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How Homeownership Became the Engine of American Inequality
- clavalle 9y agoI'd be willing to bet that if we eliminated the home mortgage interest deduction completely it would barely move the needle of what homes people choose to buy or the number of renters vs. owners. I would love to see the numbers, though.
- dcdanko 9y agoYep, bigger issues are the lack of low cost housing units to buy and older institutionalized discrimination. Not the MID.
- Swizec 9y agoUntil I can afford a down payment [in a location I like] you can put up as many carrots as you want, I still can't cough up the dough to even think about them.
- cmdrfred 9y agoLook into FHA loans. You can have a pretty low down payment.
- Swizec 9y agoThanks for the suggestion, but I don't think "low" applies to anything housing related in San Francisco. And yes there are cheaper locations, but at that point I might as well move back to Slovenia and buy a gigantic luxury condo for 300k.
- post_break 9y agoYou still have to pay insurance on the mortgage with those though.
- shados 9y agoIts like municipal taxes. People don't get about the cost of the house itself. They only care about the monthly payment (or well, the total cost of ownership, since the deduction only directly affect you yearly). This is kind of like municipal taxes. Take the city of Cambridge in Mass, which has an absurdly low tax rate. Compare it with some of the cities near by (eg Somerville). A similar property in a similar location will bring you down roughly the same amount per month. But in Cambridge, the value of the property itself is way higher, mainly because less goes to the city and more goes to the bank (and your equity). People factor in the deduction when they check what they can afford. If you save 12k a year in taxes, you can pay 1000 bucks a month more, which translates in a significantly more expensive property. If the deduction goes away, property value will adjust accordingly (blips down at first, maybe go up a little slower for a bit until things even out considering inflation and stuff). People who currently have a property and cut it a little close might be in trouble if they are not grandfathered, and people selling in the short term might be a little sad.
- rootusrootus 9y agoI have no doubt that some folks get out a calculator and plan out their budget based on the deduction, but I think many do not. Anecdotally, myself and the people in my group of friends who also own houses, we budgeted for the mortgage payment irrespective of tax benefits and just smiled on tax day. I really try to avoid as much as possible relying on outside variables like tax deductions when planning my budget. I go in conservatively and then appreciate the benefits while they last.
- wmblaettler 9y agoAnyone able to find a link to the "widely cited 1996 study estimated that eliminating the MID and property-tax deductions would result in a 13 to 17 percent reduction in housing prices nationwide"?
- arielweisberg 9y agoWhen I crunched the numbers for the mortgage interest deduction it really didn't seem that compelling. It replaces the standard deduction so the first 12,500$ in mortgage interest does nothing for you. After that it's just a minor reduction in taxable income and your tax burden is only reduced by a fraction of your mortgage interest. Not enough to cover the costs of maintaining a home and the tendency to consume more housing when owning vs renting. At the high end sure we are talking real money. Maybe some day it will all be high end housing and then it will more substantial.
- fixxer 9y agoSounds like we should increase it to make home ownership more attractive, resulting in greater civic engagement from the population ("skin in the game").
- maxxxxx 9y agoWe should make it more attractive up to a certain amount and then cut off all subsidies.
- obstinate 9y agoCivic engagement is just fine in other countries where there are much lower rates of home ownership.
- clarkmoody 9y agoI think you forgot the /s Seriously. The global financial crisis of 2007-08 wasn't that long ago...
- fixxer 9y agoOne has nothing to do with the other. The financial crisis was the result of expansion of credit. What I suggest is a reduction in the tax burden of owning a home. There are many valid reasons to be against my suggestion; the subprime crisis is not one of them. EDIT: There was definitely some sarcasm in my suggestion. This is a hot button topic for a lot of progressives because the impact of being able to right off one's interest payments is viewed as regressive. I see arguments both ways.
- DamnYuppie 9y agoI don't know of anyone who bases a home purchase decision on the mortgage interest deduction. Seriously location, school district, cost of home, time to commute, yard size, cost of HOA are all more important to everyone I know. In fact it has never come up in conversations about home purchases with my peer group.
