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The Shame of the Mortgage Interest Deduction
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Read this article and nearly wanted to puke a few times: https://www.theatlantic.com/...35/#article-comments

"It’s not just a failure of housing policy. It's a symbol of everything that’s wrong with the American tax code."


"Federal housing policy transfers lots of money to rich homeowners, a bit less to middle-class homeowners, and practically nothing to poor renters."


"Meanwhile, in 2015, the federal government spent $71 billion on the MID"


"But the MID isn’t just a symbol of housing policy falling prey to plutocracy. It’s a broader moral indictment of the tax code."


"Since tax benefits are most useful for people with taxable income" Yeah, well, duh.


"a 15-story public housing tower and a mortgaged suburban home are both government-subsidized"

Who thinks that the MID is a government subsidy? That the government is paying (already wealthy) people to buy bigger houses?
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Re: The Shame of the Mortgage Interest Deduction [efernand] [ In reply to ]
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I'm not tax expert and can't speak to it from that angle. That said, it was interesting to read some of the history of how the tax deduction came to be, even if some of the premise of the article may have been a bit over the top...possibly a bit of a veiled opinion piece.

The FHA redlining info was stuff I was already well aware of. That is something that's atrocious and given that it ended not even 50 years ago it does give credence to arguments about minorities populations not being given equal opportunities to transfer generational wealth. Those discrepancies are indisputable, even if the same discrepancy doesn't currently exist today but its consequences haven't been made even or reversed since it's really quite recent history.





efernand wrote:
Read this article and nearly wanted to puke a few times: https://www.theatlantic.com/...35/#article-comments

"It’s not just a failure of housing policy. It's a symbol of everything that’s wrong with the American tax code."


"Federal housing policy transfers lots of money to rich homeowners, a bit less to middle-class homeowners, and practically nothing to poor renters."


"Meanwhile, in 2015, the federal government spent $71 billion on the MID"


"But the MID isn’t just a symbol of housing policy falling prey to plutocracy. It’s a broader moral indictment of the tax code."


"Since tax benefits are most useful for people with taxable income" Yeah, well, duh.


"a 15-story public housing tower and a mortgaged suburban home are both government-subsidized"

Who thinks that the MID is a government subsidy? That the government is paying (already wealthy) people to buy bigger houses?
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Re: The Shame of the Mortgage Interest Deduction [efernand] [ In reply to ]
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I recently listened to a Planet Money podcast on how to fix the tax code, and, surprisingly, getting rid of the mortgage interest deduction was nearly unanimous (or maybe even unanimous) across all the varied economists interviewed (the interviewees were chosen from all across the political/economic spectrum).


War is god
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Re: The Shame of the Mortgage Interest Deduction [efernand] [ In reply to ]
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I can tell you that many Canadian homeowners with mortgages look south of the border to the U.S. with a bit of envy at being able to deduct mortgage interest on their taxes. But they are looking at it very narrowly and selfishly for their own benefits. Whenever it does come up, up here, it's almost always shot down, quickly by many leading economists, just like in the Atlantic piece, that it would be a massive drain on the government, and MOST benefit those with bigger homes, bigger mortgages, and those who are in the upper 5- 10% of incomes.


Steve Fleck @stevefleck | Blog
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Re: The Shame of the Mortgage Interest Deduction [efernand] [ In reply to ]
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Here is another article:

https://www.nytimes.com/2017/05/09/magazine/how-homeownership-became-the-engine-of-american-inequality.html


What's the big deal? The deduction partially offsets high marginal tax rates for wealthy folks. It has supported housing prices at the high-end, and is of negligible value for most middle-class home owners, since mortgage rates have plummeted (dropping interest payments below the standard deduction level). It would be great to reduce/end the MID AND LOWER top tax brackets as a part of comprehensive tax reform. We could probably agree that extraordinarily high marginal rates divert investments toward tax avoidance, which may not be optimal. Of course, ending the MID would significantly damage the housing market in some areas, and be recessionary in the short-term. Hence, the status quo.
Last edited by: oldandslow: May 15, 17 14:44
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Re: The Shame of the Mortgage Interest Deduction [efernand] [ In reply to ]
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All money belongs government. Anything you earn that you are allowed to keep is a government handout.

