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.

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).

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War is god

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.

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Steve Fleck @stevefleck | Blog

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.

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.

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Taco cat spelled backwards is....taco cat.

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...

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Proud member of the MSF (Maple Syrup Mafia)

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?

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.

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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.

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.

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Dan Empfield
aka Slowman

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.

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

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

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Take a short break from ST and read my blog:
http://tri-banter.blogspot.com/

Come on!

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Take a short break from ST and read my blog:
http://tri-banter.blogspot.com/

which taxes do you want to pay?

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Dan Empfield
aka Slowman

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

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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

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.

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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

Hmmm, the MID doesn't really do that, given that most entry-level home buyers don't gain directly anymore.

How do you figure? I still live in my "starter home" and have enjoyed the MID for the past 15 years (only to be offset by the AMT).

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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

Depends. In some instances home ownership is a disadvantage, and encouraging it comes to the detriment of the potential owner. Would it be better to rent or buy? Depends completely on the region, wages, and personal circumstances. A one size fits all solution is not a solution.

Where is the benefit to society in someone owning a home as opposed to, say, renting it?

Why should we encourage people to take on long-term housing debt as opposed to, say, student loans that might have a greater benefit to society in the long run? Or an automobile loan that might enable someone to get and hold a job a little further away, also benefiting the economy?

I'm a proponent of tax simplification, and so I support doing away with the MID (and the AMT as well).

Certainly there will be exceptions to the rule, but the rule is called "the rule," because is predominately applies.

Benefits:

1. Property taxes to the municipality.
2. Stability and sense of community.
3. Home ownership builds wealth.
4. Ownership creates equity every month.
5. MID.
6. Home equity lines can be used to pay off other debts while enjoying MID.
7. Potential capital gains exclusion.
8. Long term, buying is cheaper than renting.
9. Studies show greater physical and mental well being of home owners.
10. Studies show kids in owned homes do better in school.
11. Greater likelihood of participation in community events, community groups, volunteer organizations.
12. More interest in and participation in local elections.

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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

Benefits of home ownership to an individual, a municipality, and society in general:

1. Property taxes to the municipality.
2. Stability and sense of community.
3. Home ownership builds wealth.
4. Ownership creates equity every month.
5. MID.
6. Home equity lines can be used to pay off other debts while enjoying MID.
7. Potential capital gains exclusion.
8. Long term, buying is cheaper than renting.
9. Studies show greater physical and mental well being of home owners.
10. Studies show kids in owned homes do better in school.
11. Greater likelihood of participation in community events, community groups, volunteer organizations.
12. More interest in and participation in local elections.

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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

I also think that if one person has to pay federal taxes then everyone should pay something. Almost half the country pays no federal tax. //




Well if our billionaire president doesn't have to pay federal taxes, pretty hard to make a case for the poor schlub with a couple kids making $40k to pay his "fair share".

I said "most", and that is still true. You need to subtract out the Standard Deduction to calculate your true advantage (the MID makes up the vast bulk of itemized deductions for MOST people). You may get an advantage, but it is generally far less than you think, unless you buy a starter home in a really expensive area.

BTW, with major caveats I agree with the benefits of home ownership. MID just doesn't do that, it is primarily a way to lower taxes for folks with high marginal tax rates. One could just as eaily do this with the MID reduced to 500K (and the marginal rates adjusted lower to be revenue neutral).

One of the trickier parts of government subsidies is that inflated home values (exacerbated by the MID) make home ownership more difficult for entry-level buyers. Every coin has two sides, and the MID is no exception.

You mean the guy who paid $38 million in taxes in 2005?

'So what about those"federal" taxes he has paid the past 10 years or so? And 38 million, what is that like 8% rate for him? Better jump off this train quickly, there will be no scenario where Trump paid anywhere near his fair share. And if you are going to use the old tired line about he just took advantage of the system in place, well doesn't everyone that doesn't pay any tax do the same thing?


But I guess you are not ok with poor people paying any tax as well as billionaires making 100'sofmillions a year?

What is his fair share?

More than $00, thats for sure.

I would be alright with him paying in the low range of guys in the billionaire class, the ones that don't hide all their money in offshore accounts and write off income for 10 years based on one bad year.. So maybe 20 to 25% or so?

Oh my god, so you are the one who has his tax returns from the past dozen years or so, you should put them out there. A lot of people have been looking for those returns, with no luck at all!!!

I will pull my head out now, since you have his returns and can now tell us what he has paid the past decade, thanks Man!!!

I'm advocating changing the tax system so this isn't possible. //

Well we agree on that part at least, flat tax?

Duffy,

I agree with consumption to a limited extent. Are you advocating for everything? Milk, eggs, butter, bread?

Or booze, tobacco, fuel, etc?

Sure. I prefer a tax tied to consumption rather than income, though.

Consumption of what? Food, clothes, 200ft yachts? What if you are a rich guy and everything you consume is bought by your corporation? Are corporations people too? So average Joe eats at Mac D's and pays his consumption tax, while Bill Gates using his lifetime gold card(given to him by Kroc himself I believe) there and pays nothing? Is that how you envision it?

The MID begins to phase out at a certain income level -- $166,000 per year? So, the people at the top of the income bracket aren't really getting much from this. Also, I don't think the MID really is inflating the value of homes that much, because interest rates are so low.