- dcdanko 9y agoIt can be useful for small scale real estate developers who can use their home to get cheap capital.
- skwirl 9y agoIt definitely factors into my home ownership cost spreadsheet that I use when looking at houses. There's also a property tax deduction.
- at-fates-hands 9y agoAgreed. I've bought three houses in my lifetime and the MIB was never even in the conversation in any of those purchases.
- kgwgk 9y agoDidn't you deduct the mortgage interest you paid?
- awkwardtortoise 9y agoEveryone does. Mortgage, property tax, etc deductions can significantly lower your tax basis.
- maxerickson 9y agoThat's because people are mostly going to be able to use it, there isn't anything interesting to say about it. To the extent it factors into the monthly payment people can make, it impacts all the things you list.
- shados 9y ago
- deleted 9y ago[deleted]
- moultano 9y agoZONING.
- anovikov 9y agoWhy is it somehow bad that people who are investing their money in the place where they live - thus becoming more responsible citizens than renters who can just pack up and leave - are getting a small bonus for it?
- arbuge 9y agoPlease provide proof to back up your claim that this makes them "more responsible citizens".
- rootusrootus 9y agoAlthough the parent poster was being a little inflammatory with the choice of words, there is a bit of an interesting point there. Is there a benefit to society in general from people owning homes instead of renting? High portability can benefit the renter, but a bigger commitment to the neighborhood perhaps benefits the rest of us? Maybe enough to incentivize?
- tanderson92 9y agoHigh portability might also benefit society. We hear a lot about families in the midwest who are locked into their employment markets which are declining.
- deleted 9y ago[deleted]
- avelis 9y agoI think I remember hearing something on Planet Money on if the MID was reformed or eliminated that house prices would drop basically across the board as an adjustment to that tax code change. Certain homeowners with a mortgage could, almost overnight, go underwater with their home and on the other end homes could become more affordable under a smaller price point.
- dcdanko 9y agoSurely the MID would need to be slowly phased out or just capped?
- rootusrootus 9y agoI would think so. Assuming it was politically feasible at all, it seems like it would need to be phased in. Or at least announced quite publicly that loans originated after a particular date could not have their interest deducted. It's not particularly fair to existing homeowners to eliminate the deduction after they've already purchased a house.
- TheCoelacanth 9y ago> Or at least announced quite publicly that loans originated after a particular date could not have their interest deducted That would probably cause a crash in the housing market and leave many homeowners underwater on their mortgages. Phasing it out gradually seems like a better approach to me.
- smileysteve 9y agoMicro economically, the same happens as interest rates go up. As interest rates go up, the demand at that price drops, which means that supply has to lower the price to keep a liquid market. If you're in the currency manipulation / house flipping game, you ideally want to buy when interest rates are high and sell when interest rates are low.
- frgtpsswrdlame 9y agoHere's the economist perspective: Above all, it is inefficient. By subsidizing bigger, more expensive houses, the policy misallocates scarce savings away from productive investments that raise living standards through income- and job-creating innovations. It also makes our financial system more vulnerable: as we wrote in an earlier post, it encourages people to take on risks – in the form of large, subsidized mortgages – that they are not equipped to bear. In the recent crisis, risky mortgage debt was sufficient to put the entire financial system at risk. http://www.moneyandbanking.com/commentary/2015/6/3/why-the-mortgage-interest-tax-deduction-should-disappear-but-wont http://www.moneyandbanking.com/commentary/2015/6/3/why-the-m...
- kcorbitt 9y agoSo this article advocates for the removal of the mortgage interest tax deduction, because subsidizing home ownership leads to a larger economic divide between owners and renters. As a renter, I appreciate the intent, and I also appreciate any measure to simplify the tax code. That said, I also see compelling arguments in the deduction's favor. The sad truth is that most Americans are terrible at saving and in very poor shape for retirement[1]. And empirically, a home mortgage is perhaps the most successful mass-market forced-savings program in American society today, with much higher participation than tax-deferred retirement accounts[2]. So I see the advantage of tax policies that encourage people to buy their home. [1] Time to get on my customary soapbox: spend less, save more! You'll be happier today, and much happier in the future. [2] Back on the soapbox: If you're an American making a professional salary, have no debt and are not maxing out your IRA and 401(k) contributions, there will be a moment in your future when you do the retrospective calculation on how much more money you would have if you had done so and be very sad. :) Minimize regret, and save more today!
- jayess 9y agoRenters get absolutely screwed. Not only is there a mortgage interest deduction, I live in an area that has a special tax on rent. So not only do we pay property tax through the landlord (and probably a higher property tax for non-primary residences), we get a sales tax on top of that, being a tax on the tax. Either end the mortgage interest deduction or allow rent to be deducted (at least in part).
- cmurf 9y agoIf the tax were dropped, the short term effect is people would spend the saved money on something else. And in the long term they'd find rental that ends up in the same ballpark price per month - so they'd end up not saving anything and the various governments wouldn't collect taxes. So the tax would have to come somewhere else.
- frgtpsswrdlame 9y agoBut most of the MID goes to benefit those who have plenty to save already. Also, I think looking at mortgages as a savings program is incredibly short-sighted. Mortgages are risky and the MID encourages people to overleverage.
- jakelarkin 9y agoMID is a nice subsidy but one really can't speak to economic inequality in housing with calling out use of local zoning regulation as cause of artificially low supply. A lot more people would be able to afford a house or at least have cheaper rent if it werent for the shenanigans going on with development/zoning reviews.
- dnautics 9y ago"It is difficult to think of another social policy that more successfully multiplies America’s inequality in such a sweeping fashion." Tax deduction for employer-insured healthcare?
- rqebmm 9y agoCarried-interest loophole?
- deleted 9y ago[deleted]
- 11thEarlOfMar 9y agoIt's a very complicated effect to model. Some random thoughts: Increasing home prices also means increasing property taxes and increasing insurance costs. Larger homes mean more expense to heat, cool, furnish, maintain, etc. Some of the tax savings can contribute to a larger mortgage and thereby drive higher home prices, but there are quite a few offsetting expenses. Home equity is a contributor to the wealth effect. The wealth effect is a driver for consumer spending. Consumer spending is one of the more potent economic forces. The mortgage deduction makes home ownership more affordable, but does not mean anyone can buy anywhere. Most people who rent can identify some other location in the US where they could afford to buy. They'd need a job that produces a sufficient income, and they'd need a down payment. But they need those with or without MID. If we simply eliminated the MID, we'd see a period of volatility in real estate prices that would eventually settle out into a new equilibrium. But would that equilibrium be better overall for the economy? Would more people be able to own?
- kemiller 9y agoRemoving the MID would make middle-to-upper-middle-class people poorer, and so reduce inequality that way, but would it help poor people at all? The net monthly cost of housing would stay the same, just shift the proportion of your payment that goes to the government vs the bank. It's true that it's regressive, but I'm skeptical that's a huge factor. I think it would just help landlords, who would retain the ability to deduct mortgage interest as a business expense, and who would suddenly have both an influx of people kicked back into the renter pool and cheaper properties. The real issue is lack of supply due to zoning and planning issues, and probably the cultural preference for single-family. Also the crazy-low rates. Edit: To be clear, I'm not saying the MID is a great thing. If it didn't currently exist, I wouldn't be in favor of introducing it, and it was a huge windfall to whomever owned property when it was introduced. But what's done is done, and it would be pretty punitive to impose a negative windfall on every homeowner in America now. Maybe grant a one-time benefit when you change the tax code and let things sort themselves out from there?
- accountyaccount 9y agoI think adding an upper limit to MID would serve everyone well.
- hkmurakami 9y agoAlready exists.
- deleted 9y ago[deleted]
- tanderson92 9y agoIt is currently in-place at $1m of mortgage debt, and this fact was mentioned numerous times in TFA. It was mentioned in the article that Rep. Keith Ellison wants to move that number down to $500k.
