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Can they focus on the absolutely stupid skyrocketing house prices on the West coast first, please?

 

[ZackieChan]

Yes.

Good man.
Like Terrisus' old folder of gifs

 

[kirblar]

Can they focus on the absolutely stupid skyrocketing house prices on the West coast first, please?

There's not much you can do on a federal level regarding that, unfortunately.

 

[jmdajr]

Can they focus on the absolutely stupid skyrocketing house prices on the West coast first, please?

Isn't that more an issue for the city/state?

 

[corin7]

I guess it really depends on where you live and how you classify the middle class. I don't think a 500k home is exceptionally expensive.

This. That will buy you a 2 bedroom condo here or a 3 bedroom house an hour and a half away from the city.

 

[sangreal]

Lowering the cap on the MID is probably a good idea.

However, it'd be extremely unpopular, and the GOP isn't exactly an entity I associate with political courage, so I'm not holding my breath.

the vast majority of tax payers don't receive the mortgage interest deduction, and many of them would see a big benefit from doubling the standard deduction instead

 

[Arrogant Bastard]

I guess I'm just surprised that so many are for completely getting rid of the deduction.

 

[Mirk]

Raising the taxes on the top 2-5% to cut taxes on the top 1% is an extremely stupid idea.

Well the bottom 95% well is going to dry up someday. It would be foolish to think once its gone the top 5% wont eat their own.

 

[sangreal]

I guess I'm just surprised that so many are for completely getting rid of the deduction.

most economists are for completely getting rid of the deduction too

 

[Wilsongt]

I just purchased a single family home for $140k.

$500k is a lot for me...

 

[Piecake]

I guess I'm just surprised that so many are for completely getting rid of the deduction.

It might be one of the most important policies in the U.S. economy, but the mortgage-interest deduction sounds esoteric to most people. Perhaps that's because, for most people, it's completely irrelevant.

Although about two-thirds of American households own a home, only one-quarter of them claim the deduction, which sometimes gets abbreviated to MID. As Matthew Desmond, a sociologist at Harvard University, explains in a magisterial essay on the MID in the New York Times Magazine, this little fact has played an outsized role in the United States' yawning wealth inequality.

Federal housing policy transfers lots of money to rich homeowners, a bit less to middle-class homeowners, and practically nothing to poor renters. Half of all poor American families who rent spend more than 50 percent of their income on housing costs. In May, rental income as a share of GDP hit an all-time high. Meanwhile, in 2015, the federal government spent $71 billion on the MID, and households earning more than $100,000 receive almost 90 percent of the benefits. Since the value of the deduction rises as the cost of one's mortgage increases, the policy essentially pays upper-middle-class and rich households to buy larger and more expensive homes. At the same time, because national housing policy's benefits don't accumulate as much to renters, it makes it harder for poor renters to join the class of homeowners.

https://www.theatlantic.com/business/archive/2017/05/shame-mortgage-interest-deduction/526635/

It's no secret the mortgage-interest deduction is regressive. Richer taxpayers have 1) houses, 2) bigger houses, and 3) get bigger deductions because their tax brackets are bigger. But the bad policy doesn't stop with subsidies for those who least need them. There's also the small matter of incentivizing leverage. In other words, households that take on more debt get more of a tax break. That's a head-scratcher in our post-bubble world.

We spend $100 billion every year -- that's the annual cost of the deduction -- subsidizing bigger houses for the upper middle class. This should be among the lowest of low-hanging fruit when it comes to tax reform. It would be nice to end welfare for the well-off.

https://www.theatlantic.com/busines...rtgage-interest-deduction-is-terrible/259915/

Like someone else said, getting rid of MID and doubling the standard deduction would help the poor and middle class a lot more.

The mortgage interest deduction undermines American schools.

So what is the rap on the mortgage interest deduction?

Well, according to Preuss, it is no longer doing the job it was designed to do, namely encourage homeownership, which, to the American way of thinking, is an absolute good (a belief that may be debatable). For evidence, she relies on another study — by the Reason Foundation, a libertarian think tank. It points out that while the total amount devoted to the mortgage deduction has fluctuated since 1994, homeownership has remained fairly constant, at about 65 percent. (It climbed to nearly 70 percent during the housing bubble, but then collapsed when it burst.)

The deduction doesn't induce lower-income people to buy homes. If they can't itemize — because the standard deduction is larger than their write-offs — they can't claim it. Instead, the MID encourages those who are well off to spend more on a house they would have bought anyway — or to take out a bigger mortgage and go more deeply into debt.

