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People biggest and toughest purchase is their home. They are allowed to deduct the interest against income as an inspiration to buy or stay in a home.
People used to be allowed to have no tax on their already taxed money that they saved in accounts that were earning interest. Made people get inspired to save.
The whole tax code is manipulated to direct people's economic behavior.
One man's inspiration is another man's penalty.
Imagine a flat tax of 20 percent with one tax break that allows half of all taxpayers to pay 10 percent. If the same revenue can be raised with a flat tax of 15 percent and no tax break, government is redistributing income from those paying 20 percent to those paying 10 percent.
If renting were entirely voluntary, one could argue that people are voluntarily paying the higher tax rate, but we know that millions of people don't have the option of buying a house.
Imagine a flat tax of 20 percent with one tax break that allows half of all taxpayers to pay 10 percent. If the same revenue can be raised with a flat tax of 15 percent and no tax break, government is redistributing income from those paying 20 percent to those paying 10 percent.
If renting were entirely voluntary, one could argue that people are voluntarily paying the higher tax rate, but we know that millions of people don't have the option of buying a house.
Well, what kind of loan do you think someone has that would get that kind of a tax break. If it is so large that it cuts their income liability in half you can probably bet they will lose the home.
The main point is it helps reduce the cost of owning a home or property. It helps keep it affordable and an incentive for investing in a major industry. Real estate sales, construction and related drive a large part of the economy.
It also promotes higher prices for homes, as homebuyers know they can bid higher prices without paying the full tab thanks to the tax break.
This has the effect of increasing housing costs for those who cannot buy a home.
Well, what kind of loan do you think someone has that would get that kind of a tax break. If it is so large that it cuts their income liability in half you can probably bet they will lose the home.
I don't know about that, in the first few years of a mortgage, almost all of the mortgage payment is interest and is thus deductible.
Some people are saving a ton of money with that deduction, it's way better than switching to GEICO.
It also promotes higher prices for homes, as homebuyers know they can bid higher prices without paying the full tab thanks to the tax break.
This has the effect of increasing housing costs for those who cannot buy a home.
Not really, how much interest a year against income do people here think some write off?
The expectations of savings inferred in this thread seem out of proportion with reality IMO.
Maybe think of how many more foreclosures would be coming without little tax breaks like this.
The mortgage interest came about to stimulate people into buying homes rather than renting apartments... there was a strong lobbying group from real estate agents, title brokers, attorneys, etc etc to get this put in and it did stimulate people to buy more homes... the government thought people should buy homes and provided an incentive for them to buy homes without the government actually using their own money directly to do it... who wins? Everybody, including the government who wanted more people to own homes since they didn't have to pay anything for people to do it (ie tax credit)...
So you want to phase out mortgage interest deduction.... good luck....
I don't get this part... you want all deductions to be eliminated but you aren't saying anything about the tax code... the tax rates are as it is because of the deductions but you "inadvertently" left that out... and then you mention "rates lowered" what rates? Mortgage interest rates? Right now mortgage interest rates are around 4%... the government doesn't control the rate because the rate is dependent numerous factors including this important one, the government doesn't make the loan to you... opps... and then you add "under a certain income", I am sorry but is making more make you less of an American citizen? Why should one American benefit and another one doesn't? Does that make sense to you? I take it you don't believe equal treatment for all Americans...
I want to see the tax code radically simplified. It is absurd that even with software it takes a weekend of work to do my income taxes.
Eliminate most deductions. Some, like mortgage interest, need a phase out period, perhaps as long as ten years. Change the rates to compensate so tax revenue is unaffected.
Another deduction rarely discussed is the deduction for state taxes. I see no reason for the federal government to give us a break for the state taxes we pay. Why does it make sense for people in California, New Jersey, or NY to pay less federal income tax?
I have never figured out why we have that tax break although I will be the first to admit to taking it. But what is the reason for having it? I think it should be phased out just as credit card and loan interest deductions were. People who have a mortgage now on their primary residence can keep it but when the home is sold again, no deduction for a new mortgage. And it should be ended for all second homes now. In fact I think all the deductions should be eliminated and rates lowered for everybody under a certain income.
During a slump in the housing market, while trying to recover from a crash, you want to raise taxes on buying a house?
Let me guess - you're a liberal.
Now I would oppose removing the tax break in any case. But regardless, now is certainly not the time to even be having a conversation about it. Wait until the economy is better.
Tax deductions like this one distort the true cost of goods and services. The government seeks to change our behavior. People should buy homes because they want one and can afford them. Without ANY incentives from the government.
I want the mortgage deduction, the dependent deduction, etc. removed from the tax code. Not suddenly, but phase them out, some more quickly than others.
I find it offensive that a government official, elected or not, tries to use a carrot to get good citizens to do something they might not otherwise do.
Let's get rid of ALL deductions and credits. The goverment should not be in the business of social engineering.
Same reason we don't tax drugs or food. It adds costs to something that is every human is involved with which is housing. It would raise the cost of where you live whether it's an apartment or a home.
A statement of junk economics....Debtor ownership increases the cost of housing, especially for those wish to own with equity.
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