Beyond that I'd be happy to drop the MID in favor of a simple flat tax with no deductions and no AMT.

Also, people who don't think renters pay property tax or benefit from the MID are fools. My total cost to own the unit I rent out is the main factor in deciding how much rent to charge. Take away the MID (all else remaining the same) and guess what? I'm raising the rent.

It's only smellz.

- Rocco Siffredi
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Re: The Shame of the Mortgage Interest Deduction [efernand] [ In reply to ]
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And why this article now? Couldn't obama, with all his popularity and almost god like abilities of persuasion taken care of this in his 8 years in office?

He had a pen and had a phone...

It's only smellz.

- Rocco Siffredi
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Re: The Shame of the Mortgage Interest Deduction [efernand] [ In reply to ]
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efernand wrote:
Read this article and nearly wanted to puke a few times: https://www.theatlantic.com/...35/#article-comments

"It’s not just a failure of housing policy. It's a symbol of everything that’s wrong with the American tax code."


"Federal housing policy transfers lots of money to rich homeowners, a bit less to middle-class homeowners, and practically nothing to poor renters."


"Meanwhile, in 2015, the federal government spent $71 billion on the MID"


"But the MID isn’t just a symbol of housing policy falling prey to plutocracy. It’s a broader moral indictment of the tax code."


"Since tax benefits are most useful for people with taxable income" Yeah, well, duh.


"a 15-story public housing tower and a mortgaged suburban home are both government-subsidized"

Who thinks that the MID is a government subsidy? That the government is paying (already wealthy) people to buy bigger houses?

Yeah, articles like that, and another similar one that oldandslow mentioned start from the premise that if the government lets you keep more of the money you earn, that is essentially a government handout. Which leads to the obvious conclusion that your money isn't yours; it's the government's and anything they let you keep is a gift, a handout, a subsidy, whatever you want to call it. I find this outlook absolutely appalling on many levels. One of the articles went so far as to call the MID an "expenditure." As if the government was actually spending money on the MID much like any other government program, which is a huge leap of logic. The key element that is usually missing from many of these types of articles on the MID is what oldandslow mentioned; what would the effect of curtailing or eliminating the MID do to the housing industry? Given what happened in 2008-2009 when the US housing industry pretty much crashed, I think the damage would be sizable and difficult to recover from. I don't see any politician willing to go to bat for that.

___________________________________________________
Taco cat spelled backwards is....taco cat.
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Re: The Shame of the Mortgage Interest Deduction [Duffy] [ In reply to ]
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Duffy wrote:
All money belongs government. Anything you earn that you are allowed to keep is a government handout.

Beyond that I'd be happy to drop the MID in favor of a simple flat tax with no deductions and no AMT.

Also, people who don't think renters pay property tax or benefit from the MID are fools. My total cost to own the unit I rent out is the main factor in deciding how much rent to charge. Take away the MID (all else remaining the same) and guess what? I'm raising the rent.

I don't understand. On your rental property, mortgage interest is a legitimate business expense, thus deductible.

But you can't deduct mortgage interest for a rental property on your personal tax return, can you?

Two different issues; or am I missing something?
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Re: The Shame of the Mortgage Interest Deduction [eb] [ In reply to ]
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eb wrote:
Duffy wrote:
All money belongs government. Anything you earn that you are allowed to keep is a government handout.

Beyond that I'd be happy to drop the MID in favor of a simple flat tax with no deductions and no AMT.

Also, people who don't think renters pay property tax or benefit from the MID are fools. My total cost to own the unit I rent out is the main factor in deciding how much rent to charge. Take away the MID (all else remaining the same) and guess what? I'm raising the rent.

I don't understand. On your rental property, mortgage interest is a legitimate business expense, thus deductible.

But you can't deduct mortgage interest for a rental property on your personal tax return, can you?

Two different issues; or am I missing something?

Shhhhh he is on an ideological roll...


===============
Even if you are one in a million, there are a thousand Chinese guys just like you.
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Re: The Shame of the Mortgage Interest Deduction [Duffy] [ In reply to ]
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Quote:

Beyond that I'd be happy to drop the MID in favor of a simple flat tax with no deductions and no AMT.


