November 29, 2012

2 views on taking away the mortgage interest deduction.

From a WaPo article on the supposedly real possibility that $100-billion-a-year item with make it into the fiscal cliff deal.

1. Edward Kleinbard, USC tax lawprof:
“We simply cannot afford wasteful government subsidy programs anymore, and this is one of the most important examples of that... It’s very much a subsidy to those Americans who need it least.”
2. Mark Zandi, Moody's economist:
“It’s a very visceral thing for people.... People account for it when they think about how much house they could afford to buy. You take that away, and house prices are going to weaken. They are going to decline.”

111 comments:

The Farmer said...

A subsidy to people who need it the least? Come the fuck on. The middle class benefits from it more than anyone else. We're the bedrock of society and you want to kick us in the balls. As usual.

jim murray said...

Eliminate ALL deductions, including religious and charitable.

jim murray said...

Eliminate ALL deductions, including religious and charitable.

Curious George said...

Theory v Reality.

Shouting Thomas said...

Won't happen.

Carol said...

Of course the Realtwhores want to keep it - just a couple jumbo mortgage sales a year will float their boats.

buck smith said...

I wonder what the USC professor was saying when Bush was trying to rein in Fannie Mae and Freddie Mae and being stopped by Barney Frank and other congress scum.

Renee said...

If the government needs money, then tax. The government can now just be a nag always telling us what to do. I have nothing against taxes, as a fiscal moderate, and I have a household the benefits greatly through many deductions. But it is obvious, the government tries to encourage and discourage behavior through taxes (penalties) and deductions (rewards), in the same way a parents may discipline a child.

Tax Accountant said...

Current mortgage rates are 2.5%. The tax savings don't mean much at that rate.

Pogo said...

Making the tax code fair is a good idea, but that's not what this is about.

The aim is general population penury and dependence, creating a permanent underclass, a low-middle income proletariat, and a rich nomenklatura running our lives.

This is not a debate done in good faith, but socialism by increments.

Tank said...

1. This could happen with a very high threshold so that it can be sold as a "tax on the rich" or only affecting millionaires and billionaires.

2. To eliminate it completely would take great courage, therefore it will not happen.

All this crap should be removed. Most people should be able to file a one or two page form.

Shouting Thomas said...

As a good Facebook friend of mine said...

The purpose of contemporary government is rigging markets.

I see no possibility that this will change. All talk to the contrary is self-serving bullshit by the villains rigging the markets.

Jane said...

Let's reword this: instead of "weakening housing prices" let's say, "making housing more affordable." Isn't this just an admission that the deduction which itself was supposed to help Americans afford to buy houses, has instead caused housing prices to rise, producing no net benefit?

walter said...

Um, Mr. Kleinbard, how about we look at wasteful and stupid things like support of those who would 'produce' art, study animal flatulence, or technology that is inefficient like solar and wind. These are things that have zero impact on the average citizen, unless you like placing the vacuum hose into their pockets, daily.

DoneGoneGalt said...

Never understood the tax deduction argument for buying an affordable home. I'm suppose to pay thousands in interest so I can deduct it and thereby reduce my tax burden by a fraction of that amount. I'd much rather pay it off quickly.

rhhardin said...

It's a defense against imputed income, at least.

That's the democrat idea of taxing people who own homes for the rental value of their occupying them, as if that was income to them.

Joe Schmoe said...

If a very middle-class family puts 5% down on a house with a 30-year mortgage, the payments for the first several years are mostly interest. Amortization of the loan means that more interest is paid up front than principal. Even with a 2.5% mortgage interest, which I've not seen in my area (more like 3.5% to 4%), more than half of the monthly mortgage payment is going to interest for about the first seven years.

Killing the mortgage interest deduction might help some rich people, but it would do far more harm to the middle class. Moody economist Zandi is on the money; the USC snob is out of touch. This would cause home values, which have already tanked in recent years, to go even lower.

This is a bad idea.

Pogo said...

"...producing no net benefit?"

But the problem is also that, once the government intervenes and distorts a market, individuals act and plan on that basis.

If the state later changes the rules, it creates winners and losers, the losers being those who counted on the rules, and invested accordingly. That is, it's unfair.

