Eliminate the mortgage interest tax deduction?

[rwh11385]

Okay, so single is $5800 and your interest was $5600. The interest deduction only saved you your marginal on prop tax or other deductions... You benefit would have zero if not for other itemized stuff

Anyway, assuming 25% marginal and adding just your mortgage interest saved you 900, you only benefitted $3600 of deduction after you exceeded the standard... So not all people have $3600 already nor are in the 25% bracket.

It's not like $5600 saves you $1400 directly as some people would assume. To really benefit much you have to hurdle the standard deduction and also have high enough salary to make it matter much. That's a big hurdle for marred filing combined, and you are in the top 10-15% of households, and would not benefit at all if did file jointly.

$130B/310M =~ $420 per person
Even saving $900 personally for filling single, you are barely beating the $840 cost per person for the deduction (ignoring that tax comes from the richest payees, but the gov could afford a $420 tax credit per person if the deduction didn't exist)

Nancy Pelosi is an idiot who thinks the deduction helps the middle class and removing it would benefit the richest Americans. Ironically the opposite is true.

[Todd Black 88]

I assume in the more reasonable Real estate markets, that exemption would probably cover the Vast majority of homes sold.

I actually think that Canada WILL tax you on the sale proceeds of a home if you sell it within 2 years of purchase, unless you are selling due to employment (trying to tax or dissuade short term house Flipping)

mind you, Mortgages are just plain harder to get now as well.

Not if it is your primary residence.. If you own an investment property you do get taxed on the sale.

Iirc, in canada if you build a new house and live in it for one year after the official date of occupancy, you can sell it without taxes.

[ainadude]

bizarre sense of fairness

OK, let's assume you truly meant to use the word "bizarre" which, in the broadest sense, denotes something "markedly unconventional and/or far-fetched."

If that's the case, all I can say is ... really?

Have we actually reached a point where it rises to a level of heresy to challenge the belief it is in a society's best interest to punish industry and success ... and reward indolence and failure? That there is absolutely no danger inherent to crafting policy to divert wealth from one group to another? That juggling tax rates and regulations to, for lack of a better term, buy the votes of one group at the expense of another may not represent the wisest course of action? Is it so beyond the pale to even consider the notion that the larger government gets the less efficient it becomes ... that the larger a program gets the more resources it wastes (whether you're talking social programs, infrastructure projects, industry support or the military)?

I can appreciate -- while still rejecting -- what I see as sympathetic, emotion-based reasoning decrying the gulf that exists between the most fortunate in our society and those most in need. Most rational people -- including yours truly -- wish it wasn't so and that the truly needy have food to eat and a roof over their heads. (And we won't even broach the subject of what constitutes true need ... most Americans defined as "poor" enjoy a much higher standard of living than the majority of the rest of the planet.)

However, I find it troubling that so many appear to lack the intellectual vigor to at least consider an opposing point of view ... one that acknowledges this gulf but rejects the wisdom of exercising significant federal power to "correct it" -- especially to the degree we see today. Please keep in mind, that since the Johnson administration launched the so-called war on poverty in the mid-60s, trillions of tax dollars have been spent on welfare and other programs, yet poverty levels remain at or above where they were almost 50 years ago. During that period, trillions of dollars were taken from one group and given to another with virtually nothing to show for it in terms of diminished poverty levels. So clearly, if throwing vast amounts of money at the problem was the answer, we should most certainly have seen at least some progress by now. As such, if one is intellectually honest, they should be willing to at least entertain the notion that this may not have been the wisest course of action, and may in fact be one that has done more harm than good.

Meanwhile, back to the previous post. You appear to reject my assertion outright while offering no argument to the contrary, basically presenting opinion as fact. Now I'm not saying I have all the answers, so please, educate me and the rest of the class. If the argument I make is so egregiously insufficient -- I'm sorry, "bizarre" -- what would represent a more equitable arrangement? What would be more fair? Should this group pay 80 percent? 90 percent? 99 percent of all income taxes? Conversely, is there any value in discussing the fact that an increasingly larger segment of the population reaps the benefits of government while contributing little or nothing to its maintenance?

I'm trying to have a rational conversation here ... and look forward to a like-minded response.

