A recent article in the OC Register discussed a $150 million home for sale in south Orange County:
A rare 42-acre estate in San Juan Capistrano, known for decades as “Porcupine Hill,” has hit the market for the first time for $150 million. . . .
Marketed as “Casa Grande,” the estate includes an existing 21,000-square-foot structure consisting of three apartments, offices and storage spaces completed in 2010 and permitted plans for a 38,000-square-foot primary residence on a ridge with 360-degree views.
The plans, more than 40 years in the making, also include two 10,000-square-foot guest houses and unlimited maintenance space for the existing agribusiness.
While future residences fall under Proposition 13, agribusiness is taxed under the Williamson Act, offering reduced property tax savings based on production.
It’s not at all clear that farms should pay a lower tax rate than other businesses. Nor does it seem likely that this type of “gentleman farmer” is what the legislature had in mind when it created these tax breaks for agriculture. Many young people are leaving Orange County because of high housing prices, and yet the state is offering tax breaks to preserve a 42-acre “farm” in an area that desperately needs more housing.
In the past, I have discussed the fact that New York City often taxes Apartments in Manhattan Billionaires’ homes are much cheaper than those of working-class people in Queens. I also mentioned that progressive politicians worked hard to repeal the federal tax on super-sized luxury yachts. Many of these politicians also support the SALT tax deduction, which overwhelmingly benefits high-income earners.
New York and California are both nominally “progressive” states, filled with politicians who claim to favor a more equal society. Perhaps they will say that their representatives in Washington favor raising taxes on “corporations,” as if nonhuman entities could actually pay taxes. What can we infer about a politician’s values when he opposes raising taxes on the consumption of the rich, but supports raising taxes on the investments made by the rich?
Some on the left argue that the best way to tax the rich is to tax income and wealth. But these taxes can be avoided through clever methods. tax evasion schemes:
Let’s say you own a successful business, so successful that your stake in it is worth $1 billion. How should you finance your expenses? If you pay yourself an annual salary of $20 million, the federal government will take 37%, or about $7.4 million. So maybe you should take a $1 salary and sell $20 million worth of stock. If that stock was a gift to you when you started the business, the entire amount is capital gains and will be taxed at 20%, which would be a $4 million loss. What if, instead, you called your wealth manager and agreed to put up $100 million of equity as collateral for a $20 million loan. In 2021, the interest rate on the loan might have been as low as 2% per annum, meaning that the returns from holding the equity, rather than selling it, would have easily covered the cost of servicing the loan. Since the proceeds of the loans, which must be repaid over time, are not considered income, there would have been no tax liability. . . . When the owner of an asset dies, the value of the capital gains is “grossed up” from its purchase cost to its value at the time of death. In this way, the “buy, borrow, die” formula not only defers capital gains taxes, it can even eliminate them altogether.
