Skip to comments.Is it time to end subsidy to housing and building market?
Posted on 09/28/2008 5:44:39 PM PDT by shoedog
Most everybody here rails against the Farm Bill, Corporate welfare etc.. However the one industry that has always enjoyed a tax break is the housing and mortgage industry. Why should home owners (of which I am one) get relief for their mortgage payment, but renters get no relief? Is that not the same as a marriage tax, inheritance tax, basically behavior driven tax relief.
I understand that home ownership is a major driver for the economy, and in many people's minds, it brings some ingrained satisfaction that you are accomplishing the American Dream. However, there are many people that should not own homes, which has been one of the multitude of triggers for our current mess. There are also many that would be fine renting but feel they likely need the tax break.
My point to this is simply, nobody ever thinks of our current tax system as built to favor the housing market. However any bill passed for farming, or any other industry is roundly criticized. I believe this whole mess once again, could be used to push toward a flat tax, with no deductions (other then possibly charity) or a consumption tax.
Just one more rant after reading all the different things that are in play in today's financial circus. Now more then ever KISS (Keep it simple stupid) is needed for an American population that doesn't want or care to understand, only to blame.
Renters do get relief, just not directly. Landlord's get to depreciate their buildings, thereby lowering their taxes, which makes it so they can give renters a lower rent.
the fair tax would get rid of all income tax deductions...
Because it is an incentive to get people to try and own a home instead of having a nation of renters ....
YES YES YES
I have a small house but it is one I can afford to pay off.
Now on the other hand there is a black guy I know who has one kid and one wife, he has a 5 bedroom house three car garage and drives a Lincoln navigator
I have a 3 bedroom 3 kids and no garage as I had to make that a room
He got his house with hand outs and special programmes plus his interest rate was cheaper
because he is black
Now MLK said that we should be colour blind so why are blacks getting all these handouts and affirmative action
Back on topic
why should I have a small house for the 5 of us and a couple have a double sized house what they can’t afford and now my tax money pays for the likes of them who can’t afford their big house or are too lazy
my crime was that I was responsible , they were not
Here in st johns county,
I kid you not a woman with a bunch of kids lived in a doss hole.
this programme came in and built her a massive house, full of the best newest stuff etc
few months later she moaned that she wanted others to pay the tax on it as she couldn’t afford too
guess what she never worked and when the county would not give her a tax break she cried racism
YES END IT ALL
sorry for the rant but this does my head in knowing that there are folks like me who are responsible and there are others out there who are not and yet they get bailed
Mission accomplished. Now let’s get government out. (He says as government jumps in for ‘most a trillion dollars.)
but rent’s based upon occupancy in an area.
5% vacancy is the key level.
if more than 95% of apartments are rented, that’s an “owner’s market”.
less than 95% is a “renter’s market”.
i haven’t seen a “renter’s market” in almost 10 years.
illegal immigrants push the market towards owners.
rents have almost tripled in some areas of san diego co in less than 10 years.
Theoretically that is correct, but that is a bit of a stretch to say that renters are seeing all that relief. I believe the market determines rent much more then what tax relief dictates. There are also many apartment renters that aren’t seeing relief of renters. You do make a valid point though.
The real question is why is only mortgage interest deductible, and not (for example) credit card interest, since it's also an expense of investing in other things (even it it's not always used for that). Why should not all interest be deductible, since the IRS considers all interest as taxable income?
This was one of the major injustices of the supposed "tax reform" of 1986. We not only get screwed on high interest rates for credit cards (which is how many people start businesses), but we can't even deduct it.
Just curious. Are you an American? Here we spell it color.
Second, the myth is that what we're talking about here is an "income" tax. It used to be that all or nearly all debt interest was considered an expense and therefore deductible before computing tax (just as interest on savings was (and still is) "income" and therefore taxable.)
So MY problem is not with the alleged "break" I get for my interest expense, but that I don't get it on all debt interest. I limit my borrowing, and that's not the best use of my money, or it wouldn't be if all debt interest were deductible. When the feds decide to discourage borrowing by not allowing a deduction for a real expense, THAT's when they engage in social engineering.
Your suggestion that they end the deduction of mortgage interest from income before computing tax just shows how the government has gotten into your head. (No offense.) The reality is that when they do not allow for interest deductions they are taxing, in one area, gross income rather than net. A fellow could conceivably break even after spending his personal deduction (which is already a ludicrous fiction) and paying debt interest and the Feds would still say he had taxable income for the year.
There is a similar conceptual problem with taxing corporate income for publicly held dividend paying corporations. The dividend is paid out of the corporate income net of taxes, and then is taxable again as income to the person to whom the dividend is paid. So not only are the feds taxing our gross when they refuse to allow the deduction of all interest payments, but they tax some of our income twice!
And taxing dividends makes investment less rewarding and thus punishes some kinds of thrift and prudence, while raising the cost of goods and services to the consumer. The populism of politicians who rail at corporations confuses the voter who doesn't realize that he is going to end up paying those taxes one way or another, and who doesn't understand that those taxes cut into his retirement fund.
The fundamental problem is that "income" is so nebulous a term, once the lawyers and accountants get done with it, that a graduated income tax is fundamentally incapable of being just. Those rich enough to be able to afford fancy accountants will often find ways to shelter real world income from the legal definition of income, while efforts to prevent that kind of thing, like the AMT, end up nailing, for example, prudent parents of large families who, if they make enough to feed each other and the 8 children, will not be able to take the deduction for those children because they fall into the AMT class of earners.
But, please, do a gut check. It's YOUR money, not the Feds', and when they let you keep some, it's not a subsidy. You earned that money, while the wool payments they kept on trying to make me accept, came from the duty on imported wool, and therefore from the people who bought goods made with imported wool . I did NOT earn it. THAT was a subsidy.
But wait! There's MORE!
The reason I took the wool subsidy was that I had a friend in the USDA and, you see, the bureaucrats NEED us to take their handouts or they run the risk of losing their jobs! So this woman, the wife of the guy I bought my hay from, really pleaded with me to take the subsidy.
Anybody else see anything wrong with this? It made me sick. I wasn't that big a farmer and I gave the money to my Church. I was ashamed of it.
And what planet does this happen on???? The lowering the rent part???
While that is true, the depreciation runs out after a set period.
In farming, I could depreciate my buildings and structures for only 10 years if they were special-purpose buildings (eg, hothouse/greenhouse, pig farrowing building, milking parlor, etc), and 20 years for general-purpose buildings (eg, a shop, equipment shed, etc).
Residential real estate has to be depreciated over 27.5 years. That leaves you with a pretty long recovery period...
I’m new to the DC metro area. It amazes me that people making 1/3 of what I do can afford twice the house that I can buy. Amazing.
The author overlooks the fact that the landlord also get mortgage interest relief as a business expense. This reduces the ownership costs and allows for lower rent.
If you want higher rent..then take that away. Those of use who own rental property will either raise rent..or failing that ability sell the property and find another business.
People invest in property to make money..no money no investment..no investment and you can go out and buy your own house.
Subsidies to any industry are an artificial stimulus that distorts the market place.