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Monday, November 2, 2009

Property Taxes Wreck Cities

This article was very interesting. There was a huge property tax foreclosure auction in Detroit. People living in Detroit are mostly dependent on the auto industry, which is crashing.

Less than one-fifth of 9,000 properties sold this weekend at Wayne County's annual tax foreclosure auction, according to Reuters, despite a minimum bid of only $500.
That's very interesting. This was not a "mortgage foreclosure auction". It was a "property tax foreclosure auction".

Why would someone refuse to bid on a vacant plot of land, even if the minimum bid is $500? The answer is "property taxes". If the property taxes owed on the land are high, then it makes sense to refuse to buy, even if the price is low.

For example, suppose the property tax owed on a plot of land is $10k per year. If a comparable house or apartment can be rented for less than that, then the land actually has zero value. The property taxes owed are more than what the rent is worth.

It doesn't pay to buy a vacant lot and build, if State thugs will later jack up your property taxes.

Property taxes can accelerate complete economic collapse. Here's an example of how this works.

Suppose that the economy crashes. Suppose 20% or more of the people lose their jobs, and can't pay their mortgage or property taxes. However, State parasites demand the same amount of booty. Instead of decreasing the size of the government by 20%, the State parasites instead raise everyone else's property taxes by 20%. As the foreclosure rates rise, property tax rates rise, causing even more foreclosures. Eventually, you have the perverse situation where the property tax bill is more than the land is actually worth.

Property taxes rise as the economy crashes. Suppose you own your house without a mortgage. Suppose you can't pay your huge property tax bill and you lose your job. You can't sell your house, because the market is flooded with other tax foreclosures. It's in your rational self-interest to abandon your house, rather than pay an extortionate property tax bill.

As the economy crashes, you have a lot of houses where the annual property tax bill is more than the house is worth. There's literally no buyers. The burden of property taxes makes the value of the land zero.

That's the fallacy of land ownership as an investment. Via property taxes, you don't really own your land. If the economy is ruined like in Detroit, you can wind up in the perverse situation where the annual property tax bill is more than your house is worth. If you have a rental/investment property, then the property taxes owed can become greater than the rental income of the property. Under such circumstances, your investment is now worthless. Under such circumstances, the State has literally stolen your house and your investment.

The biggest criminals are the police who kick people out of their homes, for not paying property taxes or their mortgages. They are literally private debt collectors working for Goldman Sachs, rather than defenders of individual freedom.

A pro-State troll says "Debts must be paid, mortgages must be foreclosed, and taxes must be paid! Respect the rule of law!" When banksters create a recession/depression to loot and pillage, it's immoral to kick people out of their homes for unpaid mortgages or unpaid property taxes. Insiders get a bailout, while individuals lose their jobs and their homes and your savings.

"Respect the rule of law!" is a meaningless phrase. Laws are written to benefit insiders at the expense of individuals. Why should I respect a law designed to make me a slave?

Most individuals will pay their mortgage or property taxes, unless they're literally financially unable to do it. Most people won't abandon their home unless forced to.
As experts predicted, the auction was dominated by speculators -- may from California and New York -- who routinely outbid would-be residents for the few properties deemed habitable.

"Why am I competing against a bank?" Ross Wallace, a lieutenant in the U.S. Army, asked Reuters. "It would be common sense to have a separate process for people who want to move back to the city or it's going to stay empty."
This is extremely offensive.

If an individual wants to buy a foreclosed house, he has to actually work to raise the money to buy it.

If banksters and speculators want to buy a foreclosed house, they literally print new money and lend it to themselves.

The banksters have magic money-printing power that nobody else has. This creates an unequal economic playing field.

When I play 3-handed Pinochle against my father and sister, my father almost always outbids me. My father thinks "If FSK bid 500 (a high bid), he's probably a big favorite to make his bid. It's in my rational self-interest to bid 510, even if I have practically no chance. I lose -510 for failing to make my bid, but FSK would get +500 or more for making his bid." The net effect is that my father decreases his chance of winning a little, decreases my chance of winning a lot, but increases my sister's chance of winning a lot. Then he says "HAHAHAHA!!! FSK doesn't play Pinochle well!"

Similarly, the foreclosure auction is a public auction. Both the banksters and the general public are invited. Suppose a non-bankster bids $20k on a foreclosed house. Then, the bankster says "HAHAHA!! This house is worth $20k, because a non-bankster bid $20k on it. Therefore, I bid $21k. I can always sell it to that pathetic loser for $20k. Besides, when I buy the house I'm not spending my own money. I'm borrowing $21k from my bankster friends. If I'm wrong, I'll get a bailout. The most likely outcome is inflation, and I'll make a huge profit!"

