The Mortgage Interest Deduction And The U.S. Housing Market
http://thedianerehmshow.org/shows/2012-12-10/mortgage-interest-deduction-and-us-housing-market
President Barack Obama seems to be, so far, holding firm on his campaign pledge to raise tax rates for those with taxable income above $250,000, but he has also not ruled out reducing or eliminating longstanding tax breaks including the mortgage interest deduction. It’s been in effect for almost a century, and now costs about $100 billion a year in lost tax revenues. For many upper income tax payers, its benefit is clear, and it’s also believed to encourage home ownership. Please join us to discuss who the mortgage interest deduction helps, who it hurts and what would change if the rules were modified.
Guests
Seth Hanlon
director of fiscal reform at the Center for American Progress.
Lawrence Yun
chief economist of the National Association of Realtors.
Eric Toder
fellow at the Urban Institute and co-director of the Urban-Brookings Tax Policy Center.
Ed Pinto
resident fellow at the American Enterprise Institute and former executive vice president and chief credit officer for Fannie Mae.
Comments
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Actually some states like mine (Maryland) allow renter's deductions on our state taxes. And you are right about Canada...where the banking practices of who is given a mortgage for home purchase are far stricter than here. As one other poster noted this deduction has allowed the mortgage loan/servicing industry to raise the prices of borrowing convincing us to borrow more while getting a larger percentage back in these deductions. A house is no less valuable as a residence if it suits one's needs if it is priced at 100k versus 200k...and these are not the home mortgages that get encouraged by this deductions...
camko wrote:
"Talk about deceptive advertising! The AMT was also meant to catch folks with too many deductions and that ended up biting middle-class families after the Republican wrecking crew screwed up the indexing factors."
False.
AMT was instigated by Treasury Secretary Joseph Barr under Lyndon Johnson, passed in 1969 under Democrat-led Congress. The law was modified in 1982 and 1986 under Democrat-led Congresses during the Reagan Presidency. Most changes have come under Democrat leadership in the Congress, as Democrats have mostly led in the Congress.
The law has undergone many changes to the rates, though it has never been indexed. President Obama did propose indexing the AMT in his 2011, which budget received NOT A SINGLE VOTE FROM EITHER SIDE.
So camko, do you care to explain to the class how "the Republican wrecking crew screwed up the indexing factors"?
Hear Here
memorex39 wrote:
"Banks already inflate the mortgate rate, then add more to it to get an "APR"
, then add more cost to even work on giving you a loan."
Better go to the tape on that one, memorex. Those "additional costs" are where the "APR" comes from. The idea of the APR is to reflect to the consumer what he is ACTUALLY paying, not to "add more cost". It's a good thing for full disclosure. Before the APR, banks could say they were charging you 5%, but pile up the closing costs to raise their revenue. Now, those additional charges MUST BE REFLECTED in the APR - which is why it's always higher than the bare rate.
THX1138 wrote:
Mike Sergeant wrote: ?
I have no idea what you are talking about.
I'm sure that you don't because you have blocked out the entire Debt Ceiling Limit crisis of 2011. It was resolved almost exclusively by budget cuts.
What cuts? What was resolved?
gracewalker3 wrote:
"At year 15 of being in my home I look forward to the mortgage int. deduction each year."
At year 15, grace, you should have refinanced once if not twice to take advantage of today's low rates. The MID should be negligible for you.
THX1138 wrote:
"As usual it's only about squeezing more money from the private sector to pay for ever growing unconstitutional government activities. Never cutting anything, spending is the problem."
Bump.
Deserves repeating.
The "MID" in most peoples mind is far greater than it actually is. Good advice is to get a fifteen year mortgage and pay it off as fast as possible and forget the MID. Interest payments are pretty much the same as taking your money and throwing it in the trash.
Mike Sergeant wrote:
"The private sector is paying for the military? The private sector is paying for roads? The private sector is paying for the corporate welfare?"
I hope this was intended tongue-in-cheek, mike, but somehow I don't think so. The correct answers are:
"The private sector is paying for the military?" Yes.
"The private sector is paying for roads?" Yes.
"The private sector is paying for the corporate welfare?" Yes.