- accountyaccount 9y agoNo, I mean remove it entirely. If you're buying a $1m property you don't qualify for any MID. From the first $1 on.
- homeowner55 9y agoJust a thought experiment: If home ownership was rare, almost everyone would be renting. The management company in addition to having to pay the bank loan would also have to make a profit. To me that sounds tantamount to another tax on living. Anecdotally, owning in LA is cheaper than renting a comparably nice place. And that's irrespective of tax breaks.
- rlanday 9y agoThe management company can probably manage and maintain a large number of properties more cheaply per-property than a homeowner can maintain a single property. So even if the management company is turning a profit, that doesn't necessarily mean it's a bad deal for the homeowner. Your argument is basically the same as "no one should ever hire a plumber because the plumber is turning a profit which makes it a bad deal."
- 1_2__3 9y agoI think about how recently and spectacularly housing has gone off the rails and I get so sad. What a complete disaster this is turning into.
- super_id 9y ago"How the kulaks became engines of Soviet inequality"
- gricardo99 9y agoYou can go back further, start around the 1930s, and see housing policies/practices that didn't just drive inequality, but also segregation[1]. I was shocked (pardon my ignorance). 1 - https://www.amazon.com/Color-Law-Forgotten-Government-Segregated/dp/1631492853/ref=asap_bc?ie=UTF8 https://www.amazon.com/Color-Law-Forgotten-Government-Segreg...
- KboPAacDA3 9y agoWhat's done in Europe?
- bigpeopleareold 9y agoIn Norway here, many municipalities do not have property tax. Oslo implemented it recently, but only for property greater than a certain limit (and there is a push, of course, to remove it.) You can tax write-offs on interest from mortgages and also writeoffs and hire interest if you save in a BSU account (Bolig Sparing for Ungdom, or House saving for the young, which only applies to those 18-34.) Also, I think you can get any rental income written off if you rent a room or a basement apartment for 7000 NOK or less. The fact is now, Oslo is experiencing what people are calling a housing bubble. Prices are also impossible given salaries (given conversion rates, they do not compare to the prices like in NY, for what it is worth.) All these things tend to point to two directions: a) there is such a drive to own your own home here that it has done something to housing prices and b) they want people be maintain debt. Unlike the US, you can write off credit card and personal loan debt. It's a nice thing to be able to do but I'd presume that encourages a credit boom.
- gumby 9y agoThe mathematics of the MID are dumb; the optics are what sell it. If it lets someone making, say, $100K a year able to spend 30% more on a house payment, it also enables everyone else making 100K/year to pay that much more. So the same people compete for the same houses. Its main effect is to push up the commissions the agents pay and increase the amount of interest banks earn. It doesn't actually help the person buying the house. Except that if you're in an increasing market it can push the sale price up. A fetish for home ownership also screws up labor force mobility and reduces the granularity of variations in cost of living (some of which is discussed here). We'd be better off if large, publicly traded corporations owned most of the housing stock and provided it on long term lease (which is almost the situation today, but in the most complicated fashion possible). Then nobody would be "tied to the land".
- hrxn 9y agoSo, in effect, large, publicly traded corporations would then own the land, as you describe it? You think that's a good idea?
- gumby 9y agoA reply to my comment is marked dead and I can't revive it, but I can still reply to it: > So, in effect, large, publicly traded corporations would then own the land, as you describe it? You think that's a good idea? I don't mean it "in effect" I mean it explicitly. The advantages are large and the risks addressable: - It spreads ownership around: the shareholders all own the housing stock the corporation owns. Thus they are buffered from the risks of a local market downturn. - It makes moving easier (if you live in a place that suffers, say, a huge factory closure, you can't sell your house since everybody else wants to do so as well). - It encourages a variety of housing types (single family to semi detached to large apartment blocks) and again buffers against, let's call it, "style risk"). And frankly when you have a large corp you can regulate some of the most egregious problems like fair housing rules, environmental and code issues, etc. Such companies are likely to be stable equities good for retirement funds etc similar to publicly traded utilities and less like airlines much less high tech businesses.