What I think is really allowing home prices to soar are low property taxes. Low property taxes allow folks to practically live for free in houses as they appreciate over the years. Under low property taxes your best bet is to purchase the largest home the law will allow. Here in Texas, where you could pay north of 2% of total value in property tax per year, you'll rethink that strategy very quickly. As such we tend to have fewer real estate bubbles and better overall real estate usage efficiency.

2%!!!! Jesus, I pay 1.3% of taxable value and I think it's robbery.

I'd like to see the stats on how many more people own homes because of the MID. How many markets are saturated already and would be 'full' regardless of the MID?

People will buy homes regardless of whether they get a few grand in tax deductions or not.

I'd be happy to pay 2%. My taxes in Texas are 3.1%. It's my biggest single expense every year (no mortgage).

Um you oppose the tax loss carry forward?

Do you know how taxes work?

Trumps tax plan, which would never pass, gets rid of the MID by increasing the personal exemption to the point where a lot of people would take the standard deduction instead of itemizing.

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I miss YaHey

the MID now has merely raised the value of homes (by a small but growing amount at the high end), and is a tax mitigator for folks with high marginal rates. The advantages in home ownership is primarily for older beneficiaries of appreciated homes, since they can assist children in purchasing homes. Affordability for poorer people has diminished.

Government policies tend to create new equilibriums with various "winners" and "losers". If they further some larger goal, fine. However, they often create as many problems as they solve.

You seem to have ducked my 2nd and 3rd questions. Why is that?

And you didn't really answer my first question, either.
1. Property taxes to the municipality.
MID has nothing to do with this.

2. Stability and sense of community.
So if you have a mortgage you are more stable than someone who paid cash? Again - nothing to do with MID.

3. Home ownership builds wealth.
Ha! Only in certain markets. And why should this supposed wealth accumulation be subsidized by MID? And do you really think more societal wealth is built by individuals owning homes as opposed to landlords?

4. Ownership creates equity every month.
Every month? And this is really the same as #3, no?

5. MID.
Only if you have a mortgage ...

6. Home equity lines can be used to pay off other debts while enjoying MID.
So now I should subsidize your leggings and tats as well as your home?

7. Potential capital gains exclusion.
Nothing to do with MID.

8. Long term, buying is cheaper than renting.
Questionable, and highly dependent on individual circumstances. And even when true, is that because of the MID subsidy from other taxpayers?

9. Studies show greater physical and mental well being of home owners.
10. Studies show kids in owned homes do better in school.
11. Greater likelihood of participation in community events, community groups, volunteer organizations.
12. More interest in and participation in local elections.
You're really stretching now! Do you think 9-12 are really benefits of the MID? Or is it more likely that they reflect the socio-economic status of those who can afford a home?

Look, I get that you like the MID. But it costs the rest of us 70 billion or so a year, or ballpark $200 per capita. I can think of a lot of things I'd rather spend that $200 on than people who can already afford to buy a home without it.

I really don't understand how any fiscal conservative can support the MID other than blatant self-interest.

Let me give it a try (where's that darn FC hat?):

If you are a fiscal conservative who thinks that the progressive tax code is far too skewed, almost any policy which reduces the tax burden at the high end is better than none at all. If you are a pro-economic growth conservative, a sustainable policy which results in higher real estate valuations would be good. That is what the MID presently does. Removing the MID would cause short-term economic dislocation, and misallocation of investments, and a fiscal conservative would prefer a less volatile investment environment. A fiscal conservative (and a savvy liberal) normally just accepts the rules as they exist, and adjusts their investments accordingly to take advantage of policies, rather than bellyache.

BTW, JSA is right that home ownership, like marriage, often leads to an entire set of economically "virtuous" behaviors which help teh economy and society as a whole (saving every month, holding a job for decades, staying married, spending on "stuff", etc.). That isn't a case for the MID, but it is a general argument in favor of home ownership.

70% of tax payers take the standard deduction already. I can't remember what Trump wanted to bump it to but I think it was about $25k so the percent would go way up.

Yep, pretty much this. I do wonder, however, you're fairly liberal right? You see this with the MID but do you not also see it with, say, federal student grants and loans, or low income housing assistance?

My wife and I are in the process of buying a house, last night we attended a first-time homebuyer seminar. Many who take these classes in MA do so as a prerequisite to qualify for the various mortgage assistance programs, which have income and mortgage restrictions, which we don't qualify for. Regardless, all these programs help get low income people into homes...which also means that more people are in the housing market, upping competition and inflating home prices. I wonder what the market would look like in MA if, instead of all these low-income programs, people simply bought homes when they could afford it? They keep upping the income and mortgage limits so now you can make $125K (household) and have a $425K mortgage and still qualify for these 'low income' programs...does no one see a problem with this? And people around here wonder why it's an extreme sellers market and houses are selling at $230 a sq ft....

Holy shit! It doesn't "cost" you a fucking thing! It is MY money - not yours, not the government's. "Allowing" a taxpayer to keep more of his/her own money is not a government subsidy. To think otherwise evinces a level of ignorance and/or brainwashing that needs to be eradicated.

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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

+1 (and your next post)

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It doesn't really matter what Phil is saying, the music of his voice is the appropriate soundtrack for a bicycle race. HTupolev

Then lower tax rates and eliminate deductions. The MID is an unnecessary step that doesn't encourage homeownership, it just complicates matters.

I love how Mitt Romney got castigated five years ago for wanting to lower income tax rates and get rid of credits/deductions; his great mistake was being realistic and saying 'I don't know what credits and deductions we can eliminate, that'll be up to Congress and negotiations we'll have'. God forbid someone state the obvious that our tax code is a fucking disaster and should be drastically simplified.

