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Why? I know many Canadians would kill for mortgage interest tax deduction.

jfb 13y ago
From my perspective, it's a huge giveaway to people who are already doing fine, which offends me, morally; and it distorts the housing market in dangerous and destructive ways. Aside from employer sponsored health insurance, it's the most pernicious bit of Federal social engineering.
- mynegation 13y ago
  Thank you for your answer. On one hand, corporations get tax breaks on debt interest, even in Canada, so why should not people? On the other hand I believe that corporations are way more rational than people in taking on debt. For most people buying a house is not an investment, but very emotional decision, and I see how tax incentive may put more steam into bubbles.
  - gaadd33 13y ago
    But personal bankruptcy still carries somewhat of a social stigma whereas corporate bankruptcy is part of a good business plan.
  - drpgq 13y ago
    In Canada you get an exemption for capital gains on your principal residence, which is a pretty big tax break already.
- AnthonyMouse 13y ago
  >From my perspective, it's a huge giveaway to people who are already doing fine, which offends me, morally If it makes you feel any better, the home owner in reality gets practically none of the money. Since everybody gets the deduction it just causes everyone to have to bid that much more in order to be the highest offer. And the higher prices don't really spur new home construction to compensate as you might expect, because the areas with high demand are largely urban areas with minimal available undeveloped land and zoning regulations that often prohibit the construction of higher density housing that would relieve pricing pressure. The result is that the big winners are banks, which end up making larger loans and collecting that much more government-subsidized interest.
  - scarmig 13y ago
    Oh, so really it only goes into bankers' pockets? I feel much better now.
  - X-Istence 13y ago
    I didn't even take this into account when purchasing my home ... I made sure to buy within my means regardless of possible tax deductions I get to maybe make in the future...
    - apendleton 13y ago
      Whether you did or didn't individually, the price of housing overall reflects the fact that people generally do. It's outside of your hands.
huherto 13y ago
Because it is good for the individuals that get the break, but in sum is bad for eveybody.
saosebastiao 13y ago
1) It is a giveaway to wealthier households with plentiful credit, and 2) costs us $100B in lost revenue.
Caerus 13y ago
In addition to what others have posted, it only benefits those who have a mortgage when the deduction is passed. For everyone else it effectively raises the price of the house by the amount of the deduction.
scarmig 13y ago
It also inflates house prices [1]. If people get handouts to purchase houses, they're going to be willing to bid higher than they otherwise would. Also, I don't see why we as a society should want to subsidize loans that take 30 years to pay off, which are most used by the relatively well off anyways. It effectively enslaves people, or at least radically reduces the space for choice and entrepreneurial activity. Similar thing happens with student loans. [1] This even includes, partially, rental prices. If the market rate for a dwelling that's to be rented is driven higher, those costs are passed on in large part to the renter, especially in areas where housing elasticity is low (i.e. it's relatively difficult to add more units or houses e.g. SF, NYC). It's so bad that I really have a hard time figuring out who wins from the deduction. Except for the banks, of course.
- AnthonyMouse 13y ago
  >It's so bad that I really have a hard time figuring out who wins from the deduction. Except for the banks, of course. It's really pretty much just the banks. You get some other movement around the edges though. For example, it promotes urban sprawl, because the higher home prices make more new home construction in the suburbs cost effective, which can be to the benefit of construction companies. And people who move from areas with higher housing prices to areas with lower housing prices benefit to the detriment of those who do the opposite, because the windfall they get when they sell their home is larger than it would be otherwise -- which again promotes urban sprawl, because it increases the financial incentive for existing urbanites to move to the suburbs, and creates a similar effect for renters because higher real estate prices mean higher rents but the renters don't get the deduction so they have to move farther away from the cities to find affordable rental properties.
  - refurb 13y ago
    It's not just the banks. The money that banks lend isn't their own, its investors. Sure they get a cut through interest rate differentials and origination fees, but most mortgages get purchased by investors.
    - 13y ago

jfb 13y ago

From my perspective, it's a huge giveaway to people who are already doing fine, which offends me, morally; and it distorts the housing market in dangerous and destructive ways. Aside from employer sponsored health insurance, it's the most pernicious bit of Federal social engineering.