Exactly where do you think the money comes from, mike? The sky? Off a tree? Or out of the pockets of taxpayers?
ecgberht wrote: "Exactly where do you think the money comes from, mike? The sky? Off a tree? Or out of the pockets of taxpayers?"
I remember MS putting the same nonsense forward before, nothing penetrated last time either.
Answer the question Mike, I would be interested in your answer.
THX and eggie:
It really is too bad that you guys lost your work ethic someplace along the way and became dependent on the state/Fed. Too bad you failed to save for your retirement......the private savings designed to fund your retirement with SS and Medicare as the safety net.
Pretty evident you know few if any elderly; otherwise you would know that the bogus "free" market priced savings and life insurance accumulation beyond what ANY middle/lower earning person could ever accumulate.....even with extreme discipline. Of course you ignored the major shift in pensions - from defined benefit to tricky employer-benefit programs like 401(k) and 403(b) e.g. in the 40's - 60's a $5,000 life policy was considered adequate.....by the 80's that jumped to $150K......by 2000 that jumped to half a million.....and life insurance morphed into various stock market based "investments" as fragile as the market itself - anybody remember 2007 ? (oh, so long ago). The free market safety net NEVER existed. That's why the elderly and current tax PAYERS believed in and passed Social Security and Medicare......based on actual real life EXPERIENCE and not some haughty ingenuous theory. The elderly are reputed to have transferred to their progeny huge sums in the last few years.....your parents/forebears probably gave you an education (probably in state run schools) and inheritance and gifts and a decent living and start into your own adulthood.
The least you can do to the older generations is to say a polite "Thanks" and commend them for PAYing into Social Security and Medicare for generations......so that you don't have to take care of them......as was traditionally done from time immemorial and is currently being done in most countries, like say Communist China.
Ingrates(
Your guests keep comparing us to England and Canada and their tax system. I take it then they are also in favor of universal health care? The middle class has it hard enough in this new American oligarchy.
If anything restrict the deductions to primary residence and up to a certain amount.
The fiscal cliff and deficit furor are relatively recent anomalies. When one realistically researches their origin (call it blame), it is easy to see the "too-big-to-fail" underpinnings that created the problem to begin with.
It was NOT SS or Medicare or mortgage interest deductions or welfare ..... yada yada yada.....that created the issues.
It was the unmitigated greed and self interest of the one percenters and the programs that tried to bail THEM out that built the bubble. The bankers, hedge fund owners, and international speculators generated the need (at least in the two Admininstrations' eyes) to fix the world finances. The bail outs and economic stimulus programs would never have been needed IF the one percenters had really performed....like, say, actual Job Creation (what a bogus lie perpetrated on us...and still being done). Paris Hilton, Mitt Romney et al create so FEW jobs it is ridiculous!!
Now the middle/lower earning schlubs among us have to pay again.....to subsidize the one percenters profligate habits. And that's on top of being threatened with surrendering all the PAYments we have made for generations into Social Security and Medicare.
By the way....Medicare requires premium PAYments even now - not free, and not a burden on others as so often touted; and Medicare does NOT pay for all costs - there are co-pays, deductibles, coinsurance, COB ad infinitum to be paid by patients (the elderly) out of their meager savings and SS - at a time when their health is at its ebb and their assets at their lowest.
When states (not the Fed) assess houses at 4 or 5 times their original purchase price (not counting the interest paid) then property taxes become a major issue for those that have industriously paid off their homes.
Perhaps isolating deductions to primary homes would be a meager start....no second mortgages or equity loans etc.
In reply to developer warren
Less taxes means more money - or whatever - for giving.
If you get something in return, a tax deduction in this case, that is not giving, it is trading.
And when the rich get a big tax break for "giving," the rest of us pay for it as the government(s) seek to make up the shortfall.
HA, why are you so angry?
"The least you can do to the older generations is to say a polite "Thanks" and commend them for PAYing into Social Security and Medicare for generations......so that you don't have to take care of them......as was traditionally done from time immemorial and is currently being done in most countries, like say Communist China.
Ingrates("
Actually, I'll say thank you to my Dad who INDIVIDUALLY saved for retirement all his life (mostly through stocks, by the way) and when he passed left my Mom with enough resources to support herself. They didn't think it was right to burden their children with taking care of them ... much like I don't think it's right to burden mine.