Both banksters and non-banksters are invited to an auction, with bids open to the general public. The banksters can observe when a non-bankster places a bid, and always outbid them.

The fair way to conduct such an auction is single-sealed-bid, with the winner paying the second highest bid. In a single-sealed-bid auction, everybody submits only one bid. The highest bidder pays what the second-highest bidder bid. This provides an incentive for everyone to bid what they really think it's worth. (In case of a tie, the winner can be chosen randomly. Nobody can claim to be disadvantged, because they bid what they thought it was worth.)

In a traditional auction, everyone is in a room. The auctioneer gradually raises the bid, and the bidders visually indicate when they want to bid. The problem is that when a non-bankster makes a bid, he leaks information to the banksters. The banksters literally have an unlimited budget. Therefore, the banksters will always outbid non-banksters in a foreclosure auction.

If I obviously overbid, my father will let me win the bid and stick me with a huge loss. In a card game, it's zero-sum. My loss is the other players' gain. In a foreclosure auction, if the non-bankster causes the bankster to bid $5k more, the profits accrue to State parasites and not to the non-bankster. Therefore, the non-bankster should bid honestly. If the non-banksters are bidding honestly, then the banksters can always rationally outbid them.

Of course, the traditional auction leads to higher prices, as everyone gets caught up in the excitement of the auction. The traditional auction also allows banksters to outbid non-banksters, because the non-banksters leak information when they place a bid.

It's just like when I play Pinochle with my father. When I bid 500, I leak the information "I have a hand where I expect to make 500." Then, my father concludes it's in his interest to bid 510. My father thinks "FSK will only bid when he expects to make it. Therefore, I should always outbid him." Similarly, a bankster will always outbid a non-bankster in a foreclosure auction. (My father and sister make enough other mistakes that I still win a reasonable share of games. That doesn't mean my father isn't acting unethically. If I make a playing error, my father says "HAHAHA!! FSK sucks!" They make plenty of errors, but I almost always count the cards accurately and pick up a few extra points on every hand. There are some instances where I don't know the distribution of the cards in the other players' hands. I make a decision that's reasonable based on my limited information, but turns out to be wrong, and my father concludes "FSK sucks!!")

All taxation is theft. This is an example of property taxes leading to great evil. Via property taxes, State parasites may steal your home, even if you own your house without a mortgage. Due to property taxes, nobody really owns their land. You merely have a perpetual transferable lease. At any time, State parasites may decide to raise your rent (property taxes).

This Detroit foreclosure auction is an excellent example of State evil. The State creates an inflationary boom. Non-insiders usually buy near the peak of the boom. Then, the market crashes. Many non-insiders lose their jobs during the recession. Non-insiders lose their homes due to a mortgage foreclosure or property tax foreclosure. As foreclosures rise, the State parasites raise everyone else's property taxes to compensate. The net result is that property taxes owed on a house can be more than what it's actually worth. Speculators buy the foreclosed homes with newly printed money, borrowed from their bankster friends. Individuals lose their homes and savings and jobs, while insiders get a bailout and profit immensely. The net effect is a massive transfer of wealth from productive workers to parasites.

The speculators finance their gamble with money printed out of thin air. They are "too big to fail". They will hold onto the foreclosed homes and sell them to new slaves/suckers in the next inflationary boom. Insiders profit immensely, while non-insiders lose everything.

In this example, State parasites literally stole nearly the entire city of Detroit!

The most immoral actors in the above scam are the State debt collectors (police). They violently kick people out of their homes, collecting illegitimate property taxes. They violently kick people out of their homes, enforcing illegitimate mortgage contracts.

Property taxes are not imposed by a consensual contract. Property taxes are unilaterally imposed by State parasites. No matter where a slave chooses to live, they owe property taxes (rent) to their masters. A pro-State troll says "Voting legitimizes taxes/theft!", which is nonsense. You don't have the right to violently kick me out of my home. Therefore, you don't have the right to authorize State thugs to kick me out of home on your behalf via voting.

According to natural law, a debt contract with a bank is not a valid contract. In order for a contract to be valid, both sides must contribute something tangible. The only way an individual can get money to repay a mortgage is by actually working for it. When the banksters lend money, they literally print brand new money and lend it to you. No real work is involved when the banksters lend you money.

Via inflation, State parasites steal people's savings. This makes it very hard to accumulate enough money via savings to "buy" a house. There's lots of cheap mortgage money used to purchase houses, pushing up housing prices. If you want to "buy" a home, the only realistic way to afford it is with a mortgage.

"Mortgage" literally means "Death contract". Amusingly, if you speak French, a word other than "mortgage" is chosen.