The deduction, according to a 2010 analysis by the Tax Policy Institute, disproportionately benefits the top fifth of earners — because the bigger the mortgage and the higher your tax bracket, the more you save. In 2010, for example, households with incomes over $200,000 received a $6,253 write-off, those earning $75,000 to $100,000 got a $1,046 deduction and people with incomes of $20,000 to $30,000 saw a tax benefit of only $340. About 40 percent of the $72 billion in revenue forgone by the government went to families with incomes over $200,000. Another 35 percent went to households whose annual incomes were between $100,000 and $200,000.

Preuss of Smart Growth America points out another inequity. "The mortgage interest deduction can be claimed on second homes as well," she says. Some 30 percent of those who take the deduction on their principal residence take one on a second, too. In the meantime, those who rent apartments receive no write-offs at all.

Giving such a hefty tax advantage to homeowners over renters encourages the construction of single-family homes rather than apartments. And this is continuing at a time, says Preuss, when families increasingly want apartments. If financial incentives were neutral, cities would probably have more people living in more efficient patterns (in smaller homes or multi-family buildings) closer to their jobs.

https://www.minnpost.com/cityscape/2013/01/how-mortgage-interest-deduction-hurts-our-cities

 

[Quixzlizx]

I just bought a house last year, but for less than a $500k mortgage. Way less

Edit: By the way, I live on Long Island, so it's not like I was able to buy a McMansion for $200k in Iowa. It's possible to buy a house under $500k in major metro areas.

 

[Clockwork]

In the same way some of you major metropolitan/east coast/west coast folks think middle america people are insane for thinking $500,000 for a house is a shit ton of money and definitely not middle class (or at least upper middle class), us folks think you are delusional for not realizing that for the majority of the US this IS a shit ton of money for a house.

If you can afford that much for a residence you probably don't need a tax credit.

Edit:

An example near where I live...

$489,000
4 bedrooms
5 bathrooms
Almost 4500sq ft

https://www.zillow.com/homedetails/3425-Concerto-Ln-Green-Bay-WI-54311/60806550_zpid/

 

[conpfreak]

the vast majority of tax payers don't receive the mortgage interest deduction, and many of them would see a big benefit from doubling the standard deduction instead

I support increasing the standard deduction if that means reducing or getting rid of the mortgage interest deduction altogether. I say this as a potential future homeowner. In the current market where more people than ever are renting because of the new realities of the housing market, I'd prefer to take advantage of a higher standard deduction.

With that said, this would cause a direct hit to middle class homeowners in high COL areas come tax time.

 

[Quixzlizx]

Okay, poor isn't the proper term. So does this help or hurt middle-class families that own a home?

From the article:

You should also quote the oil companies regarding climate change, and the tobacco companies regarding lung cancer, and the NRA regarding gun control, etc.

 

[Chezzymann]

I guess it really depends on where you live and how you classify the middle class. I don't think a 500k home is exceptionally expensive.

My family is in the top 15% of household income in the united States and our house is only $120,000. Parents are still paying it off. Granted im in houston so that's a dramatic difference from, say, San Francisco but it's still weird to see someone say that a house nearly 5x the cost is not exceptionally expensive.

 

[zelas]

In the same way some of you major metropolitan/east coast/west coast folks think middle america people are insane for thinking $500,000 for a house is a shit ton of money and definitely not middle class, us folks think you are delusional for not realizing that for the majority of the US this IS a shit ton of money for a house.

If you can afford that much for a residence you probably don't need a tax credit.

I'm in MD. $500k is a ton of money for a house. Not insane, but its easily in the well paying job category.

 

[Earthbound64]

How can we give a larger tax break to the rich, oh we can fuck the poor.

Nobody is reading the article.

Yeah, fuck all those poor people buying million dollar houses.

Seriously. Got to get that first post / hot take.

-Edit-Should have said middle-class

No, should have read the article before posting.

 

[Hari Seldon]

This would simultaneously give the government more money and reduce the prices of houses. I say go for it. Better than increasing income tax.

 

[Muppet of a Man]

This will have 2 negative consequences for middle class people looking to buy in urban areas so they can be closer to work in cities: it will enable only the truly wealthy to buy in these areas, while sending the middle class back to the suburbs, increasing suburban sprawl once again, as well as increasing commuter traffic...and all the negative effects of pollution and climate change with it.

 

[Clockwork]

I'm in MD. $500k is a ton of money for a house. Not insane, but its easily in the well paying job category.

I agree. My post was more in response to these folks (and others like them):

500K doesn't buy much of a house in parts of this country.