"based on actual real life EXPERIENCE and not some haughty ingenuous theory."
Ingenious theory? Over a lifetime, NOTHING, no investment, NOTHING has out-performed the U.S. stock market. That's not a theory. That's a fact. Which is why, allowing the youngest workers to invest a small portion of their payroll tax in private accounts was always a good idea. Unfortunately, it would have limited the amount of money available to Democrats to borrow and spend from the SS trust fund, so it was doomed to demagogue.
I hasten to add the false sense of security social safety nets like SS and medicare have caused. SS was meant at it's origin to be a "supplement" for retirement, not a retirement fund. This is exactly the moral hazard I was writing about in my first post. It is no coincidence savings rates have plummeted since the institution of these ponzi schemes.
Steve on Plum Isle wrote: "And when the rich get a big tax break for "giving," the rest of us pay for it as the government(s) seek to make up the shortfall"
Deductions for charitable donations are a throw back to a time when it was understood that the Constitutional role of the federal government was not to be in the cradle to grave welfare state business. The good old days, when the constitution was important to almost everyone.
"differencetone wrote:
The home mortgage interest deduction has caused the average size of new homes to drastically increase. This is a huge energy suck for many years into the future. It should not apply to large homes at all. People who buy large homes should get zero interest deduction.
December 10, 2012 - 10:43 am"
Or people buy more House than they can afford because of the Deduction?
Not true, people have little control over the homes they must buy ie. Land costs, Zoning, infrastructure requirements have added many Thousands to the cost of a home.
Furthermore, in order to increase profit for the Developer and give "Investors", who have more money than they know what to do with, bigger loan opportunities, new homes come with loads of extras- landscaped, appliances etc, etc and the Buyer can take it or leave it.
And then the Realtor who takes 7-10% fee, every time a house turns over that takes a huge bite out of the equity, particularly in a place like the DC Area where there is (was) a lot of turnover.
Monte Haun mchaun@hotmail.com
My parents built a new home for $4000 in 1955. The monthly payments were $80 per month. I was in first grade in 1955, and the house was paid for before I finished high school.
I would guess that the mortgage interest rate would have been irrelevant at that time.
THX1138 wrote:
Steve on Plum Isle wrote: "And when the rich get a big tax break for "giving," the rest of us pay for it as the government(s) seek to make up the shortfall"
Deductions for charitable donations are a throw back to a time when it was understood that the Constitutional role of the federal government was not to be in the cradle to grave welfare state business. The good old days, when the constitution was important to almost everyone.
gary k said:
Well, it's quite obvious that those who want smaller government are quite able to go back to those good old days, or at least think they want to. But do they realize that it would require them to give up their current standard of living, and live they same way people did then?
Back in the good old days, just as an example, you didn't have to worry about the cost of medical care. For most people, there was little or no medical care available. When you got sick, the odds were you would recover on your own, stay sick, or die. In my younger days, I knew people who had lived in the good old days. They were the survivors. They could tell you lots of stories about those who didn't survive.
Eggie,
First of all, the word used was "ingenuous" not "ingenious"......vast difference in spelling and meaning. Next, annoyance for sure, not anger, at boldface ingratitude to the millions of old folks including your pop (God rest his soul) who did plan ahead to build and maintain SS and Medicare. Your Mom's SS was surely enhanced because of them. The fact that you enter these misdirected diatribes proves you know ZIP about SS. In fact, most of the borrowing from the SS "trust fund" was done during Bush II for Part D and two wars.....neither placed on a real budget. Blame the Dems for going along with W if you will. But SS is solvent for a number of years and requires few tweaks like boosting the wage cap and using real cost of living data instead of existing COLA. Your blast about the stock market flies in the face of the 2007+ era. Imagine for the moment that YOU needed to retire in 2008 and YOUR retirement was subject to the vagaries of the DOW. Back in 07 we all saw a 60 year old lady in Chicago on CNN standing in a line of job applicants for a handful of slots at a hotel.......winter, laid off after years of faithful work, over 3000 applicants, and her personal chart of her stock market based 401(k).......and her chart showed a huge drop in her assets. She followed the rules, did what her former employer suggested, and lost big time. At least her SS was immune.
