying someone's
every single way

(59:22):
spending too much money
and it's
how you get screwed,
I guess, is the point.
All right.
Can you got to top
ten of what you just got?
Yeah. Hold on.
I got to go find it.
Make make a final point.
You're in the top ten.
Counties that pay the
most school
related taxes or something.
I can do that.
Actually,
I do have that
list somewhere.
I think if you have kids

(59:43):
that are under 18,
you've got to pay
a school tax
for your neighborhood.
What if your kids are?
What if your kids
are really dumb?
Then you have to pay twice
as much.
Good point.
Okay.
They're really
you're taking up
too much resources
like I'm sorry,
I don't know. I'll tell you.
Okay.
So I went in doing
this researcher
actually came across
something
really interesting.
And I want to get
your guy's opinion on it,

(01:00:04):
because it ranked
the top states
for property tax equity.
And then it said
it was the best.
These are the best systems
to the worst systems.
But the.
Wait, wait,
what do you mean
by property tax equity.
So so it's basically
the AG
is going to hate this one.
It's basically equality.
So it's like
every single school they

(01:00:26):
they say
the best school systems,
every single school
gets the same
kind of funding.
So it doesn't matter
if you live on this site.
So in Pennsylvania
there's the,
there's a very famous one
where it's route
one on the outskirts
of Philadelphia,
and it's literally one
block to the next.
The tax different is massive
and the house
sizes are massive.

(01:00:47):
And the school systems,
the chain,
the differences are massive.
It's just one side
of a street or another.
And that's obviously,
as you could tell.
So Pennsylvania
didn't rank
very high on this list.
So they ranked the top
and the best school,
the best
tax systems for schools
as the ones that have
the most basically equal.

(01:01:08):
Yeah. Exactly.
This this list says equity.
And that's just
the way the system over.
And so I have the top
ten on that.
But then I would also argue
best system is relative
to where you're coming from.
Because someone like me,
who I literally

(01:01:29):
picked my house
and where I want to live
because I want
to send my kids
to the number one
elementary school
in the state.
So I picked where to live
based off of that.
So at the same point,
Pennsylvania is listed 44
out of 50
as far as best
school system.
But at the same time
I'm benefiting from that.

(01:01:49):
So what I say
Pennsylvania is
one of the worst.
No, because I'm
benefiting from it
is it's
probably a lot worse
than than, Pennsylvania.
And we did
the exact same thing
we, like, literally picked
the place
we want to be based
on elementary,
middle and high school.
Right.
So I guess
what would you guys
rather hear?
The top ten best
for what
they consider the most

(01:02:10):
to J's point
in Magennis
systems or the top
ten worst?
How about five and five?
It's because let's be crazy.
Two top dogs. The five best.
So the ones that have
the best statewide system.
So number one is Vermont.
So they basically they
they're the ones I mentioned
before where they statewide
education tax
is collected by the state

(01:02:31):
instead of
the local municipalities
and then redistributed
based off
of, you know,
equally amongst their Hawaii
is that
wasn't Vermont like
have like 38 people in it.
Yeah.
Well I also thought
was interesting.
That's better.
Jerry,
I was about to say
I wonder
how the results of this are
like, well,
just because they have
the best equity does it.

(01:02:53):
I didn't, I didn't
I didn't have time
to research this, AJ
but I think
one of the results is
why does Vermont
have such good
private schools? Right.
Because people
basically say, hey,
if you're going to make
every school equal
and I want my kids
to have an advantage,
I'm going to
send in private school,
not even an advantage.
They just want good
schools, right?
True.
I was giving them
the benefit of the doubt.
We're doing

(01:03:13):
another thought experiment.
Hawaii number two.
Hawaii
is actually one of the
states that,
has a statewide,
tax, property tax.
So it's not local.
It's not. Yeah.
I thought that was
super interesting.
I think so,
and I think
it's only like 0.32,
but that's probably
because
property values are so high.
Number three mass

(01:03:35):
I, I never say that
word for word
because people make fun
of how I say it.
In Massachusetts.
Number four, Minnesota.
And then
I had to
think about it, though.
I can't just say
I can't just say it off
the cuff.
And then number
five is Maryland.
Actually,
Jay spent some time there.
So,
one of the reasons we went
there was for the schools.