Leave the mortgage interest deduction alone.

sure, i dont need to own a house ever why not

and guys if you dont live in bumblefuck 500k IS middle class

 

[Macam]

They should set a date and nuke the entire exemption, as it's a waste, benefits home ownership over other forms of accommodation (renters indirectly end up subsidizing home owners), & would "simplify the tax code".

But it will never happen. Republicans love the sheer complexity of the tax code, hence their solution to everything: a tax exempt savings account for X (aka, a tax shelter).

 

[mnannola]

Republicans piss of rich people? No way is this happening.

 

[KingV]

This isn't so bad. Just continue let me deduct my property taxes.

 

[LegendofLex]

I just bought a house, after saving for three solid years as my wife and I exited our abject $10k/yr household income college years.

I'd happily trade the mortgage interest deduction for a higher standard deduction so everyone can benefit from tax relief.

 

[gutter_trash]

coming form the guy who doesn't want to hire poor people for cabinet

 

[Piecake]

This will have 2 negative consequences for middle class people looking to buy in urban areas so they can be closer to work in cities: it will enable only the truly wealthy to buy in these areas, while sending the middle class back to the suburbs, increasing suburban sprawl once again, as well as increasing commuter traffic...and all the negative effects of pollution and climate change with it.

Smart Growth America disagrees with you

Despite the ruinous housing crisis just a few years ago, the federal government still keeps the suburban sprawl machine humming.

About 85 percent of federal subsidies for housing flow to single family homes, according to a recent report from Smart Growth America, though only about 65 percent of Americans are homeowners and the majority of renters live in multi-family housing. The ultimate sprawl subsidy just might be the mortgage interest deduction. Not only is this baby completely regressive — the vast majority of subsidies flow to households with incomes greater than $200,000 — as you can see in the above map, this money tends to flow to areas where everyone is dependent on a car.

http://usa.streetsblog.org/2013/05/22/the-granddaddy-of-sprawl-subsidies-illustrated/

 

[Euphoria14]

I just bought a house last year, but for less than a $500k mortgage. Way less

Edit: By the way, I live on Long Island, so it's not like I was able to buy a McMansion for $200k in Iowa. It's possible to buy a house under $500k in major metro areas.

Curious of price range, taxes and area if you don't mind. It's always property tax that turns me away...

Looking to sell my current home. Currently in Sound Beach.

I'm in the under $300k club. Still owe $182k.

 

[JustenP88]

I don't see much value in the mortgage interest deduction and the whole "$500K isn't expensive unless you live in the middle of nowhere" attitude doesn't motivate me to look for any value.

 

[Grym]

...strange new feeling here...

...in favor of something the "Trump administration is weighing"

...hmmm...



edit - though I'm sure they will just give the extra savings to the top 1% rather than spread it around to the poors

 

[jrcbandit]

Above $500k is upper class, with the exceptions of California and some northeastern major metropolitan areas. $500k+ where I live is a McMansion / above 4000 square ft homes. Of course there are some areas like near the Medical Center or along Bellaire that homes can cost 1 million plus and not be that large in size, but for the most part we are talking 4k+ square feet.

 

[Muppet of a Man]

Smart Growth America disagrees with you



http://usa.streetsblog.org/2013/05/22/the-granddaddy-of-sprawl-subsidies-illustrated/

This is not a one shoe fits all problem, as different cities have different capabilities in terms of public transit and different levels of density. West coast cities, for example, are less dense, have relatively poor public transit (making people more likely to be car dependent), and have urban growth boundaries, which makes all housing, regardless if it is single home, townhouse, or condo/apartment extremely expensive.

In this area of the country (seattle for example), 500k affords you a 2 bedroom condo in the city and 750k a 700 sq ft bungalow.

 

[Spoiled Milk]

By some estimates, doubling the standard deduction could lower by 90 percent the use of the mortgage interest deduction by middle-class Americans, eroding much of the argument for keeping it.

Wow. Kill it, then.

 

[Quixzlizx]

Curious of price range, taxes and area if you don't mind. It's always property tax that turns me away...

Looking to sell my current home. Currently in Sound Beach.

I'm in the under $300k club. Still owe $182k.

It's a townhouse in the $200k range in the town of Brookhaven. Since it's a townhouse, taxes are $3k after STAR.

 

[Euphoria14]

It's a townhouse in the $200k range in the town of Brookhaven. Since it's a townhouse, taxes are $3k after STAR.

Ah a Townhouse. Never have to mow the grass I bet.


Brookhaven as well, so not that far from me most likely.

My house was $208k and I also pay just $3k after STAR. Small 1-1/2 floor cape though, so nothing big.

I'm told I'm lucky at my current price and tax range. I believe it because I'm not having much luck finding another home with such low taxes.