If the US government keeps changing the rules, with no real foreseeable pattern, the economy will dwindle, as investments cannot be taken when there is so much uncertainty.

The GM investors screwed by the government takeover are a good example.

It was stupid for the government to distort the market in the first place, because it makes the economy worse off and harder to fix later.

Matthew Sablan said...

Wait: So the government has distorted the markets to make it harder for people to afford housing?

Gee whiz! I wonder if anyone ever hinted that that might be a thing that was happening.

Matthew Sablan said...

"This would cause home values, which have already tanked in recent years, to go even lower."

-- Cheaper houses seem like a great idea to people who don't already own houses.

Ann Althouse said...

"Current mortgage rates are 2.5%. The tax savings don't mean much at that rate."

Good point. That means that this is the time to get rid of it if that's ever going to happen. What is the tax savings that someone with an average mortgage loan would lose? I think it's about a hundred dollars a year? People imagine it's a lot more and would tend to agree with Zandi, but if they knew that fact, they'd probably switch to Kleinbard.

Bart Hall (Kansas, USA) said...

Canada has never had mortgage interest deductability, and that certainly has not weakened or de-stabilized the housing market.

Canada also does not have 30-year fixed mortgages. They may be amortized over 30 years, but are renewable, and re-set, after five years.

Canada does not have a racially-based program forcing banks to write home loans to people who not only cannot afford them, but cannot even prove their income is what it says it is.

This is probably not unrelated to the fact that the last bank to fail in Canada was in 1923. Yes, '23, not '33.

Renee said...

"This would cause home values, which have already tanked in recent years, to go even lower."

-- Cheaper houses seem like a great idea to people who don't already own houses


Many of us are very much 'underwater' and can not refinance or sell.

CWJ said...

Mark Zandi gets both the emotion and the economics right. TNSTAAFL. The underlying value of a home is what it is. The price is another matter. All the incentives in the world won't change the value of the home. All they ultimately do is inflate the price. The problem with the interest deduction is that it has been around so long. The price inflation it causes is just now part of the landscape. Hence the emotion.

Bart Hall (Kansas, USA) said...

Canada has never had mortgage interest deductability, and that certainly has not weakened or de-stabilized the housing market.

Canada also does not have 30-year fixed mortgages. They may be amortized over 30 years, but are renewable, and re-set, after five years.

Canada does not have a racially-based program forcing banks to write home loans to people who not only cannot afford them, but cannot even prove their income is what it says it is.

This is probably not unrelated to the fact that the last bank to fail in Canada was in 1923. Yes, '23, not '33.

Matthew Sablan said...

I'm not saying it is great for everyone. Simply that if housing prices continue to drop, there will be some winners somewhere. It sucks for the people who got hosed, but for people who are now able to afford homes, that might be good for them.

Overall, there's a market reckoning coming one way or the other soon. There's been too much manipulation of the housing market, by the government and private sector.

Joe Schmoe said...

Eliminate ALL deductions, including religious and charitable.

Then following that logic to its conclusion, we should do away with the concept of a non-profit organization? These institutions should pay taxes and be supported by after-tax donations?

If they don't have to pay taxes, then why should my donations come from my taxable income?

X said...

Never understood the tax deduction argument for buying an affordable home.

to level the playing field between owner occupied homeowners and landlords/renters.

renters, do you want to do away with your landlord's interest deduction too?

Renee said...

Unfortunately, we lost the idea that a house is something you should make a home out of and belong and invest in the community on a social level. Too many of us, see houses, as merely investments. Something even if you do not flip, something you should be able to make a profit out of, even if it is home equity.

MikeR said...

It would be unfair to those who planned on it to do away with the mortgage deduction. But the deduction was itself unfair - it penalized those who rent, making them pay for other people's houses. Every deduction is unfair. And every change in law hurts someone. And if we are to cut the deficit, we are going to have to hurt people; every single cut is going to hurt someone. We'd better get started. I have a house, and I still think this needs to be done, along with a lot of other similar hurts.

Joe Schmoe said...

What is the tax savings that someone with an average mortgage loan would lose?

