The Carriage Tax in 1794 George Washington decided to raise money for the federal government by taxing the rich by placing an annual tax on folks who owned horse-drawn carriages. The lower-level models were tax at $2 per year while the nicest ones were $8 per year. This tax was contested by James Madison, among many others, who argued it was unconstitutional calling it a ‘direct tax’ and needed to be apportioned equally among several states. That particular line was used by Southern states to prevent Northern states from ever passing a direct tax on enslaved people. In court Alexander Hamilton defended the tax and the Supreme court decided in favor of Hamilton stating that line in the constitution should only apply to the compromise between Northern and Southern states. Today there are a lot of calls to institute a similar type of ‘wealth tax’ because wealthy folks don’t typically rely on income and can avoid the majority of taxes with unrealized gains. If a wealth tax is ever somehow passed, it will definitely be contested in court and the argument will likely be similar to the carriage tax argument from the 1790’s, an argument from a line in the constitution that was used to support slavery. Supporters of the tax feel that the carriage tax sets legal precedent, but some legal scholars feel a constitutional amendment would be required – which hasn’t happened since 1787.
Mortgage Rates increased marginally this week as the price of Mortgaged Backed Securities (MBS) declined. Rates are up approximately 0.25% from this time last year.
Inflation – the Personal Consumption Expenditures (PCE) showed that Headline inflation, or all-in inflation was flat in May and year over year inflation declined from 2.7% to 2.6%. Energy costs declined by 1% which helped the headline figure. The Core rate, which strips out food and energy and is the Fed’s favorite measure, rose 0.1% last month and the year over year number fell from 2.8% to 2.6%. Shelter is up 5.5% year over year and rents are up 5.26% year over year.
Home Values –the Case Shiler Home Price Index, considered the ‘gold standard’ for appreciation, showed home values rose 0.3% in April to a new all-time high. Prices are now up 6.3% year over year (down from the previous report’s 6.5%). If you purchased $450,000 12 months ago it would be worth $477,000.
Rents – Apartment List’s Rent Report showed that new rents rose 0.4%. Year over year new rents are still down 0.7% and have been negative since August. Vacancy rates are at 6.7%, the highest level since August 2020.
Mortgage Applications to purchase homes increased by 1.2% over the previous week and are down 13% from last year. Refinance volume is flat but up 26% year over year. Refinance volume makes up 35% of applications.