Even if the net effect is zero to tax receipts, it'd save tax PAYERS billions in accounting fees and time.

Society has seen home ownership as desirable for a long time. There is the belief that communities of home owners are better and more involved members because they have a vested interest in the area. Most Americans do not save enough so building equity by paying down a mortgage can be seen as a way to increase savings. Homes were also seen as an investment that only increases in value. Because of all these arguable benefits home ownership has been encouraged with government loans, loan guarantees and tax deductions for property taxes, home expenses and mortgage interest. I benefit more than most with the mortgage interest deduction. I have a larger house than I would otherwise because my in-laws live with us and I needed large enough a home for everyone to be comfortable and have their own space. It would be painful for me to loose this deduction. Perhaps the best compromise would be to only allow the first $10,000 of interest, property taxes and points to be deductible. That way middle class homeowners who rely on the deduction to make home ownership affordable could still get it.

He probably lost all tax accountant donations from that. Imagine how many poor tax accountants would be laid off if they actually simplified the tax code.

Fuck 'em. I work in IT for a financial accounting company, part of it is tax accounting. We spend 80% of our time on regulatory nonsense. Strip out the noise, simplify it, lower income tax rates and make it all easier on everyone. It's insane how much money we spend on accounting and regulating our tax collecting system. I'd be in favor of eliminating the IRS and totally gutting the whole system, creating a flat consumption tax, but since that's a pipe dream we need to at least make it so a normal person can pay their taxes without an advanced degree in accounting.

It's so complicated at this point that the only real way to simplify the tax code is to scrap it and re-write. every deduction, exclusion, credit, AMT or whatever else was originally put into the code for a reason, whether to close a loophole, encourage certain types of investments, or just increase government revenue.

It would be a massive project to get agreement on what the tax code should actually be, probably spanning several election cycles, which is why it won't get done.

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Swimming Workout of the Day:

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2020 National Masters Champion - M50-54 - 50m Butterfly

Or do as the Canadians do and eliminate the MID but create a tax exemption for the sale of your principal residence.

But isn't this pretty much exactly what needs done? The US has glommed everything in the world into the tax code. When you hit 'send' I think most people are like me, "I hope I didn't screw that up too badly and either cost myself thousands or send my ass to jail." It shouldn't be that way.

We really do need to simplify. Going to three rates or one rate doesn't do that. You need to rewrite it. You still have to go to a chart to see what your tax burden is for your income, I'm really good at arithmetic but I'd still use the chart to figure out my 15% flat tax if that was what it is.

One of my long time bitches is that not a single person in the US knows what they pay in all taxes every year. Can't be done. My gut feeling is that my overall personal tax rate isn't too high. But how would I know if I don't know how much I pay in all taxes. I might see the number and shit a brick, decide to cut off hungry children from food stamps and start dragging sick people into the street to die.

It is much like a computer program that has been around for 100+ years with 20 generations of developers working on it. No one knows exactly what it does and when you go to make a change or fix you slap it in somewhere and just hope it doesn't screw it up too badly.

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I'm beginning to think that we are much more fucked than I thought.

So true, the average mortgage balance in the US is under $150,000. At 5% interest, that means the average person has less than $10,000 of interest deduction from their mortgage.

The only reason the mortgage deduction will remain is because there are millions of dollars given to politicians from special interest groups.

Again: WHY??? Who is making home-buying decisions based on some tax exemption that saves a few grand? All these feel-good 'incentives' to do things the 'right' way are fucking stupid, they just complicate tax systems. I can guarantee you that for every page of the 74,000 page tax code it costs taxpayers at least 100 million dollars in either federal spending, to enforce that page of regulations, or lost GDP due to company and individual compliance costs.

Eliminate deductions and credits, eliminate every line of carve-outs and exemptions, create a simple tiered system and make tax collecting, accounting and regulating simple for everyone.
https://www.mercatus.org/...costs-tax-compliance

The study finds that Americans face up to nearly $1 trillion annually in hidden tax-compliance costs, while the Treasury forgoes approximately $450 billion per year in unreported taxes.

FUCK. THAT.

Exactly...and as anyone who's tried to re-write old code knows, you're better off abandoning the old system and starting over, because the current mess is unworkable. 74 THOUSAND PAGES, and if you read any one of them you'll feel like crawling into a hole and giving up. There's a whole system in place to interpret the code (tax accountants), another whole system related to enforcement and compliance (IRS), companies like H&R Block and PWC that are there precisely for individual and corporate tax compliance purposes, the thousands and thousands of lawyers who help individuals when the compliance monster comes calling, and all the periphery services and systems like TurboTax and TaxSlayer for individuals, my company for corporations.

It's all INSANE, and it costs all of us huge, huge money, people have no idea just how much this whole compliance and collection system we have in place costs us.

the tax exemption on cap gains on principal residence is a good thing IMO, because it allows you to keep your money and roll it into your next home when you sell, even if you don't immediately purchase a new home. Otherwise, the tax bill on selling a house would be ginormous.

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Swimming Workout of the Day:

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2020 National Masters Champion - M50-54 - 50m Butterfly

WTF is wrong with this guy? In short, the author is saying tax deductions are unfair to poor people because they don't get to reap the benefits BECAUSE THEY DON'T PAY ANY INCOME TAXES.