 

[Wowfunhappy]

Hey, something I'd actually support. Planet Money did an episode that covered this tax break among other things—it benefits homeowners (who are generally richer) at the expense of renters (who are generally poorer).

 

[Somnid]

I think the problem is that houses as a concept are no longer middle class and so those that can afford houses get to keep them as investments whereas the lower and middle class will be perpetual renters who will continue to see a larger percentage of their paycheck taken each year.

 

[hydrophilic attack]

This deduction increases the cost of buying and increases the risk of debt crashes as it incentivizes people to go into debt

I'm in favour. If it can be done gradually enough where it doesn't cause a market crash overnight as its removal causes problem for people truly dependent on it

 

[Muppet of a Man]

I think the problem is that houses as a concept are no longer middle class and so those that can afford houses get to keep them as investments whereas the lower and middle class will be perpetual renters who will continue to see a larger percentage of their paycheck taken each year.

This is a major problem with fewer people owning homes; it will push us even further in the direction of a rentier economy where the wealthy exploit the majority, who are renters who will scrape by on less and less. This is currently happening in major metropolitan areas on the west and east coasts. It's more expensive to rent in many of these places for what you get than it is to buy a single family home in the interior of the country.

I think the housing subsidy should be reformed so that it discourages financial leveraging (i.e., tax breaks trail off at the higher end and are greatest as a proportion of the financed amount at the lower end). I'm not sure discouraging home ownership is something people want to actually do, as it will stratify wealth and power even further, shrinking the middle class.

 

[Jenov]

As long as it's not a full removal and just a scale back, that seems fine. But I'm still suspicious of their intentions here. Seems that GOP would have no problem going after our already shrinking middle class before they would consider a single percentage increase on billionaires and corporations.

 

[JackDT]

Wow, something I actually agree with Trump on. This deduction totally skews markets and means people without homes subsidize people with houses.

 

[Syriel]

Okay, poor isn't the proper term. So does this help or hurt middle-class families that own a home?

From the article:

Hurt current owners.

Help the vast majority of non-owners by lowering prices.

The proposed change is things over 500K.

I agree that 500K can be middle class in some places.

1M is "middle class" absolutely nowhere.

Seems like it is in SF.

That's a 2 bed/2 bad condo.

Can they focus on the absolutely stupid skyrocketing house prices on the West coast first, please?

Eliminating the mortgage interest deduction would cool prices immediately. It is one of the things that fuels higher and higher prices.

 

[GreenMonkey]

One of the things I don't like. As a left leaning libertarian I don't like interference in the free market if it isn't vitally needed.

Mortgage deduction interferes with the housing market for no real reason. Add in the bonus that it helps people with more expensive houses.

Sounds like a political hot potato though.

 

[Quixzlizx]

Ah a Townhouse. Never have to mow the grass I bet.


Brookhaven as well, so not that far from me most likely.

My house was $208k and I also pay just $3k after STAR. Small 1-1/2 floor cape though, so nothing big.

I'm told I'm lucky at my current price and tax range. I believe it because I'm not having much luck finding another home with such low taxes.

Yep, no mowing, raking, or shoveling, but those $400/mo common charges.

 

[milanbaros]

This is a tax that seems really regressive to me and should be axed. I'm not sure why it exists?

 

[Horns]

I use this deduction, but I would love to see it lowered to $500k because of a relative. He said he only voted for Trump because he was going to lower his taxes which is a B.S. excuse. He bought a new expensive house.

 

[teh_pwn]

If something like that happened, ultimately house prices would drop. But the path to get to that pricing is rocky and unnecessary. Keep the law as is.

 

[Euphoria14]

Yep, no mowing, raking, or shoveling, but those $400/mo common charges.

That's the one thing that scared me about townhouses, the maintenance charges. Do you buy home owners insurance as well with townhouses?

Guessing in the ~$2k/month range total for mortgage/insurance/taxes?


I'm currently paying ~$1.5k/month, but I have to rake, mow and shovel lol.



I wonder how this affects people in our range. Do we save? Do we lose home value?

Net positive or negative?

 

[UraMallas]

This admin is already incredibly unpopular. If they want to take another hit in order to halve this deduction, I'm for it. Pls proceed.

 

[Keri]

I wonder what affect, if any, this could have on housing costs in some more expensive areas. Where I live, $500,000 is a two bedroom townhouse in a bad neighborhood. So, I wonder if a change like this might start to drag prices down a bit? Although, if most homeowners aren't using the deduction, I suppose it probably won't affect purchases.

EDIT: Actually, it's a 2 bedroom townhouse is an OK neighborhood. It's about the price of a small single family home in a bad neighborhood, though.