Mortgage interest deduction on the table

[digitalmonster]

They need to get RID of EIC too then, people get back a lot more than they pay in using EIC.

 

[downzero]

I'm not against anyone getting a mortgage to buy a house. If the deduction is the difference in keeping my head above water, I borrowed too much.

For the record, you don't "get" a mortgage, you "give" a mortgage. You get a "loan" that is secured by the mortgage, but the mortgage itself is a conveyance of your property (either title or a lien, depending on the state) in return for a loan.

And while I also agree with your statement, you're missing the whole point. When calculating rent versus buy, a rational person would consider the cost difference between the two. A deduction has a cash value at the end of the year, that in this case, means your effective interest rate is below the market rate, and in today's market, might even be a negative real rate of interest, meaning that the money you pay back is worth less than the amount you borrowed in the first place, taking the government subsidy into account.

I think it's a rational decision, if we believe that the real estate market will return to its pre-2008 trends, to consider the tax benefits when buying a home, just as I think it's a good idea to consider tax benefits in one's estate plan or retirement plan.

That said, the mortgage interest deduction needs to go, if for no other reason than that, as you say, it has encouraged people to buy homes when they really couldn't afford them. And worse yet, since it'd a deduction and not a credit, it's worth less to those low-income people than it is to higher income people to consume the benefit! It's a lose-lose scenario for every one of those low-income people who fall into this trap, and for an even smaller benefit.

They need to get RID of EIC too then, people get back a lot more than they pay in using EIC.

That's the whole point of the earned income credit; it's a welfare program for people who work. Of course people get back money they didn't pay in; the EITC is designed as a transfer payment--a negative tax.

It's also an implementation of the "negative income tax" that Milton Friedman, perhaps the most famous libertarian economist, thought was a great idea.

It encourages poor people to work instead of sitting on public benefits.

The EITC is rifle with fraud, and that really is a rotten shame, but it is a fundamentally sound policy. Talking about getting rid of it without arguing why that'd be a good idea doesn't sit well with me.

 

[hornadylnl]

The current income tax code is about buying votes with favorable tax laws and attempting to control behavior.

Yes, but in the end, EVERYONE pays more to prop up the illusion they're getting a break.

 

[downzero]

Yes, but in the end, EVERYONE pays more to prop up the illusion they're getting a break.

I don't think "everyone" pays more. Some pay nothing. In fact, many pay nothing!

And believe it or not, I'm not one of them, and I make 1/4 of what you make and I'm a full time student.

 

[hornadylnl]

I don't think "everyone" pays more. Some pay nothing. In fact, many pay nothing!

And believe it or not, I'm not one of them, and I make 1/4 of what you make and I'm a full time student.

My base is $44k. You must not make much.

 

[griffin]

If you want more of something, subsidize it.

This is exactly why we have home mortgage deduction. It was determined that home ownership promotes a more stable society, and it was a Good Thing. (tm)

Why do we want more people in homes they cannot afford?

Who said anything about homes people can't afford? We can go back to the old days when you needed 20% down, or 10% with PMI. This recent over-borrowing the .gov has promoted has nothing to do with the original concept of home mortgage deduction.

 

[pjcalla]

I don't think "everyone" pays more. Some pay nothing. In fact, many pay nothing!

Look up the Earned Income Credit. Some get a net tax benefit, yes, you read that right, the Feds PAY people.

 

[downzero]

My base is $44k. You must not make much.

Nope, I sure don't get paid very much. I do get a nice scholarship and tuition deduction that exceeds my actual pay by a considerable amount, but my actual income is crap.

 

[downzero]

Look up the Earned Income Credit. Some get a net tax benefit, yes, you read that right, the Feds PAY people.

You must not have read the rest of my post. Yes, the EITC is a negative income tax. That is not a surprise to me at all. It's welfare that you have to work in order to get. It sure beats giving people money to fail.

 

[digitalmonster]

That's the whole point of the earned income credit; it's a welfare program for people who work. Of course people get back money they didn't pay in; the EITC is designed as a transfer payment--a negative tax.

It's also an implementation of the "negative income tax" that Milton Friedman, perhaps the most famous libertarian economist, thought was a great idea.

It encourages poor people to work instead of sitting on public benefits.

The EITC is rifle with fraud, and that really is a rotten shame, but it is a fundamentally sound policy. Talking about getting rid of it without arguing why that'd be a good idea doesn't sit well with me.

It appears the the gov wants to harm the folks that when they debated they claimed they would not, so why don't we harm all of the folks?

People benefit from mortgage and EITC the same.

EITC is just free cash with no strings attached to be used as the person sees fit. Thoreau had it right " If you give money, spend yourself with it, and do not merely abandon it to them."

 

[Fletch]

I'm in favor of nuking all the deductions and getting rid of withholding. After that I don't much care; I figure the details will sort themselves out when folks are dropping off a check for their tax bill every month.

 

[downzero]

I'm in favor of nuking all the deductions and getting rid of withholding. After that I don't much care; I figure the details will sort themselves out when folks are dropping off a check for their tax bill every month.

That's a sound idea, except that many people will not drop off the check and it will cost them a fortune to collect. Then what?

 

[steveh_131]

I'm in favor of nuking all the deductions and getting rid of withholding. After that I don't much care; I figure the details will sort themselves out when folks are dropping off a check for their tax bill every month.

The idea of withholding is pure genius.

You don't even pay taxes. They take taxes. That ain't a payment. That's a jack!

- Chris Rock

 

[Ericpwp]

The existence of deductions are the admission buy the .gov, that taxes are too high.

 

[hornadylnl]

This is exactly why we have home mortgage deduction. It was determined that home ownership promotes a more stable society, and it was a Good Thing. (tm)

Who said anything about homes people can't afford? We can go back to the old days when you needed 20% down, or 10% with PMI. This recent over-borrowing the .gov has promoted has nothing to do with the original concept of home mortgage deduction.

Can you point to me in the constitution where the federal government derives the power to promote home ownership through tax deductions?

I want a yacht. Where's my tax deduction for that?

ETA: I thought most INGOers hated social engineering. Is it not social engineering when the government uses a carrot on a stick for things we benefit from?

 

[poptab]

Le sigh at the people in this thread who fail to understand simple economics.

No wonder the economy is in the ****ter and the current debate on the hill is devoid of any reason.

 

[griffin]

Can you point to me in the constitution where the federal government derives the power to promote home ownership through tax deductions?

Sixteenth Amendment. They can levy taxes however they want. They can use a flat rate or a progressive rate or anything else they choose as there is no prohibition on their methodology.

 

[hornadylnl]

Sixteenth Amendment. They can levy taxes however they want. They can use a flat rate or a progressive rate or anything else they choose as there is no prohibition on their methodology.

And as long as the government picks you as the winner, it's all good. If I'm the beneficiary, it's not social engineering.

 

[steveh_131]

And as long as the government picks you as the winner, it's all good. If I'm the beneficiary, it's not social engineering.

I wonder if the answers would be the same if there was a tax break for gay couples.

 

[hornadylnl]

I wonder if the answers would be the same if there was a tax break for gay coupes.

They're trying to fix that with the gay marriage ban.