As I mention above, for people with new mortgages who are paying mostly interest, the deduction can reduce their taxable income by thousands of dollars, thus saving them at least a thousand dollars on their tax bill.

Maybe if you're almost done paying your mortgage, then it won't cost you much. But then you're just the person Obama wants to pay more, not the family struggling to make it in their first home. But the family struggling to make it in their first home is exactly who would be hurt the most by this.

Go find some other way to soak the rich, cuz this ain't it.

AJ Lynch said...

Prof Kleinbard- Who gets to define what is wastwful and who gets to define what is fair?

And btw Althouse you should google Mark Zandi to see why it does not matter when you are a pundit/ economist who has been consistently wrong.

Marshal said...

jim murray said...
Eliminate ALL deductions, including religious and charitable


This would be fine if phased in so we don't create bankruptcies and combined with rate reductions so it isn't a tax increase. But that never seems to be the plan.

Robt C said...

If the total deduction is 100 billion a year, and (assuming here) 100 million people file a return, which seems high, thenaverage deduction would be 1,000. But still, not enough to cry about. But since the deduction artificially incentivizes buying a slightly higher priced house, since part of the payment will be deductible, it is inevitable that housing prices will drop. And it really won't hurt current owners, since when they sell they will buy something else that also dropped in value.

CWJ said...

Althouse is right that a time of low interest rates is perhaps the only time that eliminating the interest deduction would be possible. But where does she come up with this hundred dollars a year number. Who is she think thining of. Deductions work at someones marginal rate. For most taxpayers (emphasis on payers) that would probably be 28%. Even at 2.5%, how many people are paying less than $400 a year in interest. Come on.

AJ Lynch said...

The average mortgage in this country is maybe $200K. If we assume 5% interest, the average annual interest deduction would range be around $7,500. That saves the homeowner a couple thousand a year.

rhhardin said...

Cheaper houses don't affect people who own houses.

They sell a house only to buy another one, not to raise cash.

The other house is cheaper as well, making the thing a wash.

Mike said...

The thing about the home mortgage interest deduction is that it is a LOT smaller than most people think. They look at the the interest -- say $8000 -- and think it's all deducted. But you only deduct what is beyond the standard deduction. The main people it benefits are people who buy more home than they can afford. Don't think we should cancel it immediately, given the softness of the real estate market. But a phase-out would probably be a good idea.

Frankly, all you needed to tell me was that Zandi supports the mortgage deduction. There hasn't been an economist who has been more wrong over the last decade than Zandi. He said the housing bubble was a myth. He supported the stimulus. He's been running around saying we can't cut spending. He headed an org that gave AAA ratings to pile of mortgage security junk. Whatever Zandi says, do the opposite.

Joe Schmoe said...

If you're hell-bent on soaking the rich through the mortgage interest deduction, then cap it so that it doesn't hurt the millions of new home owners paying mostly interest. Let's say you can deduct up to $20K a year in mortgage interest. That's high enough so that middle class homeowners could deduct all their interest, while someone buying a luxury home could not.

Overall, though, I hate tax increases. There is no deep-seated groundswell movement to simplify the tax code. It's something people mouth without any followup. So quit latching on to a deduction here or there that you suddenly don't like today. It will bite you in the ass tomorrow.

MayBee said...

The mortgage rate isn't 2.5% for people who are already underwater and can't refinance.

With all the programs that have been geared toward "helping" people who can't afford their mortgages, this is the one thing that makes it beneficial to actually pay your mortgage.

So now they want to drop the value of homes + increase taxes. That's just swell.

Plus, what Pogo said. What kind of stupid government makes it so people have no way to plan because they suddenly change the rules?

AJ Lynch said...

Btw- the average American has only a few lifetime financial goals:

1- Own their own home free and clear with no mortgage
2- Have a fairly secure financial income in retirement
3- Have the opportunity and the marketable skills to make a good living
4- Save for kids' college education

IMO, these 4 goals describe the average American's dream and the average American's idea of the pursuit of happiness. The Repubs should align almost all of their policies with these 4 goals if they want to get more support in future elections.

Pogo said...

"Whatever Zandi says, do the opposite."

Negative bellwethers are very useful.

MayBee said...

Cheaper houses don't affect people who own houses.

