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Old 09-14-2008, 03:56 PM
 
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Quote:
Originally Posted by StoneOne View Post
Without debating the rest of the post, other than student loan interest, I can't think of any other interest that's deductible. Certainly not credit card or auto loan interest.
Property taxes are deductible, and those are certainly interest There are more forms, believe it or not. I'm not really versed in individual tax law, but for certain there are other forms deductible.
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Old 09-14-2008, 05:31 PM
 
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Quote:
Excellant point, my property taxes ar just under $6000.00 a year..! How would you renters like that? Also, property insurance, and other expenses renters don't see. That stuff adds up. The reason for the tax break is simple. The Goverment wants everyone to own a home. They do all they can to make that possible.
If you chose not to be a property owner, fine, but don't cry because some enjoy the advantages of home ownership.
I say your complaining is just sour grapes...
It is not a question of being sour grapes. It is a discussion about the proper role of government in markets, and whether its intervention causes more harm than good.
You say the government wants everyone to own a home. In its desire for this to happen, the government intervenes and creates a moral hazard, causing distortions in the real estate markets. It causes house prices to become inflated and redistributes wealth from renters to homeowners. Indeed the government will do all it can so people can own homes, including creating Freddie Mac and Fannie Mae. Enough said.
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Old 09-14-2008, 05:57 PM
f_m
 
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Quote:
Originally Posted by ndfmnlf View Post
It is not a question of being sour grapes. It is a discussion about the proper role of government in markets, and whether its intervention causes more harm than good.
You say the government wants everyone to own a home. In its desire for this to happen, the government intervenes and creates a moral hazard, causing distortions in the real estate markets. It causes house prices to become inflated and redistributes wealth from renters to homeowners. Indeed the government will do all it can so people can own homes, including creating Freddie Mac and Fannie Mae. Enough said.
If it is not made affordable to the average person, then only investors would own most of the property. As it is, 1% of the people own most of the real estate anyway. Are you looking to have more real estate be owned by the small percent of rich?

In places where the cost of housing is high (5-10x median income) it is very helpful. In areas where the housing is lower (2-4x median income), it wouldn't make so much difference.
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Old 09-14-2008, 06:13 PM
 
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If it is not made affordable to the average person, then only investors would own most of the property. As it is, 1% of the people own most of the real estate anyway. Are you looking to have more real estate be owned by the small percent of rich?
Actually if the deduction is eliminated, houses will become more affordable. Prices will come down because there no longer will be any tax incentive to own a home. Homeownership will still have other advantages (i.e., inflation hedge, certainty that you won't be evicted as long as your mortgage payments are current, autonomy), but the tax deduction will not be one of them.
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Old 09-14-2008, 06:32 PM
 
Location: WA
5,292 posts, read 20,701,286 times
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Huh?! If home loan and ownership deductions are repealed the weak housing market will totally crash and many more homes would wind up in foreclosure. It would be an economic disaster and would not be considered by any responsible legislator or any politician
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Old 09-14-2008, 07:18 PM
f_m
 
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Quote:
Originally Posted by ndfmnlf View Post
Actually if the deduction is eliminated, houses will become more affordable. Prices will come down because there no longer will be any tax incentive to own a home. Homeownership will still have other advantages (i.e., inflation hedge, certainty that you won't be evicted as long as your mortgage payments are current, autonomy), but the tax deduction will not be one of them.
In places where housing is expensive, it is due to demand (near job centers, culture, good weather, etc...). So the prices are not likely to go down much and become "affordable". They will still stay fair high as long as there are people with money that can go buy those houses in desirable regions.
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Old 09-14-2008, 07:36 PM
 
Location: Raleigh, NC
9,043 posts, read 11,324,639 times
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Quote:
Originally Posted by Donn2390 View Post
Excellant point, my property taxes ar just under $6000.00 a year..! How would you renters like that? Also, property insurance, and other expenses renters don't see. That stuff adds up. The reason for the tax break is simple. The Goverment wants everyone to own a home. They do all they can to make that possible.
If you chose not to be a property owner, fine, but don't cry because some enjoy the advantages of home ownership.
I say your complaining is just sour grapes...
Actually, I thought the appropriate term is "bitter homeowner" for many people in the country as they can't sell their depreciating homes to save their lives . I would think that sour grapes go to the "homeowners".