The article is so illogical it's almost hard to respond. You can tell me you don't like the tax structure. You can complain that the rich aren't paying their fair share. But don't try and tell me that the tax structure is unfair for the people who don't pay taxes.

So true. And as far as I am concerned the problem with home affordability is the stupid low interest rates we have had for about forever now to prop up crummy economies.

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They constantly try to escape from the darkness outside and within
Dreaming of systems so perfect that no one will need to be good T.S. Eliot

Eh, you and I disagree on this piece of it in principal though...I don't think cap gains should be taxed at all. I already paid taxes on that money, I paid taxes on my home purchase, I pay local and state taxes for the property I own. If that property appreciates in value then I should reap the benefits, just like if it loses value I'm underwater.

I totally disagree with the principal of pay taxes on something I've already paid taxes on.

And on the flip side, cheering for really affordable housing via policies that would cause a housing collapse is hardly a step forward. The economy is hardly "crummy", no matter how emphatically whiners on this board pound their chests. The MID could certainly be unwound (as could many policies), but virtually every market in the world is primed and limited by free market forces and government policies. Unwinding long-standing policies that have driven investment for decades requires more impartial judgment.

When I worked as a fund accounting we sent off boxes and boxes of our daily and monthly accounting books to be stored, then at tax time we'd recall them for the PWC auditors to look through, and we'd send the hundreds of pages of fiscal YE stuff to the client for their tax department. Every company, seven years of all that data, and I just worked on one small account while I was there. Now that I work on the IT side I see just how many of our resources--people and projects--are dedicated to compliance/regulatory changes, we charge our parent company and clients millions every year for the tax changes we make, they spend millions testing and implementing, etc etc. Just to make sure that corporation are in compliance, I can't even imagine what it's like on the personal accounting side.

But you aren't, you are only paying on profit derived from that investment. BTW, the word is "principle" and (funny enough), you pay zero tax on the "principal".

P.S. Off-topic, both the student loan program and many/most housing subsidies are extremely flawed. Not having any program at all is also extremely flawed. While we can dream that zero government intervention would fix everything, our present partisan gridlock keeps flawed programs from being fixed or replaced.

Ok, but when these issues come up and we conservatives say 'see how much compliance costs? See the cost of the regulatory burden? See the unintended consequences?', the argument against is always 'it'll hurt poor people'.

Except the market is already fucked up because of policy intended to help poor people. All these bubbles that slowly percolate or burst entirely started as a means to help low- and moderate-income people. And then it cost a lot of people and companies a lot of money on compliance. And then the market was off-balance because of the new policy so it naturally corrected itself, usually with higher prices for the goods/services/market that's been impacted. Then tweaks/new policy was implemented to support the old one that wasn't working so well any more. Wash rinse repeat.

So this is why I'll never support these government efforts to 'help the poor'. They don't work, poor people remain poor after the market corrects and everyone else suffers because of it.

Yea, the economy is so robust every time the Fed talks about increasing rates a half a percent its like the end of the world. It has to be unwound slowly but why are they so afraid of even starting. Could it be gov't debt is bigger problem if you can't borrow at super low rates.?

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They constantly try to escape from the darkness outside and within
Dreaming of systems so perfect that no one will need to be good T.S. Eliot

if you don't tax cap gains, it creates an enormous loophole for business owners avoid paying taxes on income. instead of a salary, get paid in shares, which the company immedately repurchases from the individual back into treasury. That's a cap gain - but you want all cap gains to be tax free.

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Swimming Workout of the Day:

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2020 National Masters Champion - M50-54 - 50m Butterfly

So close the loophole.

I'm not actually advocating zero taxes on capital gains, but I think our present policy is too onerous. It's why all these IRA loopholes and rollovers exist, tax avoidance. Do away with all that shit, tax gains at a certain rate and be done with it. If you're 20 and want to spend some of your investment gains great, 15% is sent to the government. If you're 80 same idea. The second you add a qualifier about age is when you need the compliance and regulatory arm, which isn't just the IRS, it's every single person needing to know (or have a professional who knows) what the law says. it all costs money, get rid of it.

Not from me. Unwinding the MID would have short-term impact on the upper-end housing market, and would REALLY hurt charities, esp. churches (due to tax treatment on charitable donations). The argument on this board is almost all from conservatives, and it is "it'll hurt me". That said, unwinding the MID (carfully) is probably good policy. (BTW, it should be noted that I arguably live in the most inflated housing market in the country, and work for a church).


Now you're just whining. Go hug a puppy.


... and doing nothing doesn't work too well either. History is full of revolutions caused primarily by folks refusing to do anything to help alleviate poverty.


How horrible is your life, really, at this moment in history? There are real life issues and inequalities and problems, but don't you think that's a bit much?

You can exempt 250,000 (500,000 if married filing jointly) in capital gains growth every single time you sell a house. It didn't used to be that way, it used to be you could only do it once-in-a-lifetime.

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I miss YaHey

Your first paragraph boils down to blatant self-interest, doesn't it? You're basically saying that a bad policy is good if it partially offsets another bad policy. Wouldn't it be better to (gradually) eliminate both bad policies, thus eliminating artificial market forces, and freeing up thousands of accountants to do more useful work?

As for the second paragraph, I'm not convinced that home ownership leads to virtuous behavior, especially if that home ownership is triggered by something as tawdry as the MID. I think the converse is far more likely: that virtuous behavior leads to home ownership.