They sell a house only to buy another one, not to raise cash.


Not true if you have a mortgage to pay off that is more than the value of the house.

Also, not everybody sells a house to buy another. They sell because they've lost a job, they sell to move into a smaller place, they sell to move in with a relative, they sell because they've left the country.

AJ Lynch said...

I do think Zandi's argument in this case is fair but, as Pogo said, the govt can't change policies midstream and f-up people's plans.

That is what Paul Ryan was arguing during the campaign when he used his mother as an example that she, at the age of 76, could not turn on a dime if the Medicare rug was pulled out from under her. So Ryan would implement Medicare changes over time.

rehajm said...

Tax expenditures- all of them- should be eliminated IF in return we can lower marginal rates. Increased productivity gains from a simpler tax code, but most importantly It's the marginal rate that matters most to economic growth. It's economic growth that matters most to government revenue- rather have an increase of 2% on marginal rates or on GDP? If you want more government revenue it's no contest.

Marshal said...

Joe Schmoe said...
If you're hell-bent on soaking the rich through the mortgage interest deduction, then cap it so that it doesn't hurt the millions of new home owners paying mostly interest.


The mortgage interest deduction is already capped. Today you cannot deduct interest on more than $1m in loan value spread over all residential properties.

SomeoneHasToSayIt said...

Common Sense said . . .

We don't have a revenue problem. We have a spending problem.

Jane said...

Yes, of course, phase out the deduction, preferably by setting a cap and reducing the cap over time, and by increasing the standard deduction at the same time.

By the way, are hybrid car purchase tax credits on the table?

john said...

It's encouraging to read so many comments, from conservatives (!), support doing away with this pernicious entitlement. The rent seekers have milked this deduction so many times over that the claim that MID saves the homeowners money is just a chimera. Also very important that no one has mentioned yet is how the proliferation of other market co-distorters, such as easy home equity loans and ARMs, coming with MID, have so destroyed home equity.

Also, we should do away with all distinctions between a for-profit and a non-profit. A non-profit could probably arrange its financial structure so that corporate income does not accrue, but passes through, like in an LLC. But it would be easier for all to do away with the taxation (or even the definition) of corporate income.

damikesc said...

Cap the deduction to houses worth $250,000 or less.

Most people who have houses worth more than $250,000 voted for the Democrats and, well, lessons can be harsh.

MayBee said...

How about this:

How about we keep the deduction and Obama stops spending a billion dollars a year flying around to photo ops.

This government does not appreciate my money as much as my family and I do.

Jane said...

For non-profits, the greatest impact of taxes that they would face if losing their status is property taxes, especially in states that are heavily dependent on property taxes to fund schools.

Of course, the property tax deduction is another big piece of the itemized deductions. Should this be on the table?

As for fairness between owners and landlords: that's not apples to apples. In the case of landlords, one pays tax on one's profit, so in determining the profit, you deduct all the various business expenses, of which interest is one, depreciation another, etc. In the case of owners, interest is deductible -- why? Was there a logical basis in the first place?

Matthew Sablan said...

While we're at it, let's end the Hollywood tax cuts.

Broomhandle said...

AJ Lynch,
Those are my goals but, as the last election suggests, they may no longer be representative of what passes for an average American.

Marshal said...

Jane said...
In the case of owners, interest is deductible -- why? Was there a logical basis in the first place?


When the tax code was enacted virtually all interest was income producing so they didn't bother to make a distinction.

http://taxfoundation.org/blog/history-mortgage-interest-deduction

Bob Ellison said...

Kleinbard doesn't seem to understand what "subsidy" means. He should Google it.

MadisonMan said...

People account for it when they think about how much house they could afford to buy. You take that away, and house prices are going to weaken. They are going to decline

Change is hard. That's essentially what this lame argument is.

You will save money if you don't have to hire a tax accountant to do your taxes.

But then what will all the out-of-work accountants do? And will the IRS have to lay people off?

X said...

something tells me that making mortgage interest non-deductible for homeowners and deductible for business (which it has to be, it's a legitimate business expense and we tax profits not gross sales) will present a huge opportunity for the rich to get richer. Maybe we could offset that by taxing renters an excise tax equal to their landlord's interest deduction.

chickelit said...