(01:03:55):
Yeah.
The state pays a larger
share of school costs
and, the lower
wealth areas there.
And then the top five worst,
they'll throw in a,
a shout out to Pennsylvania
because it didn't make
the five. It was number 44.
But, five
Alabama,
four Mississippi,

(01:04:16):
three South Dakota,
two Nevada.
And number one worst
Louisiana, Arizona.
Really?
Yeah, that makes sense.
Apparently, Arizona's
school funding
is completely reliant
on local,
property and sales taxes.
There you go.
So if you're in Arizona,
pay attention
to where you live.

(01:04:36):
And also fun little tidbit
what doing this exercise
as a real estate
investor actually
was a good exercise,
because
it must be just the areas
I've invested
in historically
where
one of the top indicators
of whether or not
I'm going to invest
in a property
is I look at
school districts,
or when I say I look at it,
my wife does all this work.
She's you know,
I don't I,
I do barely any work.

(01:04:58):
But,
she looks at school
districts
as an indicator of,
you know,
whether this is a good area
to invest in.
But I didn't realize
that there's
probably a bunch of states
and it probably
a bunch of areas
where school districts
aren't really as important.
So it shouldn't
be one of my it's
one of my top
two, top
three things that I look at,
well, areas like Florida,
some of these other ones,

(01:05:19):
I mean, you know,
I was shocked
how many private schools are
there?
Like they're everywhere.
Like everywhere.
Pennsylvania.
Yet you want to know
a weird thing that it
that I notice
in Pennsylvania,
Pennsylvania
is the only area
across the country
I've lived all over
the country
where when someone says,
where did you go to school?
They don't mean university,

(01:05:39):
they mean high school.
Yeah, that's where they
that's how prevalent, like
like make your high school
like your private school.
Like that's
that's how Idaho is. Yeah.
Because people would say
what school to go to.
We're talking oh Eagle.
Because we didn't like
especially grown up.
There was no
private schools.
So that
but I've never
seen that before where it's
just an
unwritten thing, like,

(01:05:59):
I'll meet someone at a meet
up, never talk
to them before,
and they'll be like,
what school do you go to?
I'll be like, oh,
I went to Colgate.
And they're like,
I'm like, yeah,
you know, Colgate
University,
upstate New York.
And they're like,
oh no, no, no.
Like what
high school do you go to?
And I'm like
most people
where you live child
don't go to college. Yeah.
And then what about
what about the age. Yeah.
This is close to your heart

(01:06:20):
at some point, but like,
shouldn't do
like the homeschoolers
get to opt out
of all those taxes
since we're not using tax
the school systems.
Oh that's a
that is a big beef
that I have.
I can tie this to.
So freaking ridiculous.
Let's not
let's not go down this road.
Here we are.
We're going to have
the school credits.

(01:06:40):
The school credits issue
where people basically
you get credits
and your property taxes
to go to
whatever school you want.
Credits are coming out
more and more
and all the states
because school participation
is just tanking.
Wasn't
that the Betsy DeVos thing?
Like she was a flurry
where she came
in, everyone's like,
oh my God,
this she's
going to absolutely tank
the whole education system.
And it was like one month
I'm talking about
Betsy DeVos.

(01:07:00):
And then you never heard her
name again.
The rest of time,
I've never heard her
name again.
All right. Good discussion.
Plugs hypothetical. You.
Oh, you got one, I got one.
Let's do it.
Okay. Here you go.
$1 billion.
Do you do this? Yes,
yes, I'm doing it.
I'm in, I'm in, I'm in.
As long as as long

(01:07:21):
as my family members
stay alive in the scenario,
I'm taking the
billion dollars I'm in.
So $1 billion.
But everybody
on the planet disappears
for ten years,
and you have to
survive alone on the planet
for ten years.
If you die,
you never come back.
Your family never knows
what happens to you.
You live for ten years.

(01:07:42):
You come back
at your same age,
same health.
No one knows. It happens.
Nobody knows how.
You have $1 billion.
Everything's paused
and everything.
Well,
the earth continues,
the earth continues on.
Do you and I just paused.
I was going to say,
is your age? Pause.
Because I feel like
that's changes the answer.
Let's say
you are in perfect health.

(01:08:02):
I'm in perfect health.
Done. I'm doing it.
You're waiting.
Let's say you part.
You pause
at your current age
in health.
Pause at my current age.
Yep.
And like, it's like a
it's like a wasteland,
right?
I'm assuming like,
no, no, no, no. People do.
People just disappear.
It's just.
Yeah.
But like,
what I'm saying is like,

(01:08:23):
stops working, right?
Oh, yeah.
Yeah, absolutely.
Things will stop working
nuclear
reactors will melt down.
Can I go to wait? Wait.
Can I go to
my neighbor's property
and kill a cow
and skin the cow
and eat the meat? Okay. Yep.
How do I have to prepare?
Let's say you got 24 hours.
I mean, I,
I want to do that
just for the fun of it.
Now, ten years,

(01:08:43):
though, is a long time.
If I could do, like,
three years or two,
24 hours might be two,
like two short for me
to figure out
where the best prepper is.
Like,
you've got to figure out
there's people
the duty anymore.
Go to your Cabela's dude
and just start like
pulling out your guns.
And like,
what I'm saying is
there's there's people
that were preparing
for this scenario

(01:09:03):
their whole life.
I just got to figure out
where they live.
Right?
Like,
you just got to go, dude,
if you have access
to everything,
think about,
like, going any sports age.
Not everybody has access
to a rifle right now.
They might be.
Here's the thing.
Nobody's nobody's
going to kill you.
You don't have to
worry about dying.
I got to worry
about animals.
You have to worry
about animals.
And here's the other thing.
You have to worry
about disease.

(01:09:24):
You got to go hunt.
But if I can get
into a pharmacy,
that's the thing is,
everybody vanish.
I could walk into any store.
I could get enough
freeze dried food
from walking into one store
to last me years
and like,
then I can get guns,
go to the pharmacy
and just start pulling out
all the antibiotics,
everything that I
could ever fall down
and slash your leg

(01:09:45):
and need surgery
or something,
go shoot a cow.
Okay?
That's a
that's what I'm saying.
If you find a prepper knows
that basically he's been
he's been prepared for that.
He's got his own
little garden.
He's got all this solar
panel he's on,
you know, his
his plumbing
is all hooked up and stuff.
If I can find that up.
Yeah. Ten years.
Let's do it. They.
I would work out
pretty hard to.
I'd be in great shape.
Oh. Come back.

(01:10:06):
My wife would be Like,
she would wake up
the next morning
and all of a sudden,
her husband's just jacked
in, like tan Jack.
Just like,
what if it was just
the four of us?
I do it for half a billion.
If it were,
if it was the four of us,
I'd do it for free.
That would be fun.
That's exactly.
I'm in.
Hang out
with your four buddies
for ten years.
Grab the cars.

(01:10:27):
Come on down.
Let's hang out.
AJ, forget
you're getting the
worst of this deal.
We're just going
to drag you down.
No flying in.
We create our own, like,
social nights.
And it would be.
It would be awesome.
We have to.
We have 24 hours
to get to each other,
go grab, like,
all the cool cars
we want and, like,
stock up all this gas.