The banksters scientifically create periodic recessions/depressions. During a depression, non-insiders have less access to money. It's as if the banksters say "HAHAHA!! The money supply crashed by 50%!! The outstanding balance due on all mortgages has doubled!!" Via asset bubbles, the percentage crash in the housing market is greater than the overall rate of money supply contraction. This leads to the perverse situation where housing prices and salaries are crashing, while the price of food and oil and other goods is rising. While individuals struggle to pay mortgages and property taxes, insiders give themselves a bailout.

The "credit check" part of the loan process is an evil fnord, providing the illusion that it isn't a scam. Even if they give lots of loans later proven to be a mistake, the banksters always get their bailout.

Real interest rates are negative. The banksters have the power to print and lend new money to whoever they choose. Via the money-creation process, the banksters wield an enormous amount of economic power. If you think of the economic system as a poker game, it's a game where the banksters have the power to create new chips and bet them whenever they please, diluting everyone else's chances of winning. It's possible for someone without this magic power to win if they're really skilled, but that doesn't prove that the game is fair.

Unfortunately, it's impossible to resist property taxes. The State thugs know where you live, and will assault/seige you if you resist foreclosure. If you violently resist being kicked out of your home, then State thugs will murder you.

The most immoral actors in the above scam are the State police, who enforce illegitimate debt contracts and collect illegitimate property taxes. Most policeman are pro-State brainwashed to believe "The orders of a State judge are valid!" There are a lot of people who will gladly commit evil for a steady paycheck. It helps that they sincerely believe they're doing the right thing, unaware that they're participating in a massive crime. A policeman who thinks he's a hero defending "Rule of law!" is much more dangerous than a policeman who knows he's a paid thug committing crimes.

Unfortunately, resisting property taxes is too risky right now. If you're a good agorist, you should be able to generate a lot of wealth outside the State slave economy. At that point, it becomes profitable to hire private police forces. Eventually, there will be a private police force capable of resisting a State siege. At that point, State parasites won't be able to violently collect taxes and the scam of the State is over.


Chrono said...

Applause...incredible post. Good job!

David Z said...

single-sealed-bid is interesting concept I've never heard of before. But how does it prevent the bank from simply bidding $1MM for each of the lots, thus assuring that they "win" the auction, but only obligating them to pay whatever was the fair-market bid (e.g., $20k)? I guess I don't see how it's not prone to abuse in certain instances like this one.

Robin Smith said...

You say illegal property taxes? Lets take a look at that:

How are you defining a property tax? That which is levied on the improvements to a property OR the location value in the plot of land. Or both?

Then ask yourself these Q's:

1) What is location value ?
2) Who creates that value ?
3) Who then by rights does it belong to ?

CorkyAgain said...

In previous comments on this blog, I've described the assessments behind property taxes as potential transactions. The state looks at how much your neighbors were able to get when they sold their house, assumes that you'd be able to get a similar amount for yours, and then taxes you *as if* you had sold your house. They do this every year, *as if* you sold it over and over again each year, for as long as you "own" the house.

If you haven't actually sold your house, you need to tap into some other source of income in order to pay the property tax. This is how property taxes ensures that we all continue to participate in the market for what FSK calls "slave points".

What the Detroit case shows us is that the "potential transaction" is imaginary in a very strict sense. The market, through the auction process, has established the value of these properties as zero. No one wants to buy them at any price! Therefore, you'd think that the assessed values and the related property taxes would also be zero.

But no! The state still wants the money it believes it is owed, even though it was based on demonstrably false assessments. (They're also charging interest penalties on those "past-due" taxes.)

Anonymous said...

Property taxes (in fact any sort of non-income or non-transaction tax) are evil.

In today's world there is some sort of recession every 5 years.

Unless you have strong leverage (i.e. you are friends with managers, have strong knowledge of your company's operation gained over 5 years etc.), you can get pushed out of your job and find that you have no income to pay your property tax.

So you lose both your job and your home.

Anonymous said...

Property taxes are a scam. Want free land? Democracy in action:

1. Run for mayor and promise to rob 49% to give to 51%. It's a democracy so majority rules.
2. Raise property taxes to 99% of the "appraised value". Appraise everything however high you want.
3. Foreclose on everyone in the city.
4. Buy up the whole city for free.
5. Appraise your property at its new value, $0.
6. Now the whole city is renting from you, and you don't have any mortgage or property taxes.

Anonymous said...

And the real reason for property taxes? To force you to buy and sell with worthless paper. So at some point during the year, you have to give up something of value for something of no value.

CorkyAgain said...

Don't get me wrong. Taxes on transactions are evil too.

But yeah, I have a special dislike for property taxes, excise taxes, levies or whatever other name non-transaction taxes go by.

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