Well, if my taxes are higher that yours because you get the MID and I don't, then the MID sure as hell does cost me. Blatant self-interest has apparently brainwashed you quite effectively.

No it doesn't. Lots of conservatives who don't benefit from the MID support it as a way to lower actual taxes. You aren't even addressing the positive economic impacts of higher real estate valuations. A less volatile investment environment is good economics, if you want to call it self-interest, then isn't this an indictment of capitalism in general? I put it to you - isn't this an indictment of our entire American society? Well, you can do whatever you want to me, but I'm not going to sit here and listen to you badmouth the United States of America!!




We'll agree to disagree. Dear God, the MID is too tawdry, really? Pardon me while I check out my tawdry 401K plan! Then, I'll default on my mortgage, because the entire enterprise has been sullied.... Damn, I need a shower.

NAR will swat this out of the park like a Reggie Jackson home run.

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I'll be what I am
A solitary man

So you've never benefited from services provided by the taxes your neighbors paid? Right.

"1. Property taxes to the municipality."

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owners of real property leased to third parties pay real property taxes too.

And throw the various homebuilding and roadbuilding lobbying orgs into the mix too. Although this is a fine idea, it's going nowhere, even on the margins.

And churches. The hit to charities would be even larger than the hit to the real estate industry.

Because you think the charitable deduction would be eliminated in conjunction with the mortgage interest deduction, or is there some aspect of the MID that benefits churches that I'm not aware of?

I don't get this one either. Aren't most churches tax-exempt?

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This is a logic fail

Yes .... I'm really torn on it since a lot of these newer congregations are just tax dodges but elimination would harm the churches that actually do charity

how? They don't pay taxes as it is, so eliminating the MID means nothing to the church.

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Swimming Workout of the Day:

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2020 National Masters Champion - M50-54 - 50m Butterfly

I thought he was talking about charitable deductions for donating to churches

X1 to that. The only change I can see is if the MID is eliminated people have less money to spend and they give less to their church. Maybe in the short term but long term I don't see it being that way.

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They constantly try to escape from the darkness outside and within
Dreaming of systems so perfect that no one will need to be good T.S. Eliot

No, it is because the top 10% tend to itemize deductions, only because of the MID. the MID (and property tax) make up the bulk of their deductions. THEN, their major charitable donations are fully deductible. I may only have 10K that I can afford to donate to causes this year, but I can donate 15K if I am itemizing deductions (and save 5K on taxes). Lose the MID, and hardly anybody would be able to itemize and write off their donations. The itemized deduction is the linchpin for fundraising for charities. People really need to understand that, to fully appreciate how difficult full removal of the MID would be. It would create a short-term blip in the housing market, but would reduce charitable revenue by at least 20% long-term.

Read this:

http://www.businessinsider.com/...tion-changes-2016-12

I follow now. charitable deduction would be used less because without the MID there is less itemization in general. Makes some sense.

I'll just take that as evidence that your tax code is even more fucked than ours is.

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Swimming Workout of the Day:

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Duffy pays for all the roads in California. And the airports too. Water systems. National defense!

Thank you. Your rugged individualism is admirable, if not quite realistic.

No, it is not.

Your taxes are independent of what anyone else pays.

Yes, it most certainly does fail any sort of logic test. Explain how somebody's lower tax rate costs you anything. You can't, because it doesn't. If they did away with the MID tomorrow, you would still be paying the same amount of taxes (assuming all they did was get rid of the MID). The only difference is other people would be paying more, too. How does that help you WRT to your tax bill?

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Taco cat spelled backwards is....taco cat.

In the very short run, perhaps. In the long run, taxes are set to generate needed revenue and my taxes are certainly not independent of what anyone else pays.

See my response to windywave. Government sets taxes to meet revenue targets. If one group pays more, other groups pay less. Surely you understand this.

You don't think legislators adjust tax types and rates depending on revenue targets and political considerations? Taxation is largely (although not completely) a zero-sum game in the long run. So if revenue doesn't come from one source, it will come from another. Hence the expression about robbing Peter to pay Paul.

P. S. For a guy complaining about the level of discourse in the LR, you sure aren't dong anything to improve it. So take your envy and greed and turn it around. You're capable of that, right?

As usual when facts are discussed, you turn out to be completely clueless. It took me all of five seconds to dig this up.

Looks like a pretty good correlation to me:

Yeah, and it shows that the numbers aren't the same, and only coarsely correlated.

Uh, no. If that was the case, we'd all be paying waaaay more since we're running deficits every year. Why isn't the government raising taxes to meet those revenue targets? Surely you understand that? Not to mention the fact that the MID is only one of many deductions. Are you equally pissd about people able to deduct business expenses? Medical expenses? Should I be pissed that a guy with more kids than me gets more exemptions? How about somebody who gives a bunch to charity and reduces their tax bill that way? Should we all be pissed that now we have to pay extra for them?

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Taco cat spelled backwards is....taco cat.

Duffy's tax rate has no effect on your tax rate. Spending does. Query: What's your position on tax credits specifically the Earned Income tax credit?

No, it really, really, really doesn't work that way. Not even a little bit.

Ho-ly shit ...

Seriously, wow.

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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

Not by the person actually occupying the residence, which makes a big difference.

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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

Who thinks that the MID is a government subsidy?

Technically a tax deduction is not the same as a subsidy which requires taxing money from one group and giving it to another. A tax deduction is merely one being able to keep more of their own money so technically not the same.