[rwh11385]

OK, let's assume you truly meant to use the word "bizarre" which, in the broadest sense, denotes something "markedly unconventional and/or far-fetched."

If that's the case, all I can say is ... really?

Have we actually reached a point where it rises to a level of heresy to challenge the belief it is in a society's best interest to punish industry and success ... and reward indolence and failure? That there is absolutely no danger inherent to crafting policy to divert wealth from one group to another? That juggling tax rates and regulations to, for lack of a better term, buy the votes of one group at the expense of another may not represent the wisest course of action? Is it so beyond the pale to even consider the notion that the larger government gets the less efficient it becomes ... that the larger a program gets the more resources it wastes (whether you're talking social programs, infrastructure projects, industry support or the military)?

I can appreciate -- while still rejecting -- what I see as sympathetic, emotion-based reasoning decrying the gulf that exists between the most fortunate in our society and those most in need. Most rational people -- including yours truly -- wish it wasn't so and that the truly needy have food to eat and a roof over their heads. (And we won't even broach the subject of what constitutes true need ... most Americans defined as "poor" enjoy a much higher standard of living than the majority of the rest of the planet.)

However, I find it troubling that so many appear to lack the intellectual vigor to at least consider an opposing point of view ... one that acknowledges this gulf but rejects the wisdom of exercising significant federal power to "correct it" -- especially to the degree we see today. Please keep in mind, that since the Johnson administration launched the so-called war on poverty in the mid-60s, trillions of tax dollars have been spent on welfare and other programs, yet poverty levels remain at or above where they were almost 50 years ago. During that period, trillions of dollars were taken from one group and given to another with virtually nothing to show for it in terms of diminished poverty levels. So clearly, if throwing vast amounts of money at the problem was the answer, we should most certainly have seen at least some progress by now. As such, if one is intellectually honest, they should be willing to at least entertain the notion that this may not have been the wisest course of action, and may in fact be one that has done more harm than good.

Meanwhile, back to the previous post. You appear to reject my assertion outright while offering no argument to the contrary, basically presenting opinion as fact. Now I'm not saying I have all the answers, so please, educate me and the rest of the class. If the argument I make is so egregiously insufficient -- I'm sorry, "bizarre" -- what would represent a more equitable arrangement? What would be more fair? Should this group pay 80 percent? 90 percent? 99 percent of all income taxes? Conversely, is there any value in discussing the fact that an increasingly larger segment of the population reaps the benefits of government while contributing little or nothing to its maintenance?

I'm trying to have a rational conversation here ... and look forward to a like-minded response.

You kinda just rambled there, and it's difficult until the end what even your point was.

Mortgage tax deduction is a highly regressive tax that doesn't reward success, but rather debt. It does nothing for someone who worked their whole life and paid off their mortgage, but rather rewards people who buy much more than they need.

I'm highly against punishing success, but this simply is the middle class subsidizing large houses for the rich... and only those who are in debt for big houses. Instead of incentives to save and invest, they have incentive to borrow. Of course, it doesn't make financial sense to pay interest in order to collect tax benefits, but that doesn't mean it doesn't encourage it. Many people drop dollars to pick up pennies with this deduction, mostly because they don't understand the itemized vs. standard deduction well or marginal income tax rates.

If we didn't pay people to increase their debt, we'd have to take less from everyone (more for successful people who don't borrow). We could leave more income to the successful person who paid their house in full and give less to the guy who bought a big house to show off but financially less responsible. We could afford our low capital gains and dividend rates for middle class, and promote saving / investment actually instead of debt.

Especially after the housing crisis (and many wealthy people losing their houses because they bought HUGE mansions, in part because of the interest they could deduct that rewarded them for debt rather than buying in full or at least a smaller property), don't you think it makes sense to have paying off a house being rewarded rather than the opposite?

Home ownership for average people really wouldn't change much. We'd encourage less huge houses that increase energy demand, and have less of a deficit without increasing taxes.