mynegation 13y ago
Thank you for your answer. On one hand, corporations get tax breaks on debt interest, even in Canada, so why should not people? On the other hand I believe that corporations are way more rational than people in taking on debt. For most people buying a house is not an investment, but very emotional decision, and I see how tax incentive may put more steam into bubbles.
- gaadd33 13y ago
  But personal bankruptcy still carries somewhat of a social stigma whereas corporate bankruptcy is part of a good business plan.
- drpgq 13y ago
  In Canada you get an exemption for capital gains on your principal residence, which is a pretty big tax break already.
AnthonyMouse 13y ago
>From my perspective, it's a huge giveaway to people who are already doing fine, which offends me, morally If it makes you feel any better, the home owner in reality gets practically none of the money. Since everybody gets the deduction it just causes everyone to have to bid that much more in order to be the highest offer. And the higher prices don't really spur new home construction to compensate as you might expect, because the areas with high demand are largely urban areas with minimal available undeveloped land and zoning regulations that often prohibit the construction of higher density housing that would relieve pricing pressure. The result is that the big winners are banks, which end up making larger loans and collecting that much more government-subsidized interest.
- scarmig 13y ago
  Oh, so really it only goes into bankers' pockets? I feel much better now.
- X-Istence 13y ago
  I didn't even take this into account when purchasing my home ... I made sure to buy within my means regardless of possible tax deductions I get to maybe make in the future...
  - apendleton 13y ago
    Whether you did or didn't individually, the price of housing overall reflects the fact that people generally do. It's outside of your hands.

huherto 13y ago

Because it is good for the individuals that get the break, but in sum is bad for eveybody.

saosebastiao 13y ago

1) It is a giveaway to wealthier households with plentiful credit, and 2) costs us $100B in lost revenue.

Caerus 13y ago

In addition to what others have posted, it only benefits those who have a mortgage when the deduction is passed. For everyone else it effectively raises the price of the house by the amount of the deduction.

scarmig 13y ago

It also inflates house prices [1]. If people get handouts to purchase houses, they're going to be willing to bid higher than they otherwise would. Also, I don't see why we as a society should want to subsidize loans that take 30 years to pay off, which are most used by the relatively well off anyways. It effectively enslaves people, or at least radically reduces the space for choice and entrepreneurial activity. Similar thing happens with student loans. [1] This even includes, partially, rental prices. If the market rate for a dwelling that's to be rented is driven higher, those costs are passed on in large part to the renter, especially in areas where housing elasticity is low (i.e. it's relatively difficult to add more units or houses e.g. SF, NYC). It's so bad that I really have a hard time figuring out who wins from the deduction. Except for the banks, of course.

AnthonyMouse 13y ago
>It's so bad that I really have a hard time figuring out who wins from the deduction. Except for the banks, of course. It's really pretty much just the banks. You get some other movement around the edges though. For example, it promotes urban sprawl, because the higher home prices make more new home construction in the suburbs cost effective, which can be to the benefit of construction companies. And people who move from areas with higher housing prices to areas with lower housing prices benefit to the detriment of those who do the opposite, because the windfall they get when they sell their home is larger than it would be otherwise -- which again promotes urban sprawl, because it increases the financial incentive for existing urbanites to move to the suburbs, and creates a similar effect for renters because higher real estate prices mean higher rents but the renters don't get the deduction so they have to move farther away from the cities to find affordable rental properties.
- refurb 13y ago
  It's not just the banks. The money that banks lend isn't their own, its investors. Sure they get a cut through interest rate differentials and origination fees, but most mortgages get purchased by investors.
  - 13y ago