Property taxes on Oahu

[craigwatanabe]

Re: Property taxes on Oahu

Miulang you hit on one of my hot buttons. Statistically the joblessness rate is dropping because of our hot economy. When I lived in Honolulu, to afford to live decently I had to work two sometimes three jobs to make ends meet. To the bean counters counting employment figures, they never considered that one person was working two jobs so percentage wise if there were two jobs and one person was filling both slots, the joblessness rate is at zero or at 100% employment. But then there's the other guy who didn't get the job so he's unemployed. So for the census report the employment rate is only at 50%. So which stat do you take?

The fact is that yes our economy is booming fueled by people working two jobs because wages haven't kept up with inflation forcing a lot of residents to work more than one job.

When the City and County look at figures they don't consider this, only the fact that if their homes appreciate in value so must their income.

The sad truth is that home prices have always outpaced income and many are forced to leave. When the State of Hawaii looks at county tax figures they think, "Great more taxes for us too in the form of income" Not so as many are investors from outside the state who pay no state tax. Sure the City and County get their property taxes but there's no increase in the state tax base to support county growth. Suddenly you find yourself in a recession like we did in the mid 90's and soaring bancruptcy cases.

Unfortunately now with bancruptcy reform, you can't just claim chapter 7 and wipe your slate clean for the next economic bubble to start rising as it recently has. What happens in the next 10 years when these popular interest only loans from Quicken, Ditech, Homestreet and others start collecting on principle payments and the bubble has burst? Massive forclosures, and a sudden debt ridden local economy.

If you thought the last recession was bad (and it was), with new bancruptcy laws intact, the next recession will be a real mindblower. Banks will start failing from failed mortgages and the inability to sell forclosed homes to cover the mortgage.

Right now I'm shoring up all of my investments and using the equity in my home and the current low interest rates to invest in short term bonds and aggressive growth funds that give me a higher yield than the current apr rates. My plan is to clear this equity loan within five years and to use the interest yield in an aggressive portfolio to build wealth and hedge the next wave of recession in about 10-years. This isn't new stuff, this has happened before and I followed the last two bubbles and subsequent recessions that followed. When this third bubble hit, I was ready for it and will be ready when it pops. Are you?

In a market driven economy like ours, prudent investments and cash reserves will allow you to ride out any recession or depression and stay on top of the game. Those who don't do their homework and don't prepare for the worst will feel the economic bite and will more than likely lose their homes in the process.

I've seen friends lose their homes just this way and I'm not about to become a statistic like they did.

When you ride this wave of economic boom, like surfing you gotta know when to bail out or else you end up smashed against the rocks or you have to paddle longer distances to get that next big wave.

So what is my indicator I have successfully used to tell me when it's time to bail? The Consumer Credit Spending Index. When it starts dropping that's when consumers have tapped out their credit and cannot qualify for mortgages. That's when all hell breaks loose and the market starts to implode. When you see a general tapering off of this index that's when it's time to cash in put your investments in cash reserves or precious metals.

Most economists use the Consumer Spending Index because they see that index as disposable income being used. However what they don't consider is the fact that spending is inclusive and includes high interest rate credit cards and creative mortgages that use Adjustable Rate Mortgages. When both are tapped there isn't any other source of income or credit to pay off these debts.

The Consumer Credit Spending Index however looks only at the ability to qualify for credit and in the end spend it.. Bad credit will result in no credit spending. Bad credit is the result of a failing economy and this index will flush out those numbers before it becomes a crisis.

[Miulang]

Re: Property taxes on Oahu

I was going to suggest that maybe there should be a different tax rate for investment property, too; then it dawned on me that then the renters would take it in the shorts through passthroughs from the owners. So I don't know how "fair" you can make any tax relief scheme. But when you start creating complex tax tables is when you start looking like the federal government and the IRS...they keep saying every other year or so that they're going to simplify the tax code and all they end up doing is making it easier for the rich people to keep more of their money .

Miulang

P.S. I'll be in line for one of those foreclosed houses when the next bubble bursts.

[craigwatanabe]

Re: Property taxes on Oahu

That's why taxes have no place in a market driven economy. The tax rates should be consistant regardless of the market. In the stock market that's called "Dollar Cost Averaging" and it works. By readjusting the tax rate with each fluctuation of the dollar, you develop a lag in the process of taxation.

The net result is the taxing of goods and services after demand has fallen off. This in turn generates excess supply with no demand because taxes have made it economically taboo to acquire. Suddenly you have people with higher tax rates for assets that cannot be taxed properly against. Then the tax rate readjusts again but too late for the city coffers because budgets have been drafted and approved, government services have already been justified but no tax dollars flow in to cover them. And you start the whole taxation process all over again leaving another lag and another broken economy in it's wake.

[Miulang]

Re: Property taxes on Oahu

One good example of this is how the health insurance industry sets its annual rates. They take their experience for the year and propose new rates that are one year into the future because the state requires that they announce their rates one year in advance of the year of coverage, so it means they're looking into this really cloudy crystal ball when submitting their insurance rates.

The thing about health insurance rates is that the amount claimed by individuals this year might be more or less than it will be next year. If you and the rest of the people in your pool use fewer services and less insurance, the health system makes money next year; if more people get sick than was projected, the health system loses money. The health insurance carriers (including the HMOs) have to tread a fine line between trying to stay "profitable" while keeping their rates reasonable. There's a somewhat predictable sine wave to the way health insurers make and lose money: it runs in 3-year cycles. The first year of a cycle, the company just about breaks even, the second year it makes lots of money and the 3rd year it starts losing money again. It's been this predictable since the 1950s. Unfortunately, you will rarely get a health insurance carrier to reduce its rates (unless the government forces it to).

Americans pay the most per capita for their health care and have a lower positive outcome than 3 other countries in the world. Our average life expectancy is not the longest, and yet we pour billions of dollars into pills that we see advertised on TV (I think the FDA should ban all drug ads on TV and in magazines) that may or may not be good for us.

Miulang