That the government is paying (already wealthy) people to buy bigger houses?

Most tax deductions are social engineering tax deductions. The goal is to push people toward certain behaviors. Electric cars, Solar panels, homes and even children are tax deductions that require a certain behavior to get them. I think the more pertinent question to ask is whether or not the government should be in the business of social engineering. Some would argue yes, most definitely, other would say definitely not.

Once you argue yes you're then merely arguing over which social engineering is more important. To me it is a rather moot point since I fall on the side of no government social engineering. I disagree with MID, Child deductions, yada, yada, yada.

~Matt

That looks to be a subset of the data posted above.

Take a look here and see if you still maintain there's no correlation:




Raw data available at: http://www.econdataus.com/recsrc11.html

Uh, no right back atcha. We *are* paying way more. Haven't you noticed? And government is constantly raising taxes to meet revenue targets. Haven't you noticed? And deficits go up as well, sure, but in the long run taxes will always be raised to generate needed revenue.

Not sure why you think I'm pissed? I'm pointing out that the MID has few benefits and a lot of drawbacks. Most economists and sober politicians agree with that stance.

I gripe about child deductions too, but at the end of the day I'm willing to subsidize other people's kids, if only because they truly are our hope for the future.

That and I'd rather the little hooligans be in school than running around on my lawn. :)

And of course I need them to keep Social Security solvent in my dotage.

The correlation has been diverging for a generation, with the basic acceptance of certain aspects of supply-side economics. This has allowed tax cuts to be passed with the belief that subsequent economic growth will make up for the lost revenue. Economic bubbles have partially covered the shortfall in some instances, but the necessary bumps in revenue have never consistently materialized. The end result is sharp tax cuts even when it clearly will not cover expenditures, followed by grudging tax increases. Trump's tax plan is the next iteration....

if only because they truly are our hope for the future.

I never understood this. Why in the world would I pin my hopes for the future on my kids or someone elses kids. Seems ridiculously lazy to me. I will pin my hopes for my future on myself and do whatever I can to try and make my childrens future better, not expect them to make my future better.

~Matt

As someone who has tried to employ 20-somethings for the last 10 years, if we are counting on them to fund our SS then we are truly fucked.

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I miss YaHey

The correlation has been diverging for a generation, with the basic acceptance of certain aspects of supply-side economics. This has allowed tax cuts to be passed with the belief that subsequent economic growth will make up for the lost revenue.

I won't argue the fact that spending without revenue increases will cause a gap between revenue and spending. The problem however is not simply "Tax cuts" though, we are also in a period of historically high spending. Government spending as a percent of GDP local, state and federal will be around 36.47% of GDP in 2017. Shy of the recent major recession that is the highest it's been since 1945. Pretty much the same for Federal levels save a few years in the early 80's.

Can't argue with the fact that increased spending combined with decreased revenue tends to cause a divergence of revenue matching spending, however at some point spending is simply too much.

FWI on the revenue side you have the same thing. Revenue as a percent of GDP is 36.43% of GDP, Local State and Fed. The fed and local governments are running a deficit with States actually running a surplus. We are taking in AND spending one hell of a lot more of the economy via government today than we were in 50's and 60's.

~Matt

oldandslow wrote:

The correlation has been diverging for a generation, with the basic acceptance of certain aspects of supply-side economics. This has allowed tax cuts to be passed with the belief that subsequent economic growth will make up for the lost revenue. Economic bubbles have partially covered the shortfall in some instances, but the necessary bumps in revenue have never consistently materialized. The end result is sharp tax cuts even when it clearly will not cover expenditures, followed by grudging tax increases. Trump's tax plan is the next iteration....

Good points and good analysis. In some ways you could say that the graph clearly reflects the decline in political discourse in this country over the last few decades - we can't even agree on consistent tax policy at the largest scale. Wonder what it'll look like post-Trump?

But note that despite the whipsaw effects of tax cuts, bubbles, and recession the correlation is still pretty good even over the last 20 years. Of course it's the overall growth of the economy that drives a good part of the correlation - if you use the GDP adjusted numbers you'd need to use a longer-term average to see the trend clearly.

Using the data from http://www.econdataus.com/recsrc11.html, the correlations are:
1940-2015 0.95
1980-2015 0.85
1990-2015 0.75

Top marginal tax rates in the 50s were more than 70%.

You could also work at a grocery store and own a home, support a family and manage health care.

In this day and age the majority of grocery workers are probably on Medicaid and the company owner and share holders are siphoning record profits while paying much less in taxes and labor costs.

We are subsidizing wealthy companies by giving healthcare and food stamps to their employees. All while the 1% accrues more and more and the rest of the tax payers subsidize their companies and employees.

The phrase maximizing shareholder value has justified some terrible policies for the economy and citizens.

By "our hope for the future", I mean mankind's hope. And I was joking about the SS - in fact I'm not currently eligible for SS benefits except for disability. My personal future is well-provided for as long as North Korea doesn't send a missile my way.

You think 39.6% max marginal rates are high? Why don't you go back and look what they were under Reagan. 70% in 1980 and 50% in 1986. Income Taxes are lower now than they have been in about the last 70 years and the well off are still pushing a false narrative that Federal Income tax is too high and you deserve more deductions.

So you are saying you don't understand economics? The deduction drives up prices of properties, without the deduction your cost would be lower, your mortgage would be lower and in the end, the rent would be about the same. So no, renters do not benefit.

