Completely Irresponsible

[Basementdweller]

Guess I need to clarify a point. When I say universal health care, I am not saying in the socialist sense. Everyone should be required to have health insurance or provide financial proof they should not need insurance.

 

Socialist health care generally does not deliver a great product, gets the job done for most people.

 

gone down this road with Mr. allen before and his wealthy suburb. I don't remember the exact amount but the median income for the area was $82k and homes priced at $300k that is a ton of $$$$. not sure what your interest rate is but at 5% and a $200k balance that is roughly $10k a year being deducted from federal taxes per house hold. with roughly 13k households in the city and half of those actual houses with loans that means roughly 700k in missed taxes. that is one small city in GA. what if it was nationwide?????? that would fix the problem.....

 

Just sayin

 

 

Did I ever mention I support the flat tax.......

 

Lets get rid of the underground economy, all the day labor being paid in cash. Tax that income too.

[BrentAllen]

Pack,

You are correct - you can't deduct your mortgage payment. You can only deduct interest. Of course, on a new mortgage, those first payments are almost entirely interest.

 

I've seen other estimates that homes would lose 15% of value if the interest deduction was removed. Whatever the number, I don't think that would be the worst cost to society. Stability, building wealth, etc. would be the worst casualties. Do we really want to become a nation of landlord barrons and renters?

 

If the deduction were to be removed, maybe I could sell my house to my neighbor and rent it from him, and he does the same with me. As landlords, we get to deduct interest, repair costs, and even factor in depreciation if I incorporate. If we just rented to each other at actual out of pocket cost, it would be less than a mortgage, and the government would get less revenue.

[BrentAllen]

Basement,

The mortgage interest deduction costs around $100 billion a year. Our deficits are running over $1 trillion. Eliminating the deduction won't " fix the problem....." The unintended consequences would probably cost more than you would gain.

[Basementdweller]

Well that is 10% of the deficit and a start and better than nothing. Couple that with other tax reforms and spending reduction we can do it.

[scoutingagain]

The mortgage interest deduction is a classic example of government interference in the free market. While the stated purpose is to encourage home ownership, the end result is higher housing prices that basically eliminate the intended benefit. The only folks that benefit from the deduction are banks, lawyers, real estate brokers, and middle to upper middle class home owners that take the deduction. The majority of tax payers don't take this deduction so home owners are essentially subsidized by renters and others that don't take the deduction. In most cases these are folks that can't afford home ownership, so a heavier tax burdent falls on those with less resources. It's just another special interest tax break.

 

With the elimination of many other deductions in the Reagan years, this became one of the few, if only tax haven for home owners and encouraged the construction of Mcmansions, houses way bigger than folks needed to live in, but they could borrow on the equity of the larger house and get a bigger deduction for an asset that all assumed would continue to appreciate.

 

True conservative would love to see this deduction eliminated and get government out of the housing market. Let the free market set housing prices and more people could actually afford the loans needed to buy a house. Those that saw their house as an investment more than a place to live...well any investment has risk, even T-bills.

 

SA

 

 

 

[BrentAllen]

Think losing the mortgage interest deduction would be no big deal? We bust seven myths to show why the cost is bigger than you think.

 

Myth #1: The mortgage deduction is just for rich people The mortgage interest deduction helps mostly middle- and lower-income families.

 

65% of families who use it earn less than $100,000 per year.

 

91% earn less than $200,000 per year (thats where most economists draw the line between rich and middle-class).

 

Only 9% earn more than $200,000 per year.

 

This myth may have arisen because of a related fact: If you buy a house, youre much more likely to accumulate wealth by the end of your life. Home owners have an average net worth of $200,000, while the average renters net worth is $5,000, according to the Federal Reserve's Survey of Consumer Finances.

 

 

 

Myth #2: I'm not affected by the mortgage deduction because I don't own a home If the mortgage interest deduction goes away, home values would fall by 15%, the NATIONAL ASSOCIATION OF REALTORS estimates. When home values fall, tax revenues follow suit, giving your local government two choices:

 

Raise property taxes. Not only will home owners pay more in taxes, renters wont escape unscathed either as landlords raise rents to cover their costs.

