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For the generationally wealthy laws such as stepped up basis and lower taxes on capital gains are also counter factors. The mortgage interest deduction in part

For the generationally wealthy laws such as stepped up basis and lower taxes on capital gains are also counter factors. The mortgage interest deduction in particular now helps the top 20% or so afford their homes. And afford to continue paying more for homes in their range. Thus boosting property values and prices. While the lack of mortgage interest deduction for additional homes increases the cost of homes which are let out as rentals, which directly impacts the cost of renters, and indirectly boosts the costs of renters through the rise in property values. I haven't studied this, and lack the ability to do an economic analysis of the yoyoing of increasing home prices versus new construction. But there's probably a regressive effect on wealth even for some of those who aren't living hand-to-mouth. It looks like the mortgage interest tax deduction did decrease from interest on up to $1 million in loans to interest on up to $750 thousand with the 2017 tax change. This should help reduce the effect on house prices a little bit on the margin. > it is mostly the high earners that are paying for everything, offsetting the their wealth accumulation. To an extent this is true. But this argument is also used to say that renters don't pay property taxes. Maybe not, but property taxes have a direct, proportionate effect on the rent that they pay.

s1artibartfast 4y ago
I agree with most of what you said, but I would quibble with how costs are passed on to consumers. passing costs on is a lot more complext when goods are not being sold at their margional production costs (e.g. someone has a profit margin). >To an extent this is true. But this argument is also used to say that renters don't pay property taxes. Maybe not, but property taxes have a direct, proportionate effect on the rent that they pay. When you have makets with a gap between production cost and the market price, there is the possiblity that the seller simply eats the cost. Imagine wallmart selling widgets with a profit. If the price of the widget is already set where the marginal profit for increasing the sticker price is zero, This holds true even if production costs go up. i.e., raising the price still results in fewer sales and less profit, independent of production cost. In terms of housing, if nobody can afford higher rent, landlords cant raise it without more vacancies. In that case, tax might come out of their profit and not be passed on.
- anonymouskimmer 4y ago
  > In that case, tax might come out of their profit and not be passed on. Yes, this is true. Some landlords merely use rent to offset the cost of the house, not to cover it entirely. But over enough years, the majority of rental property has to be paying its way, or it gets sold off.

s1artibartfast 4y ago

I agree with most of what you said, but I would quibble with how costs are passed on to consumers. passing costs on is a lot more complext when goods are not being sold at their margional production costs (e.g. someone has a profit margin). >To an extent this is true. But this argument is also used to say that renters don't pay property taxes. Maybe not, but property taxes have a direct, proportionate effect on the rent that they pay. When you have makets with a gap between production cost and the market price, there is the possiblity that the seller simply eats the cost. Imagine wallmart selling widgets with a profit. If the price of the widget is already set where the marginal profit for increasing the sticker price is zero, This holds true even if production costs go up. i.e., raising the price still results in fewer sales and less profit, independent of production cost. In terms of housing, if nobody can afford higher rent, landlords cant raise it without more vacancies. In that case, tax might come out of their profit and not be passed on.

anonymouskimmer 4y ago
> In that case, tax might come out of their profit and not be passed on. Yes, this is true. Some landlords merely use rent to offset the cost of the house, not to cover it entirely. But over enough years, the majority of rental property has to be paying its way, or it gets sold off.