As has already been stated in this thread, economists from all aspects of the political spectrum almost unanimously agree the MID is bunk.

It must be a tough life for you and Trump.

Some people just need to contribute more. Ask not what your country can do for you....

I love this topic and I love this thread. There isn't really a single valid argument in favor of the MID, but I love hearing people do serious mental gymnastics to justify why this isn't just a huge government handout.

Yes I claim the MID, but also 100% support abolishing this deduction. It serves no useful economic purpose other than allowing a relatively privileged person like myself to buy more bikes.

OK aside from a sales tax being completely regressive, what do you think about the effect on the economy?

In particular, I'm talking about business to business sales and private ownership resales. I suspect there would be a negative effect -- how big depends on how easy (or not) the businesses are able to dodge the penalty.

In my state / county, my sales tax is 10%. You take that hit in a lot of ways - for example selling a used car.

Many people here would prefer an income tax instead, but we know that as soon as we let that happen, we'll end up with *both* an income and sales tax.

Top marginal tax rates in the 50s were more than 70%.

Which is an argument often made without understanding of effective tax rate or understanding of the tax code. The "Top" tax payers are paying a higher effective tax rate today than they were in the 50's and the middle and lower classes are paying a lower effective rate. You could have a 100% top marginal rate and if you have so many deductions that you don't pay any taxes it doesn't matter.

You could also work at a grocery store and own a home, support a family and manage health care.

Have you seen a 1950's home? Most of them are not larger then what most people call sheds these days. Spending on food and clothing is a mere fraction of what it was as a percentage of income in the 50's. The only reasonable argument you made in that sentence refers to health care which is out of control I would agree. For the most part everything else is a lifestyle choice. Larger, nicer homes and spending far more money on non necessities, cell phones, cable and entertainment...like eating out all the time.


nd the company owner and share holders are siphoning record profits while paying much less in taxes and labor costs.

As stated above grocery stores are providing more variety at a lesser cost than they were in the 50's. 'd challenge you to take a look at grocery store, Walmart et el's profit margins. Grocery stores of the 50's could not survive on those margins. The fact that those profits are more highly concentrated doesn't change the fact that they are far lower than what they were in the 50's.

We are subsidizing wealthy companies by giving healthcare and food stamps to their employees. All while the 1% accrues more and more and the rest of the tax payers subsidize their companies and employees.

Then let's stop providing medicaid and food stamps. Seems like the easiest way to make sure that doesn't happen.

The phrase maximizing shareholder value has justified some terrible policies for the economy and citizens.

At what point did companies become responsible for the welfare of the citizenry? It's never been that way nor should it ever be that way. It is the responsibility of the citizenry to alter the actions of the companies by using their power of the purse to do so. They won't do that though because a $500 50" 4K TV is WAY better then a $1000 40" 1080P TV so citizens tend to make choices bases on maximizing their own shareholder value.

~Matt

The government is "constantly" raising taxes to meet revenue targets? WTF are you talking about? Federal income tax rates change fairly rarely, and sometimes they are lessened. The last time they went up was 2013, and then only the top two brackets increased. Seriously, what you posted above is just flat out wrong.

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Taco cat spelled backwards is....taco cat.

Quote:

OK aside from a sales tax being completely regressive

A sales tax is not regressive. It is completely proportional to consumption. In a resource restricted economy we want to encourage production and discourage consumption. The way you encourage production is to let it be. The way to discourage consumption is to tax it.

You can't compare the 1950s to now; the context is absolutely different. On the health care front, health care costs back in the '50s were far, far lower than today. There was much less technology, and for a lot of things, there simply wasn't much a doctor could do. Part of the problem in the US is health care costs rising far faster than inflation. Added to that, the 1950s US economy was by far the strongest in a world still largely recovering from WWII; the global competitive market today is a far different animal.

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Taco cat spelled backwards is....taco cat.

How about everyone contributing more than zero?

A) you are obviously a low earner (or make so much tax rates are inconsequential) b) you fail to take into account overall tax burden. i.e sales tax wasn't 11% back then

If you think people who work in grocery stores are living in nicer places than the average 1950s home I think you are out of touch with the reality of many. Even the referenced article says mid increases income/ housing inequality.

We are getting more and more of a bimodal distribution of haves and have nots. Historically I do not know of any examples where these levels of income distribution ended well, yet we are persisting in pushing it further. Even tech companies are moving to contract employees instead of full time employees.

But I don't really want to live in a society where disenfranchised hungry people with no access to mental and physical health services have access to lots of guns.

Consumer credit warning bells are ringing left and right. Cheap money seems to reaching it's limit of stinking (spell check error for stoking but that might be more appropriate) the economy.

I think MID discourages savings and encourages people to buy bigger houses- to your point earlier houses are outrageous in size these days. We do not have a very resilient economy if it is based on a perilous debt ridden existence of many. But I'm one of those weird debt free people.

It isn't. It's a wonderful life!

As far as contributing, I served in the Gulf. What have you done?

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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

Getting paid by the military raised taxes for everyone else you selfish bastard.

You are right that effective rate is much more important than marginal rate, and you are completely wrong that top tax payers pay a higher effective rate today than in the 1950's.

