A pure democracy (as the American republic is quickly becoming) is a chaotic nightmare by which the envious horde cannibalizes anyone who dares work hard and achieve any gains for themselves.
Case in point: Los Angeles. In 2022, the populace passed (by 57%) a referendum called Measure ULA: The Homelessness and Housing Solutions Tax, known colloquially as the “Mansion Tax”.
Los Angeles already had a real estate transfer tax of 0.56% of the sales price, less any transferred debt. All taxes suck, but this one was at least tolerable. The new measure adds an additional 4% tax for any real estate sold for over $5 million and an additional 5.5% tax for any real estate sold for over $10 million — regardless of debt.
So… that escalated quickly.
Again, this tax is paid by the seller and isn’t mitigated by how much they owe on the property. How would you like to sell a heavily mortgaged “mansion” only to find that not only do you not walk away with any cash, you now owe the city of Los Angeles a huge sum?
More insanity: This “Mansion Tax” isn’t just levied on single-family homes. It also applies to commercial real estate and — get this — apartment buildings.
So, the massive tax increase that was supposed to fund public housing initiatives and “address the housing affordability crises” in Los Angeles is throttling the market for apartments. Brilliant.
Well at least it raised a boatload of money, right? I mean, that’s a massive tax increase. Proponents of the “mansion tax” promised it would generate around $900 million. So, how much did it actually raise? Just $215 million.
Turns out, rich people don’t like to be fleeced, and they have agency too.
After passage of the measure but before it took effect, rich people fled the city. Sales of property priced over $5 million rose by 35%. As an example, Brad Pitt and Mark Wahlberg sold properties worth $33 million and $55 million respectively as they left LA.
There are other legal ways to avoid the tax too. Husbands and wives can own and sell as “tenants in common” to split up the legal property sold. More complex ownership structures can be manufactured as needed for more expensive properties.
Oh. And don’t forget about gray markets. If this tax stays in place, don’t be surprised if properties start selling for much less than it seems they would. It’s pretty easy to slip a seller some gold or diamonds under the table to cover the difference.
And of course, after the tax took effect, the market for “mansions” has dropped off a cliff. Afraid of the tax, many property-owners are deciding to hunker down and wait it out rather than sell.
There is some good news on the horizon. This insane tax might get repealed (also by referendum) in November 2024. There is a measure called The Taxpayer’s Protection Act that would strike down the Measure ULA and require (because it’s a “special local tax”) a 2/3 vote by referendum to reinstate it. That’s unlikely to happen because, again, it only passed by 57% in 2022 and has been a disaster.
Naturally, the demonic Gavin Newsom (along with the CA state legislature) filed a challenge with the California’s Supreme Court attempting to block the Taxpayer Protection Act from the ballot. Their argument? It would “impair essential government functions”.
Truly, we are ruled by madmen. And our envious, resentful, vote-happy democratic brethren aren’t much better.
On the bright side, Mark Wahlberg lives in my town now, Las Vegas. He’s starting a movie production company here as well. Welcome, Mark!
I hope we aren’t as stupid and spiteful as Los Angeles was and run him out of here too.
Naturally,
Adam
Want to learn why it’s important to not vote like a resentful idiot? Look here!