The government bailout for the banks and mortgage companies that created all t
these assinine mortgages has begun. If you want to know who is going to pay for those subprime mortgages look in the mirror. After all bank executives and shareholders might have contributed to George Bush’s campaign.

George Bush has already started the bailout. The Fed’s (Newly Created) Term Auction Facility handed out 50 billion last month alone. They are handing out loans to banks backed with mortgages debt, credit card debts, and any other type of junk debt that the bank can hand over. The banks can’t raise private capital because everyone in the private sector knows that the mortgage backed securities are the ulitmate “junk bonds” so the banks can get their money from the government.

It is a bailout that is cleverly disguised to look like loans. It is the ultimate way to keep real estate prices high. Just sign people up for mortgages and credit cards at ‘loan shark’ prices. Make all the money you want when the economy increases and then dump all the bad debt on the taxpayer when it goes bad.

I guess the GOP is having an excellent quarter. I wish I could invest.

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I would love to see you guru’s speculate on whether or not there is going to be a spring-bounce this year.

It is now evident that price declines have started, but the declines are too slim to claim the bubble has really really burst…

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For fun, do the math and extrapolate the net decrease in Washington property values that caused the aforementioned tax revenue decline. It’s in the gazillions.. In three months. Nothing to worry about. We are special….

That’s probably not the cause. Property assessments are still going up. This shortfall is more more due to transaction-related costs (e.g. excise tax) than it is due to property taxes. See my post above.

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But our government can’t seem to assimilate this simple idea.

Election cycles are shorter than economic cycles. When the government has a surplus of tax receipts, any politician who wants to be re-elected is going to either cut taxes or spend the surplus on projects which are visible to voters – or both. When the election rolls around, the politician can stand in front of his/her constituents and say “I cut your taxes, and got this nifty park built.” “I set aside $500 million of your tax dollars for when the economy slows down” doesn’t sell well, especially to people who can’t see the merits of saving / living within their means. If politicians were elected to 12 year or 15 year terms (thankfully they’re not), you might see more cyclical savings.

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My guess is the same as yours.

How about instead of an income tax, we have a stadium tax? Is could be handled just like a state income tax but you would choose whether to pay it or not. If you decide to pay, it’s X% of your salary and is handled on your paycheck. You get a special license plate, a dozen stickers for your vehicle, and the ability to buy season passes at a substantially discounted price. All the stadiums would be operated by the state, so we could have the same high level of service as we’ve grown accustomed to at the state run liquor stores. (hint: only two hot dog types will be available and they would both suck).

If you don’t pay the tax you can’t go to the stadium and you should avert your eyes if a game is on TV. Basically, just try to not look at the stadium if at all possible.

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I have lived in GA, CA (now) and WA. Both Georgia and California have income tax, and sales tax nearly at what WA does. I have NO idea where the money goes, both the road quality and education in Georgia and California seem to be inferior to Washington. My guess is that if WA gets an income tax, then the services will actually degrade for most citizens.

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What you want is to run slight deficits (spending on infrastructure/stabilization programs) in bad times and a surplus (to save a bit) during the good times.

I cannot agree more. I save for my retirement (bad times as far as income is concerned). I even save a little bit in case I lose a job or have a car break down on me. But our government can’t seem to assimilate this simple idea.

And infrastructure is an especially good use for deficit spending, because it tends to increase revenue over time, which helps pay off the debt. IR&D is another good place to deficit spend money during recessions for the same reason.

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I lived in CA. The only thing I noticed that was significantly *nicer* that the income tax gave me was more traffic sensors under the roads so that you don’t have to wait so long for the lights to change when traffic is light.

Aside from that ultra-mega-huge expenditure, I’m not sure where all the money went…

I don’t have anything against taxes, just spending. ;)

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Half a billion here, half a billion there, pretty soon someone will wake up!

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I think the state missed out on an easy source of revenue in the form of a Real Estate Flip Tax, where any property selling within a year of being purchased and not a primary residence would be subject to a 1-3% tax for the price it is re-sold at.

there is one of these. It’s the 1.8% excise tax. The rate of home sales has been up dramatically over the past 3 years, and the state has been making bank on that sucker.

Back of the envelope math:

If home sales are off 33% in KingCo vs last year, that’s ~11,000 homes * $390k (based on median, average is higher) * 1.8% = $78 mm lost revenue this year based on *volume*

Then if prices drop 10%, you have to add another ~22,000 sales * (390k x 5%) * 1.8% = $16mm to the shortfall based on falling prices.

That’s $94mm lost from King County excise tax alone, just from the real estate slowdown.

I’d say $423mm sounds a bit conservative.

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Real estate flip tax would be very very interesting. Might have moderated the crazy circle-jerk feedback loop of flipping that characterized the past several years.

I don’t think so.. both federal taxes and in California, state taxes do this.. by taxing you on a home sale that (this is from memory, may not be completely correct):
You havn’t lived in for 3 of the last 5 years, or

if you have multiple purchases and sales in the last 5 years.. then you get hit with taxes…

Flippers just have to charge more so they can make their profit is all….

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I wonder how that would work?

At the federal level, I personally think the “any two years” clause in the cap gains exemption is a huge handout to flipper types. I wonder how many people would really have been bitten if they had required “primary residence” to really mean primary residence?

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You want a little buffer to bump up aggregate demand in times like … what we could be seeing. Actually, the state government has been pretty darn reasonable and responsible with the budget, for the most part.

What I wonder is how a lot of the people (RE cheerleader types) who were predicting continued insane growth of housing values — how they figured that all these suckers leveraged to the max on their house would be able to support the tax increases that would go along with skyrocketing neighborhood valuations. How was that math supposed to work out?

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For workers like us, growth is horrifying. It increases gas and food costs exponentially, while putting harsh competition on worker wages!

The subsequent lower wages from growth kill real estate prices too.

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