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I agree, and I feel like limiting the mortgage interest deduction to owner-occupied homes would get us most of the way there at the stroke of a pen. It's a hug

I agree, and I feel like limiting the mortgage interest deduction to owner-occupied homes would get us most of the way there at the stroke of a pen. It's a huge subsidy and I can't think of any good reason to extend it to rentals and investment properties. In fact, we should probably repeal it altogether - in theory it subsidizes home ownership for the poor and middle class, but in practice the only people who take it are those who itemize deductions, which the poor generally don't.

iav 4y ago
Not sure if you are aware, but all forms of interest expense is tax deductible for corporate income tax purposes in the United States, not just mortgage interest. This conforms to codes in other countries. There is no subsidy that is specific enough to rentals or investment properties. And since most of corporate bank lending is secured by all assets (including real estate), mortgage debt is somewhat fungible with other secured corporate debt, so it would be pointless to try to tax one but not the other.
- ineptech 4y ago
  I believe there is a specific subsidy, but in the "other direction" - that's why you can deduct the mortgage interest on your vacation home despite not being a human and not a business. I'm aware that interest is generally deductible for businesses, and I'm suggesting that houses should be an exception to that. We subsidize most business borrowing because we want businesses to borrow and invest in stuff, and we should have exceptions for things we want to discourage investment in. Sure, it's difficult to imagine how to keep a giant corporation from finding a way around this, but we have difficulty getting giant corporations to pay taxes generally. It would still make sense to narrow or end the subsidy to discourage individuals and small businesses from investing in RE so heavily, and consider other approaches to discouraging larger corps.
  - ineptech 4y ago
    Fake edit to add: my only source is other comments in this thread, but I believe it's true that the vast majority of rental properties are owned by individuals or relatively small businesses (LLCs and such) via regular old mortgages, where the bank knows what property is being mortgaged and the debt isn't realistically fungible with other debt.
BeetleB 4y ago
> limiting the mortgage interest deduction to owner-occupied homes As an investor, you don't have a mortgage interest deduction benefit. You have a business expense benefit.

iav 4y ago

Not sure if you are aware, but all forms of interest expense is tax deductible for corporate income tax purposes in the United States, not just mortgage interest. This conforms to codes in other countries. There is no subsidy that is specific enough to rentals or investment properties. And since most of corporate bank lending is secured by all assets (including real estate), mortgage debt is somewhat fungible with other secured corporate debt, so it would be pointless to try to tax one but not the other.

ineptech 4y ago
I believe there is a specific subsidy, but in the "other direction" - that's why you can deduct the mortgage interest on your vacation home despite not being a human and not a business. I'm aware that interest is generally deductible for businesses, and I'm suggesting that houses should be an exception to that. We subsidize most business borrowing because we want businesses to borrow and invest in stuff, and we should have exceptions for things we want to discourage investment in. Sure, it's difficult to imagine how to keep a giant corporation from finding a way around this, but we have difficulty getting giant corporations to pay taxes generally. It would still make sense to narrow or end the subsidy to discourage individuals and small businesses from investing in RE so heavily, and consider other approaches to discouraging larger corps.
- ineptech 4y ago
  Fake edit to add: my only source is other comments in this thread, but I believe it's true that the vast majority of rental properties are owned by individuals or relatively small businesses (LLCs and such) via regular old mortgages, where the bank knows what property is being mortgaged and the debt isn't realistically fungible with other debt.

BeetleB 4y ago

> limiting the mortgage interest deduction to owner-occupied homes As an investor, you don't have a mortgage interest deduction benefit. You have a business expense benefit.