"Current mortgage rates are 2.5%. The tax savings don't mean much at that rate."

But doesn't this ignore that many first time homebuyers with little equity are essentially paying mostly interest at first? They are essentially paying rent on money with very little going towards principle.

Later on in a mortgage, people end up getting less of a deduction anyways which is the way it was designed to work. Refinancing and fancy leveraging schemes distort the original intent.

ken in sc said...

I just turned 65 this month, and went on Medicare. I received a letter from Social Security showing that my SS benefits will be $140 less per month next year. Why? Because I got a Cost of Living increase of 1.4% and because of the increased income my Medicare part B went up.

I have heard of this happening, so it was not a total surprise. There is almost nothing the federal government can't screw up.

BTW, the mortgage deduction is already capped and SS is already means-tested through income taxes.

X said...

renters sure do seem anxious to get rid of the MID because UNFAIR

renters, do you want to do away with your landlord's interest deduction too?

smarty said...

1st, socialists always go after the middle class, while accusing the other side of it. This is simply history and socialist economics.
2nd, I lost a job and moved, and buying another house while renting the first one out was the only option because of the crashing housing market. Then again. Now I have 3 houses and I am not Donald Trump. I would lose the mortgage deduction on two houses (max allowed) and they don't break even on rent. If I sell in 2013, I then pay tax on any profit, plus the new 3.8% tax because they are not my primary residence. I am not the only one in this kind of boat.

X said...

and for the market distortion bellyachers, do you perceive any market distortion in having some properties interest deductible and others not?

smarty said...

All that being said, home values are too high in general. For decades, high real estate values in Europe were a primary driver of low birthrate. Now here, people can barely afford a 3 bedroom house and the 2 kids to put in it. In cities, forget it, you have to be past your child bearing age to afford a family sized house. Add other cost of living items going up, largely because of government and scumbag lawyers. Our inability to afford kids as a middle class has resulted in some of the argument for importing third world illegals, who come here, get welfare, and have many kids to support the retirement plans of the aging hippies.

X said...

the proliferation of other market co-distorters, such as easy home equity loans and ARMs

there is no such thing as an easy home equity loan any longer. not getting paid back is the reason they disappeared. ARMS are legitimate. just because it may not be right for you doesn't change that. 30 Year Fixed Rate mortgages while safer than ARMs for the long term, are bigger market distorters than an interest rate that moves with the market.








smarty said...

1st, socialists always go after the middle class, while accusing the other side of it. This is simply history and socialist economics.
2nd, I lost a job and moved, and buying another house while renting the first one out was the only option because of the crashing housing market. Then again. Now I have 3 houses and I am not Donald Trump. I would lose the mortgage deduction on two houses (max allowed) and they don't break even on rent. If I sell in 2013, I then pay tax on any profit, plus the new 3.8% tax because they are not my primary residence. I am not the only one in this kind of boat.

AJ Lynch said...

Obama is very very dumb when it comes to economics and basic arithmetic so I would not be shocked if he wanted to get rid of the interest deduction for rental properties.

LarsPorsena said...

Will this force a portion of the 47% who don't pay anything to chip in? More likely the net result will be to add to the burden of the 53% who shoulder the whole burden.

Comments?

Joe Schmoe said...

IMO, these 4 goals describe the average American's dream and the average American's idea of the pursuit of happiness.

Well said, AJ. Changes to tax laws that affect any of these goals should be enacted only if they have a real quantifiable benefit.

Tim said...

The real point is, unless they sharply curtail spending ("bend the cost curve," lol - I think Obama suggests $5 in tax hikes to every $1 dollar in cuts), Americans will be robbed yet once again, and future generations of Americans will inherit $20+ trillion in debt.

Does anyone (outside of the true blue Obama trolls) really think Obama and the Democrats are going to cut spending in any meaningful way, especially with the huge cost-driving programs Medicare, Social Security and, coming soon!, the ACA?

Joe Schmoe said...

Lars, if the 47% are mostly renters, then their landlords are likely to raise their rents if the landlords lose the MID.

