The Glade 4.0

Scenario: I buy a piece of land in Year 1 at its fair market value of $100k. In Year 10, the fair market value of that land is $500k. The nominal gain is $400k, but inflation over those ten years is a constant 5%, so the inflation-adjusted gain is roughly $340k.

Question 1: If I sell the land in Year 10 for $500k in cash, what amount, if any, do you think I should pay taxes on? What amount, if any, should the purchaser pay taxes on? What is the basis for your answer?

Question 2: If I trade the land in Year 10 for some other tangible asset with a fair market value of $500k, what amount, if any, do you think I should pay taxes on? What amount, if any, should the counterparty to the trade (i.e. the recipient of the land) pay taxes on? In each case, what is the basis for your answer?

Question 3: If I hire someone as an employee in Year 10 and compensate them by deeding the land to them rather than paying a cash salary, what amount, if any, do you think I should pay taxes on? What amount, if any, do you think the employee should pay taxes on? In each case, what is the basis for your answer?

Disclaimer: The foregoing doesn't assume any particular tax laws (e.g. the US Tax Code) apply. I'm just asking what you, personally, think should happen as a general matter.

*ETA the second part of Q1 re the buyer.

No taxes, property or otherwise, should be levied against the land or its transactional value now or later. Discussion over.

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I had understood, perhaps wrongly, that you were a proponent of a sales (consumption) tax.

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Ezekiel 23:19-20 

1. 0
2. 0
3. 0

Government has no moral claim to the fruit of another's labor.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

Land must be fundamentally exemption from all forms of taxation, especially serial and transactional taxation.

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Why do you feel that way?

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Ezekiel 23:19-20 

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Really? It's not obvious to you? Consider the Liberal position on eminent domain and "due recompense".

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Totally off-topic, but every time someone uses this expression, I end up with the Hail Mary and the lyrics from Tempted, by Squeeze, competing for space in my head.

What if the scenario were changed so it was about some tangible asset other than land - say, a piece of furniture or artwork?

Scenario: You pay a sales tax at the time of purchase.
Q1: The buyer pays tax on the current value of the land
Q2: Straight swap - You both pay taxes based on the current value of what you acquired
Q3: You pay nothing to give the land away. The employee pays sales tax on the current value of the acquired land.

Rationale: Sales tax. No tax because your land is now more valuable irrespective of what you did to it.

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I don't like sales tax on land. It gives defacto ownership to government.

While government can make a case that sales taxes on other items which use infrastructure to ship are simply the delegation of user fees for such access no such argument exists for the primary resources of all human development: physical landed property.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

Eh, there can be a transactional tax here depending on what the item is, but land needs to be exempt. The power to tax is the power to take.

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There is still some gov't overhead in the transfer of land titles, recording of deeds, surveying of property lines, etc.

I guess I still think along the old English grounds that the government owns the land.

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Very, very, very little. They can charge a transaction fee, but not a tax.

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I disagree. Property taxes could be argued to give defacto ownership to the goverment, but a sales tax paid by the party purchasing the property does not. What it does to is recognize that there are infrastructural costs associated with the location of the property, regardless of your claim. For example, there is just the point of access to the land. If you can't access it, you can't own it (yes, I'm sure you can create some situation where a piece of property can be accessed legally without using public ways, or tresspassing on other property) Then, just the fact that the government by virtue of its mandated duties, is obligated to uphold and defend your property rights. Then there is the case of mineral rights... I do believe that the property owner controls the mineral rights for that property, but as part of the property, a no sales tax would make selling those raw materials non-taxable. I don't believe that should be the case, any more than selling timber from the property, or using the timber to build a house on the property should be non-taxed.

Wait, Ladas -- are you arguing that if a person wants to cut down timber on their own property and use it to build a house on that property, they should pay for the privilege to do so?

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"Aaaah! Emotions are weird!" - Amdee
"... Mirrorshades prevent the forces of normalcy from realizing that one is crazed and possibly dangerous. They are the symbol of the sun-staring visionary, the biker, the rocker, the policeman, and similar outlaws." - Bruce Sterling, preface to Mirrorshades

No, but in reviewing what I wrote, I can see how it came across that way.

I'm saying that if I understand the comments from Elmo (and Khross to some degree), that if I cut down the timber and make a table, selling that table would be subject to a sales tax. I would assume for consistency, if I were instead to cut down that timber and make a house, when I sell the house an some portion of the property, the sale would be subject to sales tax. The sales tax being a transactional fee of sorts to support the framework and infrastructure of the government that protects property rights.

Ladas:

You can charge a tax on the "house" but not the "land".

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The value of the house is directly tied to the piece of land it is on. Laying a tax on the house is a defacto tax on the developed land.

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Ezekiel 23:19-20 

If it is wholly your labor on your land and you've already paid a sales tax on the materials you're using...no tax.

Why would someone else have to pay a sales tax on the house in the future when the tax on the components have already been paid? Double triple quadruple taxation? No thanks.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

Honestly, I don't understand why you are designating land as exempt from sales tax and the objection based upon eminent domain, so without further clarification of your position in that regard, I agree with Rynar.

This makes no sense as it appears you are advocating that only raw materials should be subject to sales tax.

Nope, just a tax once on a product. I buy materials tax free and turn the ore into aluminim. I ship the aluminum and sell tax free to a person who crimps it and cuts and turns it into gutters. He sells it with no tax to a contractor who takes it to your house and charges tax to put it up or he charges you tax and you put it up.

Single point single instance taxation.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville