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The only thing I would add to your comment is that merchants aren’t the ones being forced to pay these stupid fees, it’s their customers (and primarily their po
by matthewdgreen 3y ago
The only thing I would add to your comment is that merchants aren’t the ones being forced to pay these stupid fees, it’s their customers (and primarily their poorer and often non-card using ones) who are being quite heavily taxed to fund a marketing scheme for rich customers. Most competitive businesses can’t afford to fund such an elaborate targeted marketing campaign directly out of their fees without some competitive pushback: hence the actual question you should ask is why the entire system exists, and the answer has to do with a pile of inefficiency and rent collection based on regulatory capture.
- owisd 3y agoDoesn’t seem like regulatory capture is the issue, if the market was totally free to new entrants and you brought in a low fee card with no rewards then it’s going to fail in an unregulated environment because merchants won’t go to the hassle of offering tiered pricing to low fee cards if they’re not already offering tiered prices for cash, so no-one’s going to give up their existing rewards to still have to pay the same prices. Deregulation just ends up stuck in a local minimum where everyone’s effectively paying for the highest fee cards that the merchant will accept.
- gosub100 3y agoWhile we're in this topic: why is unsecured credit card debt NOT tax deductible but secured debt like HELOC is? Fwiw I don't really care what the technical reason is, it's a rhetorical question to add to the ways the credit system holds back the poor.
- gruez 3y ago> While we're in this topic: why is unsecured credit card debt NOT tax deductible but secured debt like HELOC is? AFAIK it's a carve out specifically for houses. Car loan interest isn't deductible despite being "secured".
- judge2020 3y agoIt's a bargaining chip to get votes. If one party promises a larger tax saving on homes, then homeowners are more likely to vote for them.
- dboreham 3y agoBesides that, there may be some societal benefits to increased home ownership.
- ghaff 3y agoAs I understand it, mortgage interest deductibility was originally basically social policy (rightly or wrongly). And you can't take a benefit like that away--even if the government kind of did for most people by increasing the standard deduction. (Which was probably not a terrible way of doing so.)
- lotsofpulp 3y agoThe population likely to use HELOCs votes more and/or is more populous, so they have more votes. Same reason Medicare (old people) pays healthcare providers more than Medicaid (young and poor people).
- scarface_74 3y agoThe real estate lobby is the largest lobby in the US.
- robertlagrant 3y ago> the ways the credit system holds back the poor It would be good to understand this better. Doesn't everyone use a credit card? Not just the poor? Who are the poor in this case? Are tax deduction rules anything to do with the credit system?
- gosub100 3y agoAre you aware that merchants charge more for goods and services so they can offset CC merchant fees? Even a cash paying poor person who cannot get a CC is paying for this. My comment is to show another way this is perpetrated. People saddled with CC debt could dig themselves out faster if they could write off interest.
- NovemberWhiskey 3y agoPeople who are encumbered by credit card debt are usually people who would still be better off taking the standard deduction these days.
- bombcar 3y agoExactly. It sounds harsh but those encumbered with usurious credit card debt would be better served by being forbidden from having it at all; but that’s a position strongly fought against on all sides.
- naniwaduni 3y agoThey would not. One man's "usurious" debt is another's "wtf why do rich people get interest rates under 1% of payday loan offerings" (not in those terms).
- NovemberWhiskey 3y ago... and the answer to that is the charge-off rate on a prime credit card portfolio is currently around 2%, whereas it's 55% for payday loans.
- nfriedly 3y agoGranting a tax credit for something encourages that thing. So, from that perspective, I think it makes some sense to grant a tax credit for mortgage interest but not credit card debt.
- edwr 3y agoTax credit for mortgage interest encourages speculative investment in the housing market. Tax credit for credit card debt encourages consumer economic activity.
- red-iron-pine 3y agoyou have to live somewhere. maybe you rent, but renters DGAF about the local community the way that homeowners do. home (property) taxes also fund a lot local services, schools, etc. you want prices higher and stable, and not dominated too heavily by mega-corps that will weasel out of paying said taxes.
- i80and 3y agoI've rented in my town for ten years, and I care about it a lot thank you very much. Renters absolutely care about the local community.
- mwexler 3y agoThough one can write off losses from gambling in the US. I wish the tax code had more a more positive slant per your point, but lobbying seems to be a bigger driver.
- ScottEvtuch 3y agoPretty sure you can only write off gambling losses to offset gambling winnings, which entirely makes sense. That way you only pay taxes on your net winnings for the year.
- 3y ago
- keltex 3y agoYou used to be able to deduct any consumer debt. But that stopped in 1986. The reason was "Congress believed deductions for personal interest encouraged people to consume and stifle savings." https://www.telegram.com/story/news/local/worcester/2007/03/25/reagan-axed-tax-deduction-for/52945177007/ https://www.telegram.com/story/news/local/worcester/2007/03/...
- toyg 3y agoWhich is kinda stupid, when the economy is based on people consuming. I guess Reagan's friends at that point wanted more money for Wall Street to gamble.
- ghaff 3y agoThere used to be mostly piddling deductions for all sorts of things that you don't have today. It's probably mostly a positive to not keep track of things like sales tax in order to minimize your income tax.