- 9y ago
- kcorbitt 9y agoFrom the article: "She goes without a savings account and regularly relies on credit cards to buy toilet paper and soap." Maintaining a relatively constant credit card debt (which is what it usually meant by "relying on credit cards" for routine purchases) is often more of a financial literacy problem than an income problem. It's obviously harder to get out of this trap on a low income, but if you're servicing your debt -- and if you're living off of credit cards long-term you have to be -- then your average income actually matches your average expenditures, including credit card interest charges. Someone in that situation would be so much better off if they could just pull together the few $1000's necessary to pay off the debt, and then start slowly accumulating savings from the money that would otherwise go towards interest payments. Unfortunately, the people I know who live on credit card debt seem willing to spend any small windfall that comes their way immediately, instead of using it to pay down those high-interest loans and start saving. I have a brother-in-law who's in this situation. He makes $90k and has no dependents, but seems to have constant credit card debt that fluctuates between $10-$20k. That's an extra $1500-$3000 free and clear he could have every year by just paying off his cards and pocketing those interest payments, but for whatever reason he sees things differently and is totally content to carry that balance indefinitely.
- lr4444lr 9y agoBut then you invite an onslaught accusing you of blaming the poor for their cyclical poverty, because they never had parents who taught and modeled sound financial behavior.
- SaltySolomon 9y agoI really don't get this deduction, it is basically rewarding people to take risk and makes it better to take a morgage than buy the home outright?
- AnimalMuppet 9y agoNo. If you pay $X in mortgage interest, you get $X * Y% back, where Y% is your incremental tax bracket. That is not a net win. It's just less of a loss.
- JustAnotherPat 9y agoif you put your money in something like crypto instead, you can come out ahead easily.
- AnimalMuppet 9y agoIf you put your money in something like crypto (I presume you mean Bitcoin?) instead, and if it performs like you expect, you can come out ahead easily. But if you put your money in Mt Gox...
- thescriptkiddie 9y agoPeople are going to downvote you for mentioning cryptocurrencies, but your point is true even of much more conservative investment strategies. A home is not an investment, it is a depreciating asset. If you can afford to buy a home (in cash or on a mortgage), you will almost always come out ahead if you put the money into mutual funds and rent instead.
- AnimalMuppet 9y agoI question your "almost always". If I buy a home, it's a depreciating asset. That is, I buy a home (via mortgage) for $300,000, and at the end of the mortgage, it's only worth $200,000. So I've paid $300K for an asset that's only worth $200K. But if I rented, at the end of the same time period, I have an asset worth $0, and still have to pay to live somewhere. But of course it's not that simple. I can often rent for less than I can buy; I can invest the difference. If I don't live in the same house until I pay off the mortgage, I don't wind up with a place to live for free. If I downsize, I can wind up with a place to live for free and a chunk of cash. And so on. Let's take one specific example. Suppose I have little cash. I could borrow $300K and buy a house. At the end of 30 years, I have a house. I've paid, what, $2000/month in payments. At the end of the deal, I have an asset worth $200K, in which I also can live for free (but I can't do both - I can get the $200K, or I can live in it for free). If I want the same deal putting the money into a mutual fund, I probably can't get it, because nobody's going to lend me $300K to invest in a mutual fund. The deal I can get is to rent for $1000/month, which gives me $1000/month to invest. At the end of the same amount of time, I have nothing to show for the $1000/month in rent except having not been homeless. For the $1000/month I've invested, I have... well, it's hard to say. What's your best guess about the rate of return of the mutual fund, and what's your variance around that best guess?
- macmacaka 9y agoIs this the right TL;DR of this article? "Homeownership leads to inequality". "Inequality is bad". Therefore, "Home ownership is bad". Therefore we should make home-ownership as hard as possible. So when nobody owns a home, everybody is equal. Sounds about right.
