DSTs And Flogging A Dead Horse

Beating a dead horse cartoon, September 2012. (Marc Cortez, http://marccortez.com).

I bet you didn’t know the most recent jobs report found that “ten out of 10 states with unemployment rates above 14% are in liberal blue states.  Ranked from highest to lowest, they are Nevada (25.3%), Hawaii (22.6%), Michigan (21.2%), California (16.3%), Rhode Island (16.3%), Massachusetts (16.3%), Delaware (15.8%), Illinois (15.2%), New Jersey (15.2%) and Washington State (15.1%).”  We call this this the “blue states job depression.”

Correspondingly, the states with the lowest unemployment rates are all conservatively governed red states:  Nebraska (5.2%), Utah (8.5%), Wyoming (8.8%), Arizona (8.9%) and Idaho (8.9%).

This is hardly shocking news.  We have been telling income property investors for several years that the move was on from high tax blue states to low tax red states.  Not only do you get to keep more of what you earn but from a regulatory standpoint, red states are more business friendly and housing more affordable.  In addition, we believe lifestyles in these states are more conducive to families.

The long and short of it according to economist Stephen Moore of the Washington Examiner is, “Liberals are anti-business and their policies are especially hostile to small businesses.”  Unfortunately, most income property investors utilizing DSTs are small businesses.  Whether it’s an LLC, partnership, family trust, etc., these are all closely held businesses where a limited number of individuals share ownership and management responsibility.

As a small business owner/operator you just don’t have the resources and connections in high places to protect yourself from government predation.  High profile billionaires like Elon Musk can bend local and state governments to their will with the threat to leave, you can’t.

Because you can’t, governors and mayors of the most progressive states and cities can continue to impose lock downs and sit idly by while you face the potential of your business going bust or being looted, or your property being burned.

The solution to these problems of their own making is to continue raising taxes on what and who is left.  Witness Measure 26-210 creating a “wealth tax” in the Portland Tri-County area.  More generally, I believe property taxes in progressive cities and states may go up dramatically to pay for budget short falls brought about by the lockdown.  In light of this, Stephen Moore thinks “it’s safe to say that liberalism is bad for your wallet.” 

Fortunately, the majority of DST properties available for exchange purposes are usually located in red states.  This is not an accident, it is purposeful.  It’s an attempt on the part of property providers with decades of experience with diverse commercial property types to help you escape blue state America.  According to Moore, “over the last five, 10, 20 or 30 years, red states with low taxes have created double the percentage of jobs than blue states with high taxes.”  Where would you rather own rental housing, retail store fronts or an industrial distribution center?

Economic life in a capitalist society is lived forward, not backward.  It’s past time to escape those boarded up store fronts, homeless encampments and going out of business signs with DSTs.  I hope we are not “flogging a dead horse” here.


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