[rwh11385]

http://voices.washingtonpost.com/ezra-klein/2010/11/who_does_the_mortgage-interest.html

The people who would be most affected are those in the 90-95% of household income and see a loss of 1.7% of after tax income, and only those who owe on their house. If they were wealthy and paid for their house in cash, they would see absolutely no loss in after-tax income, but the US would be closer to a balanced budget without having to raise their income tax rates.

http://www.economist.com/blogs/freeexchange/2010/09/mortgage_interest_deduction

I JUST got an email from Nancy Pelosi’s press office lambasting John Boehner for wanting to eliminate "tax relief benefiting millions of middle-class families" by scrapping the mortgage interest deduction.

LOL @ misinformation of politicians.

And Republican wanting to eliminate a tax that benefits the rich most, while Democrats defend it. If anything, they should use this to demonstrate the misinformation out there and Republicans aren't for any "1%" but for intelligent tax code reform.

[ainadude]

You kinda just rambled there, and it's difficult until the end what even your point was.

Mortgage tax deduction is a highly regressive tax that doesn't reward success, but rather debt. It does nothing for someone who worked their whole life and paid off their mortgage, but rather rewards people who buy much more than they need.

I'm highly against punishing success, but this simply is the middle class subsidizing large houses for the rich... and only those who are in debt for big houses. Instead of incentives to save and invest, they have incentive to borrow. Of course, it doesn't make financial sense to pay interest in order to collect tax benefits, but that doesn't mean it doesn't encourage it. Many people drop dollars to pick up pennies with this deduction, mostly because they don't understand the itemized vs. standard deduction well or marginal income tax rates.

If we didn't pay people to increase their debt, we'd have to take less from everyone (more for successful people who don't borrow). We could leave more income to the successful person who paid their house in full and give less to the guy who bought a big house to show off but financially less responsible. We could afford our low capital gains and dividend rates for middle class, and promote saving / investment actually instead of debt.

Especially after the housing crisis (and many wealthy people losing their houses because they bought HUGE mansions, in part because of the interest they could deduct that rewarded them for debt rather than buying in full or at least a smaller property), don't you think it makes sense to have paying off a house being rewarded rather than the opposite?

Home ownership for average people really wouldn't change much. We'd encourage less huge houses that increase energy demand, and have less of a deficit without increasing taxes.

Damn, I can oppose anything but the unimpeachable genius of the class-warfare argument. I yield to your brilliance and will reserve my shallow efforts for lesser mortals.

[rwh11385]

Damn, I can oppose anything but the unimpeachable genius of the class-warfare argument. I yield to your brilliance and will reserve my shallow efforts for lesser mortals.

So do you support a regressive tax?

More importantly, do you support a tax on paying off your mortgage or taxing borrowing less?


It's not a war on class, it's a war on debt. Did you cry when Reagan eliminated the deduction for credit card debt interest?

[mrsleeve]

The truth is that it's a very short term benefit. The long term impact is that it inflates home values. Most people buy homes based on what they can afford to spend in a month. (or can't, really.). The mortgage deduction, just as the absurdly cheap Fannie/Freddie loans do, just serves to make payments more affordable and therefore increase the amount of house that your average W2 worker can afford. Since the number of people in need of housing hasn't changed, all that really does is increase prices in the long term. It works great for a little while, until normal is reset though.

This I agree with you on this 100% you beat me too it,

[rwh11385]

http://www.taxfoundation.org/news/show/1341.html

$50-75K: 50% claim mortgage interest deductions
75-99K: 69% claim
100-200K: 79% claim
$200K+: 75.7% claim

The problem ainadude is that MID does absolutely nothing but increase the federal deficit (or raise tax rates) on those 50%, 31%, 21%, and 24.3% of each income bracket.

And it actually punishes those who go for a smaller house and a 15 year mortgage.

[nrubenstein]

This I agree with you on this 100% you beat me too it,

I forgot to mention that it totally fucks people who want to put in a lot of cash. It's absurd that you don't get better treatment for putting a lot of cash in, and the inflated prices inflict their own pain.

[mrsleeve]

^

yeah been saving for a while, and hoping to not have to do a mortgage at all, and just buy a home in cash. But thats getting harder as prices in my area are not correcting well and being bought as vacation homes keeps them inflated. That said if the right place comes along, I will sign a note for it and just pay it off very quickly.

[joshh]

It's governments failure at compensation for helping create a false market. If the market was where it should be no one would need this deduction. Not to leave out the banks for their adding to the false housing market.