You really need to read my posts much more carefully. I support a revenue neutral approach to ending the MID, but I am merely pointing out a short-term consequence of an abrupt shift (a small drop in house prices at the very high-end). I also have pointed out that issues around charitable giving would need to to be addressed to avoid a sharp downturn. This also has political ramifications, because churches would oppose such a shift, and politically one would needs to address that to have even the slightest hope of change. The easiest task would be to drop the leverl to 500K, and lower the top marginal rate commensurately. BTW, the idea that a home should never be considered an investment is simply silly (that is for another thread). Also, our present policy of pushing wealth appreciation to stoke economic growth is a basic reality (bubbles notwithstanding) and responsibly reducing our dependence on that is tricky. That said, I agree with you (in my long-winded way).

Sorry for attempting to bring some level of nuance to the LR, I really need to work on the over-the-top middle-aged repetition of talking points that so many folks here have mastered ;).

So after we have a constitutional convention to sort out our tax system, what does it look like?

Real estate? Rent? Do we keep property taxes? Are income and property taxes banned at the local level? Get rid of separate gas tax? License fees? Or one of my favorites that Ohio snuck in, a late fee on your license fee, even though you can't be late because you don't owe the money until the car is on the road.

One reason I am not in favor of switching over to all consumption tax is that it becomes very difficult to tell how much tax you have paid. Until I am rotting in the grave I will be bitching that no one knows how much tax they pay each year. I want one source and make the source trackable. If it were all income we could do that.

Not arguing, just thinking out loud/typing. And avoiding work.

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I'm beginning to think that we are much more fucked than I thought.

All glommed together in my post. Do we tax real estate transfers and/or rent in a consumption tax?

Transitioning into getting rid of the MID and implementing a consumption tax on real estate would be challenging in the real estate market. Maybe, at least it seems that it would.

Not taxing real estate transfers means the biggest increase in expenditures as people make more money doesn't get taxed and would really concentrate wealth in the upper classes..

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I'm beginning to think that we are much more fucked than I thought.

You have a point - I should've been more specific. I was speaking of tax increases more generally, and not just federal income tax. Local and state governments have a lot more flexibility to increase taxes, and they are less likely to accumulate large deficits like the feds do.

But taxes are constantly changing, and almost always going up. In the last few years in my state, we've had changes in local sales taxes, bed taxes, rental car taxes, and we even have a special $5 tax on studded tires!
And despite a local tax cap, my property taxes are adjusted every single year, either by assessing at a higher value or mil rate increases.

Don't get me wrong, though. I think the overall level of taxes I pay is quite reasonable, and I would pay more without too much fuss for certain government services. What I object to is the complexity of the tax code. Rather than spending time and money gaming the tax system, I want to live my life simply and spend my time on meaningful things in life. Like posting in the LR. (?)

not to the municipality.

Pick one.

I think sin taxes are silly. I do, however, support things like a gas tax, or toll roads/bridges, so that those who are using infrastructure are paying for it.

As to my comment about regressive taxes: if you look at the effect of a sales tax, *as a percentage of their income*, the poorest are worse off. Why? They live paycheck to paycheck. Whereas someone wealthy tends to roll much of their incoming dollars back into investments.

Washington state exempts grocery food items from the sales tax which alleviates some of the burden, but overall I'd say a sales tax or VAT tends to favor the rich and hurt the poor.

So, what you are saying is that the poor, as a percentage of tax receipts, pay the least to get the same benefits (roads, police, fire, courts, etc), as the wealthy.

QED we taxes on the poor should be raised according to eb

Federal budget: $4T
Tax payers: 250 million

Everyone pays $16K

No deductions, loopholes, etc.

That way no one can complain about carrying someone else's load

Done. Hell I'd pay double

Um that's not what I said at all. But keep on misreading.

Hahaha! You have a real ability to Make Shit Up.

Now explain to us how the poor "get the same benefits" as the wealthy from "roads, police, fire, courts, etc." Because they don't.

I'm sorry, I didn't realize that the police and fire departments don't respond to poor neighborhoods, and the poor aren't allowed to drive on public roads.

Well because they pay less in taxes that means your taxes are higher (See your MID position for reference) therefore they should pay more in taxes especially because they use things your higher taxes pay for, you heartless monster you .

Being allowed to do something is different than being able to do it. Those without cars tend to drive less.

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I'm beginning to think that we are much more fucked than I thought.

So what? People with (good) jobs tend to use food stamps less. ;-)

Your reduction ad absurdum ignores the reality that emergency services really do respond differently in poor neighborhoods (sometimes for legitimate reasons).

And it ignores the reality that a cracker like me who lives on a dirt road really does not benefit from the Interstate Highway System as much as say, my sister who around her city drives 10-20,000 miles a year on those interstates.

The wealthy have more skin in the game. They pay more for basic services, and they generally benefit more. Is that a surprise?

Logic fail. And I'm not completely heartless; I'm a very caring monster.

Detroit Public Schools vs Birmingham Public Schools
Number of Students: 42,580.42 / 7,423.81
Local Revenue per student: $3,812.01 / $9,964.35
State Revenue per student: $10,116.00 / $8,190.93
Federal Revenue per student: $4,649.30 / $113.71

So, the poor DPS district receives over half it's funding from the state, and a quarter from the feds, while the rich district received about 45% from the state and nearly nothing from the feds and about 55% from local.

So, how are the poor not receiving public services?

Sure it does. Property taxes on a 100 unit apartment complex are less than on 100 individual houses.

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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

Funny, I don't recall education funding being part of the discussion. It certainly wasn't me who brought it up.

Just pointing out how the poor, get a lot bigger bang for their tax buck in education.