There, but for the grace of God, might be you.
gary k wrote: "They could tell you lots of stories about those who didn't survive"
The the thing about life, no one gets out alive.
"it is interesting to know that Medicare did not improve the rate of progress in life expectancy that was occurring before the program started"
Seriously, read on....
In 1930 average life expectancy for Americans at age 60 was 74.5 years. (Infant mortality pulls down average life expectancy, hence the measure "at age 60.") In 1960 -- five years before Medicare began -- the average jumped 2.6 years, to 77.1. By 1990 -- 25 years after Medicare began -- it had jumped to 79.7 -- again 2.6 years.
Medicare did not make the upward-sloping life-expectancy curve any steeper!
For historical context, from 1900 to 1960, overall life-expectancy increased 22.4 years, from 47. 3 to 69.7.
I hasten to add that the medical system may be the least important factor in life expectancy, and one must never judge a country's health care by that measure. (Too many other factors -- lifestyle, genetics, culture -- play more important roles.) Nevertheless, it is interesting to know that Medicare did not improve the rate of progress in life expectancy that was occurring before the program started.
In Canada there is no morgage deduction but there is no tax on any increase in value when you sell.
Isn't ironic that the show would visit mortgage interest just as more articles are coming out about the travesties perpetrated on taxpayers by lenders from AIG to Countrywide to BOA? Angry comments came from Ben Bernanke about these robber baron mortgage machines. Their various senior managers paid themselves millions and millions in incentives and "retention bonuses" even AFTER they had gotten bailout money from the federal government.......literally paying themselves for pillaging their own customers, many of whom were retirement funds, municipalities, and local government entities. They sold bundles of putrid underwater loans to unwary and trusting victims, most of whom were supposed to be professional "money men". AIG is in the last throes of paying back the US for its largesse, funded by borrowed fed funds....i.e. Taxpayers. And theses machine lenders had hundreds of thousands of employees at their apex, all charged with sell...sell...sell...and doing ANYthing to lure in unwary borrowers. Countrywide did get nailed for some relatively meager funds....nothing to compare with what was bilked out of the US economy.
And now the same cadre of highwaymen are paying off every lobbyist and rep to avoid even tiny changes in tax rates and place the burden of the debt......Guess where: right back on low/middle income earners. Worst of all, there are millions of well meaning conservatives in the electorate and Congress who have been brainwashed into assisting the thieves once again. Why anyone who takes home under 250K backs the ultrawealthy is beyond conscious belief.
"Your Mom's SS was surely enhanced because of them."
Why do you speak with such authority on things of which you know squat, HA? Actually she could have gotten by fine without the SS at all. So her SS was not "enhanced" by his fiscal responsibility. SS was not the focus of her retirement savings. It was a SUPPLEMENT. Just like it was intended to be.
Actually, "ingenious" is an old form of "ingenuous" - you could look it up. But I won't deny the misreading in my once-over of your post.
"The fact that you enter these misdirected diatribes proves you know ZIP about SS. In fact, most of the borrowing from the SS "trust fund" was done during Bush II for Part D and two wars.....neither placed on a real budget."
I wouldn't be pointing fingers about ignorance while demonstrating your own, HA. You have no support for your statements about Bush and the wars wrt SSTF. In fact borrowing from the trust fund has been continual since there was a surplus and the money goes right into the general fund - mostly under Democrat Congresses, like I said. Oh ... and Part D? will run 50 to 75B a year into 2020 - a blip on the SSTF - now at 2.5T. Now, who was that that was ignorant again?
"Your blast about the stock market flies in the face of the 2007+ era. Imagine for the moment that YOU needed to retire in 2008 and YOUR retirement was subject to the vagaries of the DOW."
This is a very popular meme of the left. Anyone who was 64 (one year from retirement) in 2007 and had the bulk of their money in stocks was either greedy or stupid - and most were the former. I have empathy, but not sympathy. That is why the Bush plan for privatizing SS addressed the youngest workers with the safest investments (i.e. indexed mutual funds e.g.) in the stock market - not people who were 64 and about to retire.
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