How about dropping the MID and also dropping income tax by the approximate amount that taxes are reduced via the deduction? i.e. revenue neutral, and approximately the same tax distribution? Why not?
Last edited by: oldandslow: May 15, 17 15:20
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Re: The Shame of the Mortgage Interest Deduction [eb] [ In reply to ]
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eb wrote:
Duffy wrote:
All money belongs government. Anything you earn that you are allowed to keep is a government handout.

Beyond that I'd be happy to drop the MID in favor of a simple flat tax with no deductions and no AMT.

Also, people who don't think renters pay property tax or benefit from the MID are fools. My total cost to own the unit I rent out is the main factor in deciding how much rent to charge. Take away the MID (all else remaining the same) and guess what? I'm raising the rent.

I don't understand. On your rental property, mortgage interest is a legitimate business expense, thus deductible.

But you can't deduct mortgage interest for a rental property on your personal tax return, can you?

Two different issues; or am I missing something?

I own a duplex that I live in. the tax implications are based on relative square footage. Also, what people seem to not understand is that it's not a tax credit for interest paid. I don't pay $100 in interest and then my tax bill is $100 less. It just lowers my taxable income by $100. I'm still paying interest, I'm just doing it with pre-taxed dollars.

Either way, if my monthly nut increases then so does my tennent's.

It's only smellz.

- Rocco Siffredi
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Re: The Shame of the Mortgage Interest Deduction [oldandslow] [ In reply to ]
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oldandslow wrote:
Quote:

Beyond that I'd be happy to drop the MID in favor of a simple flat tax with no deductions and no AMT.


How about dropping the MID and also dropping income tax by the approximate amount that taxes are reduced via the deduction? i.e. revenue neutral, and approximately the same tax distribution? Why not?

Wouldn't bother me at all. The MID really isn't a big deal either way for me. I've always thought that people who cite it as a reason to buy a house are fools. Also, my mortgage isn't that high and interest rate is in the low 2s. I bought and borrowed within my means (crazy, huh?). It really isnt that big of a deal.

It's only smellz.

- Rocco Siffredi
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Re: The Shame of the Mortgage Interest Deduction [Duffy] [ In reply to ]
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Quote:

Wouldn't bother me at all. The MID really isn't a big deal either way for me. I've always thought that people who cite it as a reason to buy a house are fools. Also, my mortgage isn't that high and interest rate is in the low 2s. I bought and borrowed within my means (crazy, huh?). It really isnt that big of a deal.


Not for you as an individual, but you are not the entire housing market. Prospective buyers wouldn't be able to afford a house at the same price point. Homes in expensive markets could easily see a one-time drop of 20%. No big deal if they have been appreciating for decades (and you don't want to sell anyway), but clearly an issue for the larger economy. Some of this would be mitigated by a rotation of investment into equities and other investments. OTOH, charities could take a huge hit, given that they are massively dependent on donors who itemize deductions, and the big-time deduction that makes them/us itemizers is their/our home.

========================

To an earlier point that you made: "Take away the MID (all else remaining the same) and guess what? I'm raising the rent. "

Not if the rental market collapses. You are talking as if it has to stay mystically static.
Last edited by: oldandslow: May 15, 17 15:47
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Re: The Shame of the Mortgage Interest Deduction [eb] [ In reply to ]
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eb wrote:
On your rental property, mortgage interest is a legitimate business expense, thus deductible.

i might be having brain fade, but i think you deduct the entire mortgage payment on a home that you rent as income property. your home is basically like a business. it's like a little schedule C operation. the REAL tax dodge with rental property is you get to depreciate it.


Dan Empfield
aka Slowman
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Re: The Shame of the Mortgage Interest Deduction [oldandslow] [ In reply to ]
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Homes in expensive markets could easily see a one-time drop of 20%.

That could happen but that's not a rational response. The MID does not make your home 20% cheaper to buy by any stretch.

I don't think the MID should go away, btw. I just don't think the economic hit would be all that drastic.

Too say it would devastate the housing market is a bit overblown and ignores history. Remember we used to be able to write off credit card interest? And getting rid of that was going to decimate the credit card industry...

Another thing I'd like to add. If I can't write off interest paid then I don't want to pay taxes on interest earned.