 

Cut services that everyonerenters and ownersenjoys.

 

 

 

Myth #3: Switching to a 12% mortgage interest credit would be a wash for most One proposal floating around Congress is to replace the mortgage interest deduction with a 12% nonrefundable mortgage interest tax credit. (Deductions reduce your taxable income; credits reduce your tax liability.) This plan would increase taxes for many home owners.

 

Example: If you paid $10,000 in mortgage interest, and youre in the 25% bracket, youd pay $1,300 in extra taxes.

 

The $10,000 deduction you have now saves you $2,500 on your taxes (25% x 10,000).

 

The 12% credit would save you only $1,200 (12% x 10,000) on your taxes.

 

In this scenario, if the mortgage interest deduction is changed to a 12% credit, youd lose $1,300 (the current $2,500 savings minus the $1,200 youll save under the 12% plan).

 

 

 

Myth #4: Not that many people take the mortgage interest deduction - There are 75 million American home owners, and 38.5 million of them take the mortgage interest deduction. The average mortgage interest tax deduction is $12,200, and a typical benefit for home owners is $3,050 a year.

 

The mortgage deduction is a key benefit to first-time home owners and trade-up buyers because you pay the most mortgage interest when you first take out a mortgage. (You wont pay equal amounts of principal and interest until year 13 or later, depending on your interest rate.)

 

People with large families also get a lot of bang from mortgage interest deductibilitythey buy relatively big houses for their big families.

 

 

 

Myth #5: Getting rid of the deduction won't affect me or my housing market It will mean lower property values for all American home owners, including the one-third who own their homes outright and the 12 million who take the standard deduction.

 

Even if you dont have a mortgage, getting rid of the MID will affect how much home you can afford to buyand how much a buyer will pay for your home.

 

 

 

Myth #6: People will still buy my house without the mortgage interest deduction Yes, people will still value home ownership, but it will be harder for them to buy your house. The mortgage interest deduction makes it cheaper to buy a home because it saves real money at tax time.

 

If you bought a home last year with a $200,000, 30-year, 5% fixed-rate mortgage and youre in a 25% tax bracket, youd save about $2,500 from the mortgage interest deduction alone in the first year you own your home. Thats money you can use to pay down other debts, save for your childrens college education, or put away to buy a move-up house.

 

 

 

Myth #7: Solving the U.S. budget problems requires everyone to sacrifice Home owners already pay 80% to 90% of the federal income tax collected. If mortgage interest deductibility disappears, you and your fellow home owners could foot 95% of federal income tax.

 

If youre at the beginning of your mortgage, losing the mortgage deduction will cost you a bundle:

 

$26,685a 15% drop in value for the median home valued at $177,900.

 

A proportionally smaller gain in overall home equity over your lifetime, because your home now starts from a lower value.

 

http://www.trulia.com/blog/andrew_kalinowski/2011/03/7_mortgage_interest_deduction_myths

 

[perdidochas]

Brent Allen posted: "The mortgage interest deduction costs around $100 billion a year. Our deficits are running over $1 trillion. Eliminating the deduction won't " fix the problem....." The unintended consequences would probably cost more than you would gain. "

 

 

And the same thing is said about almost every program. The problem is that each $100 billion adds up......

 

I'm sort of irritated that the government is avoiding the Simpson-Bowles plan. While not perfect, it was much better than anything I've seen seriously considered to date.

[Tampa Turtle]

"Don't tax you, don't tax me, tax that fella behind the tree"

[packsaddle]

Scoutingagain, I agree.

Perdidochas, as I've written before, it's because the plan IS to have no plan. If things chug on like they are, there will be no further agreements on the budget and the across-the-board cuts will begin. It's that simple. I hope I'm wrong, however, and they would do well to at least follow Simpson-Bowles.

But I agree, it pains me to listen to Alan Simpson's good sense and then see it ignored and worse, wasted. Too bad for us.