(01:10:47):
And just like I might,
we might have to have a vote
on that because, like,
something
that's that dangerous,
I might have to say,
we got to last
the ten years,
you know, like,
it's like
like we got
there's got to be some way.
And then the ten years
comes up.
Can we do another two years?
We will take the extension.
I'll give back

(01:11:08):
half the money.
If I could do this
for a couple of years.
Do the extensions come
after this long?
We pay it back
for extensions.
Okay, one more hypothetical.
No, that was a fun one.
We got to end on that, Jay.
I don't save that
for next week. Plugs.
What do you got, Mauricio?
Dude,
I don't know
if you guys can
still hear me.
I gotta fix my
internet thing, but,
no coaching with Mauricio.
Just got a coaching with
Murray sitcom.

(01:11:28):
I'm still doing my weekly
coaching. It's been awesome.
Where did you keep
the name of it?
The same, or is it?
Oh, it's the elite.
It's called elite
Inner Circle.
And we're
working through
a compliance program
like an audit file
so that when you
when you joined, by the time
you're done,
you're gonna have
a complete audit
file of everything you need
you could do to pass
SEC scrutiny.
So it's
developing really nicely.

(01:11:48):
So if you're interested,
just go to coaching
with reset a com
and we'll
I'll send you the details
and see if it's a fit.
They're also working
on their internet
one of these days
Mauricio you'll
you'll be able to afford
good internet AJ
what do you got buddy?
You know what.
Go check out our tech fund.
We're still racing for it.
That's what.
Think? Yeah.
Go check out the tech fund.
Diversified, tech

(01:12:10):
on three different software
companies that we,
use in our businesses
and everything else.
So go check it out.
Go to Cedar Creek Capital,
dot com.
And then right there,
you can go.
Jay, what do you got?
I'm plugging
next week's episode.
We're going to be doing
our mid-year
prediction episode.
Really?
I knew if I didn't

(01:12:30):
say it here,
you guys wouldn't
let me do it.
I love that
you snuck that in,
like I'm I'm committing.
I don't
I don't want to do this.
Why?
Everybody everybody
loves our predictions
episodes.
They're like our best viewed
episodes.
But like,
they do realize in this
what's going on
in the economy
and everything global,
like everything
that's going on.

(01:12:50):
Like we're just making up.
You just hate the fact
that the four of us
have been wrong
about everything
every time for three years.
And that's what I think.
How can you predict
anything right now?
Like it's
like it's fun talking.
You feel like
we're just taking
a shot in the dark, that
maybe we get it right
so we can clip it
later and be like,
Jay was right
about everything. Duh.
No wonder
we've had no clips.

(01:13:13):
Exactly.
I just want to be able
to rub in the fact
that we're ratio's,
10% inflation
hasn't happened yet,
and his and his crash.
All right,
if you set it up,
Jay, I will show up
prepared.
I will
I will do the spreadsheet.
I will
I will listen back
through the last episode
and I will documented all,
and we'll be ready for you
going to make us

(01:13:33):
do scorecards to know.
But you'll know.
We'll get to see
what we said last time.
Everything was wrong.
Let's let's just.
Everything was wrong.
How does gold doing
actually get gold?
We might have hit gold.
What episode was that?
It was the first
one in January. I,
All right.
Plugs.
Go leave a review
on conference.

(01:13:54):
Connect comm.
One of these guys, Jay,
AJ, Mauricio.
They're all speakers.
They all speak at events.
Limitless coming up.
I think they're, two of the.
You guys
at least are
speaking at that go.
I'm sure everyone,
if you're listening
this podcast,
you've heard one of these
these guys speak.
Go leave a review
for one of them
on conference connect guy.
Com go,

(01:14:14):
help them out,
boost their reviews.
So I got
we still figured out
a way to do an hour and 15.
You ruined the end here
because I usually end off
feeling good
about coming back next week.
I'm like,
oh, let's
everybody see this.
And I'm
not even looking
forward to it.
So thank you for
robbing that from me. But,
if you're into the
whole predictions thing
like Jay thinks you are,

(01:14:36):
I guess I will see
you next Thursday.
Tell us in the comments.
See you guys later.

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104. What If We Eliminated Property Taxes?

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