I have a less jaundiced view of the 47% as I know many of them aspire to have better-paying jobs and own their own homes. Getting rid of the MID will not help them make that transition from taker to maker.

Tim said...

LarsPorsena said...

"Will this force a portion of the 47% who don't pay anything to chip in? More likely the net result will be to add to the burden of the 53% who shoulder the whole burden.

Comments?


The answer my friend is NOT blowin' in the wind...we all know this will add to the burden of the 53% who pay the bills.

Free-riders gotta ride free!

edutcher said...
This comment has been removed by the author.
edutcher said...

I somehow get the idea the only reason the Demos are even talking about this is how much it will hurt all those white people in the 'burbs.

Tim said...

The real point is, unless they sharply curtail spending ("bend the cost curve," lol - I think Obama suggests $5 in tax hikes to every $1 dollar in cuts), Americans will be robbed yet once again, and future generations of Americans will inherit $20+ trillion in debt.

Does anyone (outside of the true blue Obama trolls) really think Obama and the Democrats are going to cut spending in any meaningful way, especially with the huge cost-driving programs Medicare, Social Security and, coming soon!, the ACA?


No. The only spending cuts Demos like are defense cuts.

gerry said...

I'm taking the latest fashionable progressive attitude: last year I paid $717 in mortgage interest deductions on one property and own another completely free and clear.

Screw everyone else. Let 'em pay more taxes and give them to me, an old fart about to start collecting Social Security with my nearly paid-off house.

So there.

X said...

The MID debate is an IQ Test/Parasite Test to test if you are dumb enough to want higher taxes on yourself or feed from higher taxes on others.

I don't feed at the government trough and am not really interested in contributing more to those that do.

Tank said...

MikeR said...

It would be unfair to those who planned on it to do away with the mortgage deduction.


Many years ago I borrowed money to go to law school knowing that later the interest would be tax deductible. Then they changed the law so that by the time I was paying back the loan, it was no longer deductible. Then, after I paid the loan off, they changed the law back so that interest was deductible again.

jimbino said...

You can keep your mortgage deduction and more if you follow this simple strategy:

You buy a house and rent it to your sister; she buys a house and you rent it from her.

This is better than the homeowner deductions: both of you can take deductions for all business expenses including the usual mortgage interest and taxes, and in addition for repair, maintenance, insurance, depreciation and even phone calls and visits to each other, and all the deductions are in addition to your standard deduction!

No sensible man ever lives in his own house.

X said...

exactly jimbino. in fact you could even lose money and offset other income. let the shenanigans begin.

AJ Lynch said...

Broomhandle- you made an excellent point.

David said...

For the rich--and I mean the really rich--it won't matter. They will just pay off their mortgages. It's a simple equation. Would you be better off avoiding a non-deductible interest payment of 4% on your money, or earning interest or dividends at a lesser rate which are taxed at 40% plus at the margins?

It's a no brainer.

Birches said...

We just bought a new house and planned on the deduction being eliminated. Our interest rate is 3.25% (and they are lower now). I think these unnaturally low interest rates are in place on purpose, because they know the deduction is going to get eliminated and are letting everyone try and get in on a rate that won't hurt as much.

David said...

Tax Accountant said...
Current mortgage rates are 2.5%. The tax savings don't mean much at that rate.


On what planet? You can get under 3% with some adjustables, but then when the rates go up, you are stuck.

15 to 30 year fixed are running 3.25% to 4% for conventional, more for jumbos.

And you, a tax accountant . . . .

Of course you are not one.

Kristian Holvoet said...
This comment has been removed by the author.
Michael said...

David. The advantage to the rich is not so much in the deduction but rather in the joy of tax free money from borrowing. The home can be used as a cash machine by thise with the ability to dismiss the debt with a check.

On the deductibility front I think it should stay in place for a defined middle class

Conserve Liberty said...

In my observation, this is purely typical of what government does.

Government creates an incentive which causes the great bulk of rational citizens to behave in a certain fashion and to make a certain structure of financial commitment.

Once enough citizens are herded into a contractual obligation, government permeptorily and exernally changes the rules such that the mass-herded citizens are now trapped in an economically diadvantageous position (to the credit of government).

