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The mortgage interest deduction "hurts" only government tax revenues. Raising the tide on minimum wage impacts every business that has employees, regardless of

by alttab 11y ago

The mortgage interest deduction "hurts" only government tax revenues. Raising the tide on minimum wage impacts every business that has employees, regardless of what their cost structure is. What if your business worked in such a way that a single employee wouldn't even produce $15 of revenue in an hour? You can't lose money on every sale and make up for it in volume. The artificial increase is a problem because it goes against supply and demand, which is a natural law of economics.

spankalee 11y ago
The mortgage interest deduction disadvantages renters compared to owners. Subsidizing home ownership effectively taxes renting.
- alttab 11y ago
  Disagree. I've owned 3 homes and my mortgage interest deduction made no difference on whether or not I purchased. The difference between renting and owning is income, savings rate, and lifestyle. If you can't afford to buy, you either don't make enough or don't save enough. It's the down payment that separates a lot of renters and buyers. If you are arguing homes are expensive, I'd argue that $15 minimum wage isn't helping. Mortgage interest deductions may be bad policy, but it doesn't "tax renting." That's asinine.
  - msellout 11y ago
    It changed the amount you paid.
    - alttab 11y ago
      Either you're wrong, or I'm about to learn something. Explain?
      - sokoloff 11y ago
        You probably paid a higher purchase price, because even if you couldn't take the mortgage interest deduction (for whatever reason, maybe you paid all cash), you are still competing against other buyers, most of whom could take the deduction. That deduction saves them money, meaning they're willing to pay a higher price than they would if they couldn't take a mortgage interest deduction. That those other buyers are willing to pay a higher price affects the comparable sales, the appraisal, the "Zestimate [haha]", the willingness of the seller to select your offer, etc. Then, assuming you did have a mortgage and qualified for the deduction (most people with one home do), you paid less (net) for the loan than you would have otherwise.
        alttab 11y ago
        Your argument is suggesting that there are enough people in the market using their tax deductions as a strategy for paying their mortgages. I'd argue that if you are that close to not being able to afford your mortgage, you won't make it past underwriting. Even if you did, the volume wouldn't be such that it demands significantly higher sale prices. And even if it did - it would pale in comparison to China-fueled cash-in-hand sales and zero interest rate policy, which is driving all markets. A quick google search doesn't produce results that suggest that removing the deduction would reduce housing prices to the point that people in this thread are saying. Here is just one example that states it would reduce prices by 0.3%: http://www.taxpolicycenter.org/taxvox/what-changes-mortgage-deduction-would-mean-home-prices http://www.taxpolicycenter.org/taxvox/what-changes-mortgage-...
        sokoloff 11y ago
        You read that wrong I think. It says that limiting itemized deductions to a marginal rate of 28% (an Obama proposal that was DoA) would cause housing prices to fall by 0.3%. Reading two sentences further from that same article you linked: "completely eliminating the mortgage interest and property tax deduction—a drastic change that probably would only happen if accompanied by a new tax preference for housing—would cause housing prices to fall by an average of 11.8 percent in the 23 cities studied. Estimated price declines would range from 10.3 percent in Seattle to 13.8 percent in Milwaukee." I'm not using the tax deduction as a "strategy for paying my mortgage". I did figure the savings from the tax deduction in modeling my budget, the effective cost of housing, all of which influenced my bid(s).
- gozur88 11y ago
  Sure, and property taxes effectively tax owning. The amount of tax a landlord pays per unit is less than a homeowner pays for his house.
rconti 11y ago
Who does it help? Anybody? When you tell every home shopper "you can afford x% more house thanks to this deduction", what do you think that does to prices?
- alttab 11y ago
  Trust me, its not mortgage interest rate deductions that are driving up demand and prices for homes. Overseas buyers paying all cash are driving up prices - and stock markets pumped full of zero interest cash are causing soaring prices. If you are suggesting that mortgage interest rate deductions are fueling another housing bubble, then we are about to witness another amazing sub-prime real-estate crash. Considering I just purchased a new home under the new underwriting rules / regulations, I can assure you that this marginal deduction is not qualifying a huge number of home buyers to the point it makes a difference on the price in comparison to the rest of the home market environment.
  - rconti 11y ago
    I am not suggesting that mortgage interest tax deductions are fueling a housing bubble. Nothing of the sort. I am merely pointing out that a subsidy that applies to everyone in a market naturally drives up the price by a similar amount. It wouldn't fuel runaway growth, but neither does it help 'affordability'.
  - msellout 11y ago
    The mortgage interest deduction started in 86. Or rather, the isolation of mortgages as tax deductible started in 1986. The effect has been in place for longer than the more recent trends you're describing. I suppose that means I don't trust you?
    - rconti 11y ago
      You're overthinking it. Once again, I say, I am not talking about bubbles, I never said "more recent trend." It's very, very, very, very simple. You could afford $500k without the interest deduction. Let's say the deduction helps you afford a monthly payment on a $550k mortgage. Now you can afford $550k. The same is true of all other potential buyers of the same property. Guess what, a $500k property just became a $550k property. I didn't ask you to trust me, I didn't say anything about "more recent trends," I didn't cite it as a cause of the bubble, I didn't mention dinosaurs. I merely said I don't see how the mortgage interest tax deduction actually helps anybody, because it causes prices to rise accordingly.
msellout 11y ago
Mortgage interest deduction also inflates home prices, benefitting home sellers and harming everyone else. A home buyer might think they're benefitting, but in fact the seller simply increased price until the deduction was of net zero benefit for the buyer.
- alttab 11y ago
  What are you talking about? Mortgage interest deduction determines how much money a private person pays in taxes to the federal government each year, relative to their income minus deductions. It does not directly impact home sale price.
  - marrington 11y ago
    The National Association of Realtors argues that removing the mortgage interest deduction would reduce home values by 15%. There are likely other less biased studies as well but that was the first that I found during a quick search. More at https://en.wikipedia.org/wiki/Home_mortgage_interest_deduction#Opinions_about_the_deduction https://en.wikipedia.org/wiki/Home_mortgage_interest_deducti...

by alttab 11y ago

spankalee 11y ago

The mortgage interest deduction disadvantages renters compared to owners. Subsidizing home ownership effectively taxes renting.

alttab 11y ago
Disagree. I've owned 3 homes and my mortgage interest deduction made no difference on whether or not I purchased. The difference between renting and owning is income, savings rate, and lifestyle. If you can't afford to buy, you either don't make enough or don't save enough. It's the down payment that separates a lot of renters and buyers. If you are arguing homes are expensive, I'd argue that $15 minimum wage isn't helping. Mortgage interest deductions may be bad policy, but it doesn't "tax renting." That's asinine.
- msellout 11y ago
  It changed the amount you paid.
  - alttab 11y ago
    Either you're wrong, or I'm about to learn something. Explain?
    - sokoloff 11y ago
      You probably paid a higher purchase price, because even if you couldn't take the mortgage interest deduction (for whatever reason, maybe you paid all cash), you are still competing against other buyers, most of whom could take the deduction. That deduction saves them money, meaning they're willing to pay a higher price than they would if they couldn't take a mortgage interest deduction. That those other buyers are willing to pay a higher price affects the comparable sales, the appraisal, the "Zestimate [haha]", the willingness of the seller to select your offer, etc. Then, assuming you did have a mortgage and qualified for the deduction (most people with one home do), you paid less (net) for the loan than you would have otherwise.
      - alttab 11y ago
        Your argument is suggesting that there are enough people in the market using their tax deductions as a strategy for paying their mortgages. I'd argue that if you are that close to not being able to afford your mortgage, you won't make it past underwriting. Even if you did, the volume wouldn't be such that it demands significantly higher sale prices. And even if it did - it would pale in comparison to China-fueled cash-in-hand sales and zero interest rate policy, which is driving all markets. A quick google search doesn't produce results that suggest that removing the deduction would reduce housing prices to the point that people in this thread are saying. Here is just one example that states it would reduce prices by 0.3%: http://www.taxpolicycenter.org/taxvox/what-changes-mortgage-deduction-would-mean-home-prices http://www.taxpolicycenter.org/taxvox/what-changes-mortgage-...
        sokoloff 11y ago
        You read that wrong I think. It says that limiting itemized deductions to a marginal rate of 28% (an Obama proposal that was DoA) would cause housing prices to fall by 0.3%. Reading two sentences further from that same article you linked: "completely eliminating the mortgage interest and property tax deduction—a drastic change that probably would only happen if accompanied by a new tax preference for housing—would cause housing prices to fall by an average of 11.8 percent in the 23 cities studied. Estimated price declines would range from 10.3 percent in Seattle to 13.8 percent in Milwaukee." I'm not using the tax deduction as a "strategy for paying my mortgage". I did figure the savings from the tax deduction in modeling my budget, the effective cost of housing, all of which influenced my bid(s).
gozur88 11y ago
Sure, and property taxes effectively tax owning. The amount of tax a landlord pays per unit is less than a homeowner pays for his house.