- bombcar 3y agoDeductions also cause people to go temporarily insane - it’s fine paying 5% unnecessarily because I get 2% back on my taxes! Ignore the 3% that is gone forever …
- lupire 3y agoSales tax deduction still exists. 2017 law temporarily lowered but didn't eliminate it.
- brewdad 3y agoIF you itemize. 90% don't. Also, you can only deduct sales tax OR state and local income taxes but not both.
- bombcar 3y agoEven then I’m not sure how much it affected the poorer people, since you still had to overcome the standard deduction (lower, sure). The deduction on mortgage interest now mostly only affects the well-off because the standard deduction for married filing jointly is so high.
- Spooky23 3y agoIt was! Auto leases were deductible too which was a big subsidy for the auto industry. Once rich people figured out how to get poor people to be angry about things like higher marginal tax rates for rich people and “death taxes”, we raised taxes on the suckers to benefit the richer people.
- scarface_74 3y agoTo a first approximation, no one actually takes advantage of the mortgage tax deduction any more because the standard deduction is so high and the cap on state tax/property taxes is so low that most people don’t itemize. Only about 10% itemize. https://www.taxpolicycenter.org/briefing-book/what-are-itemized-deductions-and-who-claims-them#:~:text=Taxpayers%20typically%20choose%20to%20itemize,to%20itemize%20(figure%201) https://www.taxpolicycenter.org/briefing-book/what-are-itemi....
- ghaff 3y agoAnd the majority of those make more than $500K. The deductions are probably mostly some combination of mortgages on very expensive properties or very large charitable contributions, probably often tax-shielded in some manner.
- mcguirep 3y agoYou can’t deduct interest on personal income tax for mortgages over $750,000, so it seems somewhat unlikely that such deductions make up any significant amount of the deductions: https://www.irs.gov/publications/p936#en_US_2023_publink1000229891 https://www.irs.gov/publications/p936#en_US_2023_publink1000...
- junar 3y agoThe $750,000 amounts to a cap on the deduction. If your mortgage is in excess of that amount, you would pro-rate the deductible interest accordingly. I think it's reasonable to say that the folks with the largest mortgages are the ones most likely to itemize mortgage interest, even if they are capped.
- mcguirep 3y agoYeah, that is what I was trying to convey with regards to the interest deduction being capped, not that the deduction just stopped. I think I was a bit muddled with my second point as I was trying to suggest by the time you are at a very high income level, your deductions are primarily made of other things, because the mortgage interest deductions can only be so large. That's indeed what the underlying data from the IRS shows as you go up in income past $500k a year comparing column 91 (total home mortgage interest deducted by itemized filers) to column 61 (total itemized deductions) in the ridiculously massive table that the the Tax Policy Center summarizes from that starts on page 137: https://www.irs.gov/pub/irs-pdf/p1304.pdf https://www.irs.gov/pub/irs-pdf/p1304.pdf
- sgerenser 3y agoHELOC debt is (since 2017 TCJA) now only deductible if used to purchase or upgrade/repair the house. And now the vast majority of people are not going to be deducting any mortgage or HELOC debt anyway, since the standard deduction is so high now.
- jjav 3y ago> While we're in this topic: why is unsecured credit card debt NOT tax deductible but secured debt like HELOC is? HELOC interest is rarely deductible either. First, you now must be able to itemize deductions, which the recent tax changes have made very unlikely. Less than 12% of tax returns are able to itemize: https://www.irs.gov/pub/irs-soi/soi-a-inpre-id2303.pdf https://www.irs.gov/pub/irs-soi/soi-a-inpre-id2303.pdf In addition, even if you are in that ~11% who can itemize, HELOC interest is only deductible if you use it to work on the same house being used to get the LOC. Any other use is not deductible.
- judge2020 3y ago> The only thing I would add to your comment is that merchants aren’t the ones being forced to pay these stupid fees, it’s their customers (and primarily their poorer and often non-card using ones) who are being quite heavily taxed to fund a marketing scheme for rich customers. Counterpoint: i will pay you $500 if any of the big retailers (>2k stores) lowers prices now and cites "lower credit card fees means we can charge less".
- bombcar 3y agoDo you think prices would remain the same if interchange fees doubled?
- ryandrake 3y agoIf the company could profitably charge more for their products, they already would be, regardless of what interchange fees (or other costs) were.
- watwut 3y agoRaising costs means they need to charge more somewhere or lower transaction. Unless in monopoly situation, price pressure goes both ways. If competitors can lower prices, whole market eventually ends up having to do that.
- rqtwteye 3y agoDuring the current inflation companies have used inflation as excuse to raise their prices way above inflation. It may be the same here. Publicly state that interchange fees are the reason for the increase but raise the price by way more than the increase in fees.
- supertrope 3y agoBecause of the stickiness of prices, passing through of cost savings usually manifest as slower inflation. Costco is rumored to have negotiated 0.3% from Visa in exchange for exclusivity. This is part of how they are able to sell goods at thin markups. Aldi USA used to only take debit cards. They caved and now take credit cards. Travelers Insurance offers two prices on every quote: by bank account or a higher one by credit card. http://www.bloomberg.com/features/2015-how-amex-lost-costco/ http://www.bloomberg.com/features/2015-how-amex-lost-costco/