This cycle is expecially galling to those who Are rule-followers and trusting; who mistakenly, it appears, believe that their elected representatives feel some se4nse of obligation to honor decisions made by those who preceded them.

Yeah, I have a mortgage. Yeah, I'm screwed out of a few thousand a year if they add the mortgage interest into my taxable income.

But I don't have a 401k or an IRA.

Good luck on that tax deferral, middle-class motherfuckers.

Rusty said...

Tax Accountant said...
Current mortgage rates are 2.5%. The tax savings don't mean much at that rate.

Bullfuckingshit.

Any money that is yours to begin with that the STATE allows you to keep is always a benefit.


The Moody analyst is more on the money. This will drive current weak real estate sales even lower.

McTriumph said...

Actually both gentlemen are correct.

Real estate is going to continue to decline till the market clears, regardless of what happens to the deduction.

The real advantage for taxpayers entitled to the interest deduction is that it allows them to file a schedule A, allowing them to take all the other deductions not available to renters.

cubanbob said...

The real issue isn't the deductibility of mortgage interest. The real issue is how much of an individual's income is he or she allowed to keep versus further redistribution to those that don't produce.

Why not free up more revenue for the government by rolling back public sector salaries and benefits to the 2005 level instead? And if social security is good enough for the private sector, cancel all public sector retirement plans including for those already retired and let them instead receive what they would be getting under social security with the payment starting at the social security age they would fall under.

McTriumph said...

cuban Bob

There is no "fiscal cliff", it's a political fiction.

But what you have described in your second paragraph is default. It's what going to happen when no one wants US dollars and the government can't buy their own bonds. The stock market no longer being propped by the Fed will drop to match the true economic indicators and performance, the middle class wealth and savings will evaporate. The government will not be able to keep it's promises, that is default.

Geoff Matthews said...

So my house was more expensive because there was a 'subsidy' that allowed me to write off interest paid, which allows sellers to charge more?
In short, its more difficult to buy a home because of the interest deduction.
Given the huge deficit that we've amassed (thus screwing our children over) the least we could do is make housing more affordable by getting rid of the interest deduction.

MayBee said...


Given the huge deficit that we've amassed (thus screwing our children over) the least we could do is make housing more affordable by getting rid of the interest deduction.


So the people who managed to save and put together enough money to buy a house and make their payments should suffer so you can buy one instead?

leslyn said...

Joe Schmoe said...
Eliminate ALL deductions, including religious and charitable.

Then following that logic to its conclusion, we should do away with the concept of a non-profit organization? These institutions should pay taxes and be supported by after-tax donations?

If they don't have to pay taxes, then why should my donations come from my taxable income?


Agree with ALL of this.

MayBee said...

So the people who managed to save and put together enough money to buy a house and make their payments should suffer so you can buy one instead?

Get serious. Suffer??

If this is suffering, you should do some traveling. Like in Bangladesh, perhaps.

jimbino said...

Not only should a man never live in his own house, he should buy whatever real estate he does buy through an LLC.

That way, he never has to pay RE transfer taxes, because when he sells, he sells the LLC, not the real estate, so that no tax is incurred.

That's what Mitt Romney did when he bought his last $5M house.

McTriumph said...

jimbino

If there is such a huge benefit using a LLC to purchase a home why doesn't everyone do it? It only takes a ten minute phone call to the Sec of State in most states to register or create one.

SteveOrr said...

So the people who managed to save and put together enough money to buy a house and make their payments should suffer so you can buy one instead?

So the people who managed to save and put together enough money to outright buy a house WITH CASH should suffer so you can mortgage one instead?

We Republicans need to think about how this impacts youth vote. We laugh at 20-something slackers living in their parents' basement. But the home mortgage subsidy encourages this arrangement.

Obviously this only affects fringe cases. An ambitious go-getter is going to take the world by the horns without regards to the tax code. But IIRC, the rate of adults living with their parents was about 15% in 1980. And that rate has gone up about 50%. 7% of the population might have changed their behavior becase of the tax code.

Sadly, Democrats are doubling down on dependency. More student loans & 26 year olds living off of their parents' health insurance.

leslyn said...

I just bought a house. I bought it based on what I could pay per month within my budget, not on what disposable income I might get back at the end of the year from a tax break.