rconti 11y ago

Who does it help? Anybody? When you tell every home shopper "you can afford x% more house thanks to this deduction", what do you think that does to prices?

alttab 11y ago
Trust me, its not mortgage interest rate deductions that are driving up demand and prices for homes. Overseas buyers paying all cash are driving up prices - and stock markets pumped full of zero interest cash are causing soaring prices. If you are suggesting that mortgage interest rate deductions are fueling another housing bubble, then we are about to witness another amazing sub-prime real-estate crash. Considering I just purchased a new home under the new underwriting rules / regulations, I can assure you that this marginal deduction is not qualifying a huge number of home buyers to the point it makes a difference on the price in comparison to the rest of the home market environment.
- rconti 11y ago
  I am not suggesting that mortgage interest tax deductions are fueling a housing bubble. Nothing of the sort. I am merely pointing out that a subsidy that applies to everyone in a market naturally drives up the price by a similar amount. It wouldn't fuel runaway growth, but neither does it help 'affordability'.
- msellout 11y ago
  The mortgage interest deduction started in 86. Or rather, the isolation of mortgages as tax deductible started in 1986. The effect has been in place for longer than the more recent trends you're describing. I suppose that means I don't trust you?
  - rconti 11y ago
    You're overthinking it. Once again, I say, I am not talking about bubbles, I never said "more recent trend." It's very, very, very, very simple. You could afford $500k without the interest deduction. Let's say the deduction helps you afford a monthly payment on a $550k mortgage. Now you can afford $550k. The same is true of all other potential buyers of the same property. Guess what, a $500k property just became a $550k property. I didn't ask you to trust me, I didn't say anything about "more recent trends," I didn't cite it as a cause of the bubble, I didn't mention dinosaurs. I merely said I don't see how the mortgage interest tax deduction actually helps anybody, because it causes prices to rise accordingly.

msellout 11y ago

Mortgage interest deduction also inflates home prices, benefitting home sellers and harming everyone else. A home buyer might think they're benefitting, but in fact the seller simply increased price until the deduction was of net zero benefit for the buyer.

alttab 11y ago
What are you talking about? Mortgage interest deduction determines how much money a private person pays in taxes to the federal government each year, relative to their income minus deductions. It does not directly impact home sale price.
- marrington 11y ago
  The National Association of Realtors argues that removing the mortgage interest deduction would reduce home values by 15%. There are likely other less biased studies as well but that was the first that I found during a quick search. More at https://en.wikipedia.org/wiki/Home_mortgage_interest_deduction#Opinions_about_the_deduction https://en.wikipedia.org/wiki/Home_mortgage_interest_deducti...