Posted on 12/11/2012 6:52:48 AM PST by Hemingway's Ghost
The generous mortgage-interest tax deduction that homeowners have long enjoyed could be diminished or eliminated as part of efforts to reduce the federal deficit, disproportionately hurting Massachusetts and other regions where real estate is especially costly.
Proposals to change the deduction include limiting it to the 28 percent tax bracket and lower; converting the deduction to a less generous tax credit; reducing the maximum allowed mortgage balance from $1.1 million to $500,000; and eliminating the benefit for second homes and equity loans, according to the Brookings Institution, a Washington, D.C., nonpartisan think tank.
(Excerpt) Read more at boston.com ...
Because it was not then about home ownership as it is now not about "fairness".
It is about control of the population through one of the prime vehicles - redistribution of wealth.
Limiting mortgage deductions would encourage more owners to pay off their principal to reduce their total interest. This is not a bad idea anyway, but this choice would affect consumption and have unpredictable effects across the economy.
It would also cut down on the purchase of second-residences, bad news for those who own the properties someone might buy for that purpose.
“Secondly, but most importantly, such a deduction shouldn’t be the determining factor when purchasing a house. If you need such a deduction to afford the house, then the house costs too much.”
Let’s assume a “worst-case scenario” — in this case, that the deduction for mortgage interest is eliminated in its entirety.
How will this impact the housing market?
I sense home prices will be forced downward, but by how much?
Will it affect interest rates for mortgages?
Sound advice, we just gave the same advice to our kid who's buying his first house. Other advice was to make sure the payment wasn't more than 1/4 of his income (not counting his wife's income.) Those were the old "rules" and they served us well. Today though rates are so ridiculously low and house prices so depressed, that his payment is about what ours was when we bought a house 25 years ago...but his salary is at least twice of what my husband's was when we bought our first. Who'd have "thunk" it.
Well, it might mean that average housing will become more affordable for those with average incomes, which would be a good thing.
Those are good questions that I have no answer for. There are various elements affecting housing. But, I still 'think' prices are still overvalued. Unfortunately, the main indicator on housing prices won't be the deduction, but the Joe Biden three letter word: Jobs.
No big time false collateralized MBSs, so it’s time to rein in the brainwashing of “mortgage deduction” = ownership.
* Get Rid of Fanny and Freddie and the CRDA.
* Get rid of the 250k & 500k deduction and make it equal to 15% Cap-Gains rules for your house and also change it so you can take a loss.
* Get rid of Dodd-Frank, Sarb-Ox etc etc and start over...
* You want to get rid of the Mortgage Deduction? Good trade it for 100% Deductibility of Health Care Insurance for the Individual and can Obamacare...
I am so sick of being fed a bill of goods about my home, nice place to live yes, but stop BS-in' me, about what it isn't and sticking it in the tax code to boot...
But, is it right to give a tax benefit to one group (a government subsidy), while not giving it to another?
Obama gives tax benefits to “green companies,” but not to regular companies.
Big corn gets big tax benefits to produce ethanol.
Volt buyers get tax benefits buyers of other cars don’t get.
Renters don’t get a tax benefit to help them pay the cost of their housing.
From a pure math perspective, the HMD has the effect of increasing home prices (because buyers feel they can afford more home because of the tax benefit). But, who really benefits from higher home prices? Agents (who work on commisions) and banks (who make larger home loans).
Without the HMD, the price of homes would not be as high, and thus the loans to purchase them would not be as big.
My main point was though, that we get all exercised about government tax breaks/subsidies for others, we shouldn’t be crying foul when our sacred-cow tax-breaks are targeted.
Yes, but you also have to consider that money today is a lot less valuable than it was when you and your husband bought your first house.
I take issue with your term "a government subsidy." It is our money until they get it, not all theirs and a little of it might get "given" back to us.
However, aside from that, I agree with you. I don't think tax policy should be used to control, manipulate, reward, or punish particular subgroups.
My point was simply that, if there's a change in the current regulations, the results will be economically interesting, and certainly "Unexpected!" to many of those who originally thought it was a good idea.
From a political stand point, this seems to be the federal version of “we’ll have to cut police and teachers.”
Every time there is a suggestion that spending needs to be reduced at the state/local level, the threat of cutting police and teachers is thrown out to scare people.
Now, the GOP is talking about closing loopholes to increase revenue instead of raising taxes, and someone is floating eliminating the HMD? Just a scare tactic.
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