I think far fewer people benefit from the mortgage interest deduction than believe they do.
Fairer still: The government could get out of the business of "encouraging" home ownership. Their efforts to goose home prices with tax deductions, low interest rates, and unrealistically low down payment requirements helped build the bubble and crash for which we'll be paying a long time.A fairer way to reward home ownership using the tax code would be to simply have a tax credit that would be phased out at some income level that would be based on the property tax value of the home or property.
While I wont disagree with the premise, it would hurt someone like me. Single, with a mortgage payment. Taking the standard for a single is about $5800 or so. By itemizing, Im near $12000 in total deductions. So it would tax me an extra $1500 or so. Down the road it wouldnt matter, as my interest amounts decrease. If i was married, it would be of little, help,too. Unless of course she demanded a bigger more expensive house to move intoA couple months ago I remember reading a Scott Burns column in the newspaper that the effect on most people wouldn't be that bad, and why.
I found the article on his website:
Would You Miss the Mortgage Interest Deduction? - Registered Investment Advisor
Fixed it for ya...Whatever the approach.... there will be higher taxes forever [-]next 30 years[/-]!
The deduction never did me much good, since after the first 2 years of my mortgage, I could no longer find enough deductibles to get above the standard deduction. Comes of excessive frugality. On the policy question, I have a libertarian slant: let the government get out of the business of encouraging home ownership, horses, children, or anything whatever. It's no proper business of government. Eliminate all deductions.
+1 to the above. Especially the children. It seems like the government wants people who cant afford children, to have more of them! Its gotten to the point that you need to be very rich or very poor to have children. Just my opinion.The deduction never did me much good, since after the first 2 years of my mortgage, I could no longer find enough deductibles to get above the standard deduction. Comes of excessive frugality. On the policy question, I have a libertarian slant: let the government get out of the business of encouraging home ownership, horses, children, or anything whatever. It's no proper business of government. Eliminate all deductions.
I'll go so far as to say the home mortgage deduction helps no one (or almost no one).
Everyone considering buying a house works out their monthly payment, and almost everyone incorporates the tax benefits into an estimate of what they can afford. If a tax break allows everyone to buy more house, nearly everyone will. As a result, housing prices should increase by roughly the present value of the interest rate deduction benefit. This won't be a dollar for dollar offset, but it significantly offsets any benefit to homeowners.
Not to mention the enormous US property transaction market. I believe that these people are strong enough to fend off any important changes to the mortgage deduction for a very long while.I agree with your reasoning that people buying now gain no real benefit from the mortgage deduction since prices are raised in response. However, to remove it now would certainly hurt those who already own a home.
Everyone considering buying a house works out their monthly payment, and almost everyone incorporates the tax benefits into an estimate of what they can afford. If a tax break allows everyone to buy more house, nearly everyone will. As a result, housing prices should increase by roughly the present value of the interest rate deduction benefit. This won't be a dollar for dollar offset, but it significantly offsets any benefit to homeowners.
I go even farther and say eliminate the income tax, and replace it with the Fair Tax.
+1 to the above. Especially the children. It seems like the government wants people who cant afford children, to have more of them! Its gotten to the point that you need to be very rich or very poor to have children. Just my opinion.
Fairer still: The government could get out of the business of "encouraging" home ownership. Their efforts to goose home prices with tax deductions, low interest rates, and unrealistically low down payment requirements helped build the bubble and crash for which we'll be paying a long time.
I agree. I'm just resigned to the fact that as long as there are politicians, the tax code will be used to their benefit.
I agree with your reasoning that people buying now gain no real benefit from the mortgage deduction since prices are raised in response. However, to remove it now would certainly hurt those who already own a home.