- wnissen 9y agoThe subsidy is enormous compared to the cost of other housing programs, and it almost all goes to well-off or rich people. So, no, your TLDR is not accurate, as it points to homeownership as an important wealth-building mechasism for those who can afford it. Furthermore, since the FHA was straight-up refusing to insure mortgages in black communities until 19-freaking-68, there is a strong historical effect of perpetuating racial inequalities by making only whites eligible for housing subsidies. We spend more than four times as much on mortgage interest than Section 8 housing subsidies. TL;DR: The mortgage interest deduction is a welfare payment that you have to be rich (and until 1968, white) to get. Maybe we shouldn't spend $71 billion a year on it.
- spaceflunky 9y agoThis article is incredibly misguided for several reasons... 1.) If you truly are "rich," then you pay for your home in cash. You do not take out a mortgage on your house. Look at a distribution of loan amounts, the vast majority are around $600k. Very few are are >$1M [0]. Home loans are a product for middle-class Americans. 2.) A lot of rich people don't really pay income taxes like middle class people do. This is something a lot of people fail to understand. For example, you can be multi-billionaire and make $0 in given year and still be a multi-billionaire. 3.) If you're rich, do you really care about the $20k deduction you get every year? Probably not. 4.) Interest rates are so low that the deduction is becoming less relevant. For example, if you take out a 3.75% loan on $600k, your deduction really isn't that much, you get to deduct a whopping ~$20k, which even if the highest tax bracket, you'll get back ~$10k The deduction argument holds a lot more weight when interests rates are high. But glad to see more attacks on the "bourgeoise middle-class" from the trusty NYTimes. [0] http://lenkiefer.com/2016/10/11/hmda-viz1 http://lenkiefer.com/2016/10/11/hmda-viz1
- microdrum 9y agoThis, 1,000x. There are a lot of families making $1 million gross ($500K net) in income. They live in SF and NY. Both parents work 10 hour days. They live in an uncomfortably small house and have a $1 million mortgage. They can barely save for college after paying for childcare costs and the mortgage. But they're "rich." Yeah, right.
- mi100hael 9y agoIs there really no cheaper housing options available to people like that? That sounds absurd.
- chadgeidel 9y agoNot sure about your numbers here. A million dollar mortage today represents just under $5k per month or $60k per year. that's well under the recommended 30% for a $500k income. I have a hard time believing "They can barely save for college after paying for childcare costs and the mortgage" - I have no idea what childcare costs are, but I would be shocked if they were in excess of $300K-$400k per year.
- cmurf 9y agoFWIW, business rent is tax deductible, whereas personal rent is not. Another way to look at it is, personal rent is taxed, so it acts as an indirect consumption tax.
- ars 9y ago> who generally fail to acknowledge themselves to be beneficiaries of federal largess. “Today, as in the past,” ... “most of the recipients of federal aid are not the suspect ‘welfare queens’ of the popular imagination but rather middle-class homeowners, salaried professionals and retirees.” This quote is extremely misleading! There are not given aid, they are just not charged as much tax. When people think "welfare queens" and "federal aid" they are talking about people who pay negative tax - they get more aid then their tax. Simply not taxing people at 100% of their income should not be considered "aid".
- pjmorris 9y ago> "It is difficult to think of another social policy that more successfully multiplies America’s inequality in such a sweeping fashion." > "In 2015," "That same year, the federal government dedicated nearly $134 billion to homeowner subsidies." The article author isn't thinking of the Fed's various QE programs, which have subsidized lenders through the purchase of ~1.8 Trillion in mortgage-backed securities over a five year period after the financial crisis. MID is a drop in the bucket next to that. If you treated the 1.8T as a single 30 year mortgage at, say, %3.5 interest, that's about a 10 Billion/month mortgage payment we're collectively carrying to bail out whoever sold those MBS to the Fed. That's about the same as the aggregate homeowner subsidies mentioned in the article.
