5 ms·

For now...

by gok 9y ago

For now...

gumby 9y ago
I doubt people would tolerate giving it up. It's like the mortgage interest deduction, which doesn't even help homeowners: it feels like a middle class giveaway and people don't want to lose it. Chopping it would make everybody (except real estate brokers) better off, but the innumerate majority would shriek.
- gok 9y ago
  The mortgage interest deduction is dumb, but it is marketable as a giveaway to "everyone." The state income tax deduction is both dumb and a handout to state governments and those evil "coastal elites." I think a compromise that might work is similar to what happens with the mortgage interest deduction: a cap. Maybe you only get to deduct state and local income tax up to the top federal tax bracket.
- AnimalMuppet 9y ago
  Could you explain how the mortgage interest deduction doesn't help homeowners?
  - gok 9y ago
    The argument is usually that it inflates house prices to consume most of the deduction. See also: federal guarantees on student loans have just made tuitions rise to consume the loans. Even if you don't go for that argument... - It disproportionally helps richer people (you get a bigger benefit if you have a $1m house than a $100k house). - It encourages riskier borrowing.
  - dragonwriter 9y ago
    > Could you explain how the mortgage interest deduction doesn't help homeowners? The mortgage interest deduction helps mortgage lenders by subsidizing mortgages, which increase demand for them; and it helps people who owned homes when it was passed by increasing the market-clearing price of homes. It doesn't help people become home owners, and people who become homeowners while it exists are hurt as much as helped by it, but would face a one-time additional hit if it ended (both from increased total mortgage cost and the decreased home value because buyers would no longer be subsidized.) Essentially, the deduction increases the nominal price of homes by encouraging (compared to not having the deduction) getting into and remaining in debt to own them.

For now...

by gok 9y ago

For now...

I doubt people would tolerate giving it up. It's like the mortgage interest deduction, which doesn't even help homeowners: it feels like a middle class giveaway and people don't want to lose it. Chopping it would make everybody (except real estate brokers) better off, but the innumerate majority would shriek.

gok 9y ago
The mortgage interest deduction is dumb, but it is marketable as a giveaway to "everyone." The state income tax deduction is both dumb and a handout to state governments and those evil "coastal elites." I think a compromise that might work is similar to what happens with the mortgage interest deduction: a cap. Maybe you only get to deduct state and local income tax up to the top federal tax bracket.
AnimalMuppet 9y ago
Could you explain how the mortgage interest deduction doesn't help homeowners?
- gok 9y ago
  The argument is usually that it inflates house prices to consume most of the deduction. See also: federal guarantees on student loans have just made tuitions rise to consume the loans. Even if you don't go for that argument... - It disproportionally helps richer people (you get a bigger benefit if you have a $1m house than a $100k house). - It encourages riskier borrowing.
- dragonwriter 9y ago
  > Could you explain how the mortgage interest deduction doesn't help homeowners? The mortgage interest deduction helps mortgage lenders by subsidizing mortgages, which increase demand for them; and it helps people who owned homes when it was passed by increasing the market-clearing price of homes. It doesn't help people become home owners, and people who become homeowners while it exists are hurt as much as helped by it, but would face a one-time additional hit if it ended (both from increased total mortgage cost and the decreased home value because buyers would no longer be subsidized.) Essentially, the deduction increases the nominal price of homes by encouraging (compared to not having the deduction) getting into and remaining in debt to own them.