Contrary to consensus, Hong Kong's property market recovery is not tied to China's struggling real estate sector. The key driver is a local policy change: scrapping stamp duties, which unleashed pent-up demand, particularly from mainland buyers whose market share jumped from 20% to 50%.

Despite voter popularity, broad wealth taxes are historically ineffective. Most OECD countries have abandoned them due to low revenue, administrative complexity, and capital flight. A more practical approach is to focus on targeted reforms like closing the carried interest loophole and taxing capital gains as ordinary income.

The 2008-2010 first-time homebuyer tax credit serves as a cautionary tale. While it caused a temporary rise in sales, it primarily pulled demand forward. The housing market hit its post-crisis lows only after the program expired, suggesting such policies don't fix underlying problems.

Taxing a specific industry like AI is problematic as it invites lobbying and creates definitional ambiguity. A more effective and equitable approach is broad tax reform, such as eliminating the capital gains deduction, to create a fairer system for all income types, regardless of the source industry.

A capital gains tax exclusion for home sales, set in 1997 and not indexed to inflation, now traps seniors in large homes. Facing a substantial tax bill if they sell, many choose not to downsize. This prevents family-sized homes from entering the market, exacerbating the inventory shortage for younger generations.

To address the housing supply crisis, policymakers should index the capital gains tax exclusion for home sales to inflation. The current thresholds, unchanged since 1997, create a disincentive for long-term homeowners to sell. Adjusting the exclusion would incentivize downsizing, releasing existing housing stock onto the market for new buyers.

A significant cause of today's housing inventory shortage is that homeowners are locked into low-interest mortgages. "Portable mortgages," which are being actively evaluated by the FHFA, would allow homeowners to transfer their existing mortgage to a new property, removing the financial disincentive to move and potentially unlocking market liquidity.

Instead of taxing unrealized gains, which forces asset sales and creates economic distortions, a more sensible approach is to tax the cash that wealthy individuals borrow against their assets. This targets actual liquidity and avoids punishing the long-term investment that builds the economy.

Billionaire wealth taxes are easily dodged by relocating. A more robust policy would tax capital gains based on the jurisdiction where the value was created, preventing billionaires from moving to a zero-tax state just before selling stock to avoid taxes.