Also, renters pay the same property taxes that homeowners pay, as the landlord passes the cost on to the tenant.

Thank God I just closed on selling my house last week. My market (Raleigh) has just begun suffering from the bursting of the bubble and there are great pains ahead for many here.
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Old 09-14-2008, 07:45 PM
f_m
 
2,289 posts, read 7,363,491 times
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Quote:
Originally Posted by ViewFromThePeak View Post

Also, renters pay the same property taxes that homeowners pay, as the landlord passes the cost on to the tenant.
Except that the rate per renter is likely lower due to the type of housing (apartment or home), and if the landlord purchased at a good time (which a smart investor should do) then their taxes would be lower.
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Old 09-14-2008, 07:46 PM
 
Location: Chino, CA
1,458 posts, read 2,898,182 times
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Default Government wants people to buy homes... not because they are nice... but because it's financially better for them.

Obviously the interest tax deduction influences demand/desire to own a home vs. renting.

But, I don't see it as something that would reduce government total tax revenues... nor is it a penalty on renters.

In fact quite the opposite. From what I can tell, the government brings in more revenue from people buying homes than renting because of the increase in property tax revenues.

Let's say empty lot X was empty land.... the government gets property tax... but not much since it's "empty" land (appraised lower). If the government is able to get someone to "buy" the land and make improvements, the property tax for improved land is higher than the "empty" land. So, the tax deduction "carrot" actually allows the government to bring in more tax revenue.

Think about it this way... cities during the boom were hungry for development and converting empty land into homes. Why? because they actually get "more" tax revenue than letting that land stay empty. Likewise, if an existing home is sold, the government can get more property tax revenue as the home would have "appraised" higher than it did in the past (notch up... instead of the normally 2% cap on property tax increases - at least in California there's a yearly cap on property taxes - haven't you heard of those people who have lived in the same home for 30+ years and how ridiculously low their property tax are?).

So, in a sense the interest tax deduction is a carrot that actually Nets positive tax revenues for the government. The government actually wants more home owners since more home owners = a net increase in tax revenues. Not a penalty on renters since they don't pay as much in taxes in the first place. Likewise, the government is trying to keep people in their homes now.

On another note, the government also wants you to have children... but not too many children.... They aren't being nice but in actuality they want productive citizens to get an increase in long term income and other tax revenues. The government wants to "invest" (tax deduction/credit) a little now... to actually get in return a Net increase in the tax base. For parents... that includes an increase in sales tax and maybe property tax (since you eventually would need a bigger place... or ... :O buy a home).

They have people analyzing this all the time. What is the Net effect on tax policies. So NO, it isn't to the best interest of the government to repeal the interest tax deductions on home owners.

-chuck22b

Last edited by chuck22b; 09-14-2008 at 08:08 PM..
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Old 09-15-2008, 01:30 AM
 
Location: Los Angeles Area
3,306 posts, read 3,324,115 times
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Quote:
In fact quite the opposite. From what I can tell, the government brings in more revenue from people buying homes than renting because of the increase in property tax revenues.
Did you drink too much today? This makes little sense, most people are talking about federal tax. But even state wise a lot of the property tax doesn't go to the state in the first place, but rather local governments. So even in the case of state governments the removal of the deduction will increase tax revenue. Additionally, property tax gets paid whether a property is rented or lived in. How does an increase in ownership increase the number of homes required in an area?

Quote:
They have people analyzing this all the time. What is the Net effect on tax policies. So NO, it isn't to the best interest of the government to repeal the interest tax deductions on home owners.
They do, they do! And what they've found is that removing the tax deduction should net the federal government 1.2 trillion over a 10 year period. Of course the situation differs from state to state, after all some states don't have income tax in the first place.


Anyhow, I don't mind the mortgage interest deduction per se so long as a similar deduction is given to renters. If the mortgage interest deduction exists, then renters should be able to deduct about 50% of their rent in addition to the standard deduction.

But obviously the better option is to just remove the mortgage interest deduction and reduce income tax rates. Ideally the IRS would slowly reduce the deduction to zero over a 5~10 year period.
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