I received many emails in response to my above-referenced blog on Friday, many of them pointing out that the potential changes in capital gains tax rates may actually spur more selling in the short run – which would increase inventory.
The thought is that property holders may want to sell now before capital gains taxes go even higher.
And, an additional point had to do with reforming Step-Up in Basis rules that allow investors to pass assets like real estate on to their heirs at current market values, and thus eliminate potential capital gains.
This is a strong incentive for many investors to not sell their assets but to instead hang on to them until they are gone, so their heirs can take advantage of the stepped-up basis.
Mr. Biden is proposing a change to these rules that might give investors an incentive to sell now, as there will be no tax advantages to be gained by holding properties.
BUT – given that many sophisticated investors are worried about inflation and a potentially overheated stock market, I suspect they will still be reluctant to sell their properties.
Many will likely want to hang on to them as income sources and as inflation hedges and b/c they might not see other appealing investment opportunities where they can park their gains.
WHY YOU CAN’T CATCH UBERS NOW
Last week, I had to wait 20 minutes for an Uber from the airport and it cost me $140, – almost $100 MORE than what it usually costs me.
This made me wonder where have all the Uber drivers gone?
According to the article, with the significant increase in jobless benefits in response to COVID, many workers, including Uber drivers, make more money staying home than they do working.
So, it is not just COVID keeping workers home; government incentives are doing so as well.
I found that interesting, as it is another example of unintended consequences of government policies.
It is not just Uber drivers staying home of course but workers from all industries, and that no doubt is contributing to the “broken supply chain issues” where manufacturers still can’t get enough inputs or supplies – which is driving up prices everywhere, as we all know.
This is actually good news to some extent b/c when those workers eventually return to the workforce, broken supply chains will revive and prices may in fact start to fall again, as pundits like Barry Habib have predicted.
