3 ms·

At the moment, interest rate on morgages are low enough that tax deduction doesn't make a big difference, in addition, The Netherlands has a special tax for liv

by phicoh 6y ago

At the moment, interest rate on morgages are low enough that tax deduction doesn't make a big difference, in addition, The Netherlands has a special tax for living in your own house (fake income due to not paying rent), so these cancel each other out to some extent. The biggest issue at the moment is the shortage of house in most parts of The Netherlands. So people max out what they can spend on a house, and certainly with low interest rate that amount to quite a lot. As to fiscal reforms, at moment you get only a percentage of the interest you pay back, not the percentage of your highest income bracket. In addition, load need to be paid back in 30 years (linear or annuity) otherwise you don't get the tax credit. [(edit) one addition, it is interesting that in The Netherlands, the more right wing, conservative parties want to keep this tax deduction the most, the left wing parties want to get rid of it]

bollorior 6y ago
Imputed rent tax and mortgage tax deduction make sense together but not separately in my opinion. Mortgage tax deduction without tax on imputed rent (as in Norway, Sweden and the US) is a subsidy to those who are rich enough to own their own homes. It is also a perverse incentive in that if you pay off your mortgage, you lose the tax benefit. So people take larger mortgages than makes sense, and invest their spare cash in risky assets rather than paying their mortgages down. An imputed rent tax without a deduction for mortgage interest would be grossly unfair to borrowers, but does not exist anywhere as far as I know. An imputed rent tax with a deduction lightly taxes mortgage borrowers against the benefits they receive from owning not renting. It has a bigger effect on owner occupiers without mortgages - they pay the full tax without any deduction. So it is progressive. It also levels the playing field between landlords and owner-occupiers - both are taxed on the rental value of their property and receive (roughly similar) deductions. So neither form of ownership has a built-in advantage. (Probably the right wing parties want to remove the tax deduction because they also want to get rid of the tax on imputed rent?) As pointed out in the reply, this was a misunderstanding.
- phicoh 6y ago
  The right wing parties want to keep the tax deduction. One thing they did introduce was that the imputed rent tax was limited to the interest tax deduction. To encourage people to pay off their mortgages, but that is now being rolled back. One thing is that killing the tax deduction is likely to lower the value of houses because people cannot borrow as much without the tax deduction. The elephant in the room in The Netherlands is not only the shortage of land to build new house but also what it costs to build a new house. You can lower prices by increasing availability, but only if the new objects are actually cheaper than what people pay now. Building a house in The Netherlands is insanely expensive. Some of it for good reasons, a building code that has lots of requirements. A large part of The Netherlands is effectively a swamp, so foundations are also very expensive. However, contractors, etc. make quite a bit of money, but the worse part is that local governments try to make money of land. To finance the city, but also to have regular house subsidize social housing.
bluGill 6y ago
Interesting, in the US the right wing has done the most to get rid of the deduction. Though some of it was probably an unexpected side effect - the tax reform of the 1980s (I can't remember the exact year, 84 comes to mind) lowered tax rates and got rid of a number of deductions, but the mortgage deduction remained. Then Trump's tax changes of a couple years ago raised the standard deduction so high that most people don't qualify to take the deduction at all. I expect the deduction to disappear in the near future as most people discover it doesn't apply to them only the rich. Prior to Trumps's changes that tax deduction was an important factor to the majority of the US.
- mywittyname 6y ago
  > I expect the deduction to disappear in the near future as most people discover it doesn't apply to them only the rich. Nah. Two big reasons I can think of: people don't understand tax policy and wealthy people benefit (just less so in Blue states). The first point is pretty straight forward. Lots of people talk about how things are "tax deductible" without even considering whether or not the deductions apply to them. Even if the IRS published that 85% (number made up) of people took the new standard deduction, thus used no deductions, you'd be hard-pressed to convince most people to get rid of the mortgage interest deduction. People in general (even smart ones) are just irrational when it comes to tax deductions. Secondly, the mortgage interest deduction is still used by relatively wealthy people. A $600k mortgage generates >$16k in interest payments in the first year, even at the low rates we have today. That's easily enough to clear the standard deduction (for a single person). For married people, the hitting the SALT limit with that mortgage is enough to cross the threshold.

by phicoh 6y ago

bollorior 6y ago

Imputed rent tax and mortgage tax deduction make sense together but not separately in my opinion. Mortgage tax deduction without tax on imputed rent (as in Norway, Sweden and the US) is a subsidy to those who are rich enough to own their own homes. It is also a perverse incentive in that if you pay off your mortgage, you lose the tax benefit. So people take larger mortgages than makes sense, and invest their spare cash in risky assets rather than paying their mortgages down. An imputed rent tax without a deduction for mortgage interest would be grossly unfair to borrowers, but does not exist anywhere as far as I know. An imputed rent tax with a deduction lightly taxes mortgage borrowers against the benefits they receive from owning not renting. It has a bigger effect on owner occupiers without mortgages - they pay the full tax without any deduction. So it is progressive. It also levels the playing field between landlords and owner-occupiers - both are taxed on the rental value of their property and receive (roughly similar) deductions. So neither form of ownership has a built-in advantage. (Probably the right wing parties want to remove the tax deduction because they also want to get rid of the tax on imputed rent?) As pointed out in the reply, this was a misunderstanding.

phicoh 6y ago
The right wing parties want to keep the tax deduction. One thing they did introduce was that the imputed rent tax was limited to the interest tax deduction. To encourage people to pay off their mortgages, but that is now being rolled back. One thing is that killing the tax deduction is likely to lower the value of houses because people cannot borrow as much without the tax deduction. The elephant in the room in The Netherlands is not only the shortage of land to build new house but also what it costs to build a new house. You can lower prices by increasing availability, but only if the new objects are actually cheaper than what people pay now. Building a house in The Netherlands is insanely expensive. Some of it for good reasons, a building code that has lots of requirements. A large part of The Netherlands is effectively a swamp, so foundations are also very expensive. However, contractors, etc. make quite a bit of money, but the worse part is that local governments try to make money of land. To finance the city, but also to have regular house subsidize social housing.

bluGill 6y ago

Interesting, in the US the right wing has done the most to get rid of the deduction. Though some of it was probably an unexpected side effect - the tax reform of the 1980s (I can't remember the exact year, 84 comes to mind) lowered tax rates and got rid of a number of deductions, but the mortgage deduction remained. Then Trump's tax changes of a couple years ago raised the standard deduction so high that most people don't qualify to take the deduction at all. I expect the deduction to disappear in the near future as most people discover it doesn't apply to them only the rich. Prior to Trumps's changes that tax deduction was an important factor to the majority of the US.

mywittyname 6y ago
> I expect the deduction to disappear in the near future as most people discover it doesn't apply to them only the rich. Nah. Two big reasons I can think of: people don't understand tax policy and wealthy people benefit (just less so in Blue states). The first point is pretty straight forward. Lots of people talk about how things are "tax deductible" without even considering whether or not the deductions apply to them. Even if the IRS published that 85% (number made up) of people took the new standard deduction, thus used no deductions, you'd be hard-pressed to convince most people to get rid of the mortgage interest deduction. People in general (even smart ones) are just irrational when it comes to tax deductions. Secondly, the mortgage interest deduction is still used by relatively wealthy people. A $600k mortgage generates >$16k in interest payments in the first year, even at the low rates we have today. That's easily enough to clear the standard deduction (for a single person). For married people, the hitting the SALT limit with that mortgage is enough to cross the threshold.