It's only smellz.

- Rocco Siffredi
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Re: The Shame of the Mortgage Interest Deduction [efernand] [ In reply to ]
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MID should be scrapped. Buy a house, deal with the consequences of paying interest. Should we get a deduction for car loan interest, credit card interest, student loan interest? I guess I'm a bit biased being completely debt free, but even when I had a mortgage, the goal was always to have a small enough loan such that I'd never hit the deduction limit. I see that as bad personal fiscal policy.
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Re: The Shame of the Mortgage Interest Deduction [Duffy] [ In reply to ]
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Beyond that I'd be happy to drop the MID in favor of a simple flat tax with no deductions and no AMT.

---

Once, I was working on a flat tax proposal and accidentally proved there was no god.






Take a short break from ST and read my blog:
http://tri-banter.blogspot.com/
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Re: The Shame of the Mortgage Interest Deduction [Tri-Banter] [ In reply to ]
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Tri-Banter wrote:
Beyond that I'd be happy to drop the MID in favor of a simple flat tax with no deductions and no AMT.

---

Once, I was working on a flat tax proposal and accidentally proved there was no god.

Huh?

It's only smellz.

- Rocco Siffredi
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Re: The Shame of the Mortgage Interest Deduction [Duffy] [ In reply to ]
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Come on!







Take a short break from ST and read my blog:
http://tri-banter.blogspot.com/
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Re: The Shame of the Mortgage Interest Deduction [Tri-Banter] [ In reply to ]
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Tv reference? Sorry, I'm woefully ignorant of most of those.

It's only smellz.

- Rocco Siffredi
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Re: The Shame of the Mortgage Interest Deduction [Duffy] [ In reply to ]
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Duffy wrote:
Another thing I'd like to add. If I can't write off interest paid then I don't want to pay taxes on interest earned.

which taxes do you want to pay?


Dan Empfield
aka Slowman
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Re: The Shame of the Mortgage Interest Deduction [tigermilk] [ In reply to ]
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tigermilk wrote:
MID should be scrapped. Buy a house, deal with the consequences of paying interest. Should we get a deduction for car loan interest, credit card interest, student loan interest? I guess I'm a bit biased being completely debt free, but even when I had a mortgage, the goal was always to have a small enough loan such that I'd never hit the deduction limit. I see that as bad personal fiscal policy.

Do you really not see the benefits in encouraging home ownership? Really?

If there are no dogs in Heaven, then when I die I want to go where they went. - Will Rogers

Emery's Third Coast Triathlon | Tri Wisconsin Triathlon Team | Push Endurance | GLWR
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Re: The Shame of the Mortgage Interest Deduction [spot] [ In reply to ]
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spot wrote:

Yeah, articles like that, and another similar one that oldandslow mentioned start from the premise that if the government lets you keep more of the money you earn, that is essentially a government handout. Which leads to the obvious conclusion that your money isn't yours; it's the government's and anything they let you keep is a gift, a handout, a subsidy, whatever you want to call it. I find this outlook absolutely appalling on many levels. One of the articles went so far as to call the MID an "expenditure." As if the government was actually spending money on the MID much like any other government program, which is a huge leap of logic. The key element that is usually missing from many of these types of articles on the MID is what oldandslow mentioned; what would the effect of curtailing or eliminating the MID do to the housing industry? Given what happened in 2008-2009 when the US housing industry pretty much crashed, I think the damage would be sizable and difficult to recover from. I don't see any politician willing to go to bat for that.

I completely agree.

In addition, it is beyond offensive to consider the MID as a government subsidy when at the same time many of us take the MID, we get hit with the AMT. Unreal.

If there are no dogs in Heaven, then when I die I want to go where they went. - Will Rogers

Emery's Third Coast Triathlon | Tri Wisconsin Triathlon Team | Push Endurance | GLWR
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Re: The Shame of the Mortgage Interest Deduction [JSA] [ In reply to ]
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Quote:

Do you really not see the benefits in encouraging home ownership? Really?


Hmmm, the MID doesn't really do that, given that most entry-level home buyers don't gain directly anymore.
Last edited by: oldandslow: May 15, 17 16:52
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