Is there something wrong with that? Because it sure feels right.

Revenant said...

The mortgage interest deduction lowers my taxes. Despite that, I still pay well above what the median American pays.

So anybody who wants to touch that deduction can either (a) lower my taxes to compensate or (b) go fuck themselves. End of discussion.

Revenant said...

what disposable income I might get back at the end of the year from a tax break.

Is there a reason you're extending the government that interest-free loan all year? :)

Most people adjust their withholding so that the amount owed to (or recovered from) the government is minimal.

leslyn said...

Not for the mortgage interest deduction.

Revenant said...

Not for the mortgage interest deduction.

Um, yes -- for the mortgage interest deduction, too.

MayBee said...

If this is suffering, you should do some traveling. Like in Bangladesh, perhaps.

Seriously, a "War on Women!" lefty is using this line?

But women are being stoned in Pakistan! And children are starving in China!

I've been around, thank you. Why should any American get a housing subsidy or food stamps? People in India live in ditches. It's tragic. Americans don't need anything in comparison, and the poor people here should give their fair share to people in India and Cambodia.

MayBee said...

I just bought a house. I bought it based on what I could pay per month within my budget, not on what disposable income I might get back at the end of the year from a tax break.

It't not money you get back at the end of the year from some tax break. It's money you've earned over the course of the year. It's up to you how you adjust your withholding and plan your budget, but that isn't the government giving you a bonus at the end of the year.

This is the same as saying the government raising your taxes wouldn't affect your budget.

William Martin said...

Really I never understood the tax deduction argument for buying an affordable home.

By
William Martin
PPI Claims Made Simple



ambienisevil said...
This comment has been removed by the author.
MayBee said...

So the people who managed to save and put together enough money to outright buy a house WITH CASH should suffer so you can mortgage one instead?

Most likely, if they paid with cash they got a better price on the home. Certainly, they haven't paid any mortgage interest so they are financially better off than me with my mortgage.

We both bought under a standard set of rules. It's the idea that now, when people who have mortgages bought using very set financial rules, people are saying, "well, housing prices should be lower to benefit those who don't have houses. People who do have houses and bought them under a defined set of rules should be willing to take a further hit to benefit others."
What other rules should we change to make it easier for other people to afford stuff? Maybe 401(k) investments shouldn't be made with pre-tax income or get tax-free interest, because we need that tax money to help young people invest in retirement savings. We could start by taxing the interest made on everybody's 401(k) right now.

On top of that, what Revenant said at 8:57 PM.

leslyn said...

MayBee said,

"Why should any American get a housing subsidy"

Exactly. Eliminate the mortgage interest deduction.

leslyn said...

MayBee said,

"It't not money you get back at the end of the year from some tax break. It's money you've earned over the course of the year."

Explain how this applies to people whose mortgage interest is not enough to qualify for the deduction.

It's a tax break that applies only to a certain class of people who have mortgages large enough to qualify for the deduction.

IOW, it's encouraging larger home debt.

I bought my home at well below the limit that banks think I can afford. Been there, done that, won't do it again. This home fits my budget by planning for the exigencies of the future.

Amd because I saved stringently for a sizable down payment and lower debt, I may not even qualify for a mortgage interest deduction. So what?

So...tell me how I did this wrong by saving to decrease my debt load.

leslyn said...

MayBee said...
"So the people who managed to save and put together enough money to outright buy a house WITH CASH should suffer so you can mortgage one instead?"

Most likely, if they paid with cash they got a better price on the home. Certainly, they haven't paid any mortgage interest so they are financially better off than me with my mortgage.

We both bought under a standard set of rules. It's the idea that now, when people who have mortgages bought using very set financial rules, people are saying, "well, housing prices should be lower to benefit those who don't have houses. People who do have houses and bought them under a defined set of rules should be willing to take a further hit to benefit others."


This is ridiculous.

1) Some people save to decrease or eliminate debt. Perhaps they decided not to buy all the house they could "afford" with a mortgage. Why whine about it?

2) If you're depending on your mortgage deduction, you won't be as your debt decreases--unless you keep on accumulating debt. In that case, you are only penalizing yourself.

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