- acconrad 9y agoCan anyone speak to how taxes are appropriated? Because in all of this talk about MID and perhaps how eliminating it might level the playing field, that only seems to make sense if that money is then appropriated to lower income individuals. I mean the government could simply take that surplus of taxes and shove it into the military for all we know, which in the end doesn't help anyone given our already exorbitant military spending budget. I also wonder how much of this is personal accountability, and I say this as someone who has voted for and willingly pays additional taxes to provide low income housing opportunities in my community. I mean one of the families that was highlighted was a family of 6 that lives off of $50k/yr with only one parent working. Personally I can't imagine raising one child on $50k/yr in the greater Boston area, let alone 4, and knowingly not trying to have both parents employed. The wife even mentions that the husband was out of work for 8 months...were you not trying to fill in the gap? Even a minimum wage job should cover the cost of day care for their youngest child, who is too young for full-time schooling. I'm really trying to be on the side of some of these folks, but their stories and situations find it hard for me to empathize.
- ianai 9y agoWhy would you remove something to lower everyone? How about looking for tax incentives for renters? Maybe make rent increases tax deductible. I read this as a tale about "how the property owners are standing on the promise of the working class".
- xherberta 9y ago>Even a minimum wage job should cover the cost of day care for their youngest child, who is too young for full-time schooling. In many markets, no it won't, if you can even find a daycare with an opening. Anyway, this plan sounds like a net negative for the family unless the job can cover daycare PLUS commuting costs, work wardrobe, increased food costs (less time to cook from scratch), and the hassle involved with finding alternate care when any of the four kids are sick. Some people consider the "humanity value" of having a parent at home to care for children to be worth the financial downside. That's their choice. By the way, most developed nations agree... From the New Republic: *Among developed nations, the U.S. is now the only one that doesn’t guarantee some kind of paid employee leave available for new parents." http://bit.ly/2pZ03Ay http://bit.ly/2pZ03Ay
- ProfessorLayton 9y agoRemoving the mortgage interest deduction is the third rail of politics. Until most people are renters, I realistically don't see it ever going away, and is one of the few major benefits widely available [1] to the middle class. The US is still reeling from a strong racial divide, particularly in regards to homeownership. As stated in the article, banks would literally redline neighborhoods that weren't white enough as late as the 80s [2]. But it was worse than that, my parent's house (Built in the 40s) in the East Bay came with old covenant documentation stating that no POC were allowed to live in the home unless they were servants! Thats how bad it was in some areas as prosperous as the Bay Area, and we're still feeling its effects. [1] https://www.census.gov/housing/hvs/files/currenthvspress.pdf https://www.census.gov/housing/hvs/files/currenthvspress.pdf [2] https://en.wikipedia.org/wiki/Redlining https://en.wikipedia.org/wiki/Redlining
- jjt-yn_t 9y agoeh, until most young people who bear the brunt of not being able to save by home ownership also are politically represented wholesomely in some manner... [ not negating your statement... ]
- smileysteve 9y agoIt can however, be implicitly reduced. The rumours of the trump plan include doubling the standard deduction and removing the state tax deduction. Minus other major itemized deductions, this will reduce the MID usage.
- mikekij 9y agoIt seems many of these articles see tax deductions as the government giving money to tax payers, instead of the government agreeing to forcibly take less of a tax payer's income. It's an important distinction I rarely see made by the NYT.
- pc2g4d 9y agoI've been wishing for the following: a compelling, interactive visualization of wealth transfers in the united states. Which states give/get more from the federal government? Which parts of the income spectrum give/get more in taxes/benefits? Is there something like that out there? Yesterday there was the thing about county wealth disparities. Something like that but more general.
- terminlvelocity 9y agoIf they wished to show the effects of the MID, I wish they would have started by comparing a renter vs. a homeowner that were in more similar circumstances. Of course a family with 2 adults that are 10+ years older and waited a decade longer to have kids are going to be in a very different financial situation than a 26 year old single mom that makes 13% of the income of the couple. How does such an apples-to-oranges comparison remotely demonstrate that the MID is the "engine of American inequality?" But perhaps the point is that the renter has no chance of escaping her current situation? The story of the homeowners proves that it is absolutely possible to do so. Recall that Asare grew up poor. While we don't know much about his wife's background, we do know that the two were also renters for years, before a nonprofit program helped them buy their first house.