 

Edit: Brent, I admit I'm perplexed. You're one of the last people I would have expected to push for a special interest like this.(This message has been edited by packsaddle)

[Beavah]

Yah, packsaddle, everybody is a conservative until it comes to their big-government subsidy. . Can't touch that.

 

Kinda like the tea party folks with da "no socialized medicine!" T-shirts and the "hands off my Medicare!" signs.

 

B

[scoutingagain]

Doesn't suprise me that a Real Estate Agent would come up with a bunch of rationalizations to keep government subsidizing the housing market for the benefit of industry insiders. Heck some of his points contradict each other.

 

Believe what you want. It's a special interest tax benefit that the majority of taxpayers don't use or qualify for. Those that take it are subsidized by those that don't.

 

For the record I take it but fully recognized it's a government benefit I take advantage of. I fully understand my home would lose value and I'd pay a bit more in federal taxed if it went away. I also believe it would lower housing prices, allowing my sons a better chance to own their own home for less money. It would help reduc the deficit, again allowing my sons a better chance at a stable economy in the future. It would get government out of a key market sector that they've continued to screw up.

 

100 Billion/year for 10 years is a $Trillion bucks. Thats a greater contribution to deficit reduction than the current budget compromise came up with.

Or using the numbers in Brent's post, it's more like $117 Billion a year for 10 years is $1.17 Trillion buck. (38.5 million X $3050ea) Again a pretty good chunk of cash.

 

SA

 

[BrentAllen]

perdidochas,

I sort of agree, about the Simpson-Bowles plan. Isn't this new deficit commission just a repeat?

 

packsaddle,

I don't see why this is so hard to fatham. Homeowners have an average net worth of $200,000 while renters average $5,000. Which group is going to have their hand out to the government throughout their retirement years? As a conservative, I want to encourage people to build wealth so they can take care of themselves and not have to rely on the government. Encouraging home ownership also encourages marriage and two-parent families, all of which are good for our country. Where would you rather live, in a stabile neighborhood where the families know each other, or in a transient neighborhood where people come and go every 6 months? Which neighborhood will typically have the best schools? Who do you want living next door - an owner who will be more inclined to take care of his property (and help keep your property value up) or to a renter who doesn't really care about the house, since he has no ownership in it?

 

Beavah,

You see it as special interest, I see it as the government not taking as much of MY money. Government needs to be smaller, and not need as much of my money. I guess in your book, a tax cut is a subsidy, as well? I wonder what you call the Earned Income Tax Credit?

[Tampa Turtle]

I never found the deduction that helpful when I had the mortgage. I know it is for some folks.

 

It was always understood to be a government inducement to encourage home ownership for social stability; if the economic crisis sufficiently threatens social stability then I think it is fair to put it on the table.

 

And yeah if it worked for me sure I will use. I play the tax game too though I play honest. I take the IRA deduction but if it wasn't there I would still do the IRA.

[packsaddle]

Wow!

[Beavah]

Yah, hmmm... me thinks yeh have the causation thing backwards there, BA. Homeowners do have higher net worth on average, because on average homeowners make more money. Not because they don't rent. In most markets, they'd have more money still if they chose to rent and invested da difference in the market. Of course, takin' big mortgages is a leveraged investment, with many folks leveraging out 5 to 1 or more with other people's money and several levels of government subsidy. They won't let yeh do that in the stock market.

 

BrentAllen, a tax break is a subsidy. No different than the EIC. Yeh pay less than your share of taxes in return for doin' somethin' the government wants you to do. That means that somebody who doesn't own a house or take the deduction has to pay more for things like flood relief and such that primarily benefit homeowners, and for the military and everything else. It's a distortion of the market, which ultimately harms the economy.

 

You're talkin' like a liberal with all this stuff about "social stability". Like da big government can create social stability by giving benefits to some people but not others. Yeh want the government to start encouraging marriage now? And subsidizing better schools?

 

Sheesh. Crazy liberal. Remember, a government that uses economic policy to encourage marriage can encourage any sort of "marriage."

 

All da new-fangled "conservatives" want smaller government, so long as they get to keep da government subsidies that they use. Then big government is OK, eh? Just as long as someone else is payin' their dole.

 

Beavah