How would you force banks to lend money to people at 3.5%?
SHouldn’t we let private lenders and private borrowers decide for themselves what the value is of the money they are lending and borrowing, without government interference?
IF we eliminated the mortgage interest deduction, the cost of houses would come down, and poorer people would be able to afford houses.
The mortgage interest deduction drives up the price of houses, and only helps rich people, because poor people can’t really get any benefit from the interest deduction (either as the article says they are doing standard deduction, or their marginal tax rate is only 15% anyway).
Rich people have large mortgages, and are in a high marginal bracket, so they benefit more. Because this is a targeted tax item, essentially government is paying rich people to help them buy houses.
But logic dictates that government subsidies don’t help the people receiving the subsidies, when targeted. People have an idea of what something is worth. They are willing to pay that much. Let’s say that, for a particular house, someone is willing to part with $300,000 of their own money. Or, looked at another way, they can afford $3000 per month for that house.
Now, government says they will throw in another $500 a month in mortgage interest deductions. (I’m making up all the numbers, so they don’t work out based on percentages or anything).
Will the people buy the same house, and pocket the $500? No, they will still be willing to pay $3000 a month, but now they can spend $3500 a month. And since they are competing for houses with others, the bid price on the houses will go up to that $3500. So all the government did was drive up the cost of the house.
But poor people don’t GET $500 a month from the government to buy a house, because they don’t pay income taxes. So even if they scraped together enough money to pay $3000 a month for the house, they couldn’t outbid the rich people who get the $500 government subsidy.
As conservatives, I believe we should push to eliminate all targeted tax deductions, in exchange for across-the-board tax rate reductions. We are so excited about cutting taxes that we support targeted deductions and credits, which really are just government spending used to force people to do what government wants them to do.
Like Obamacare — where the government could have avoided the unconstitutional mandate if they had just made it a tax credit — give everybody $5000 a year if they buy insurance; it’s like a $5000 fine for NOT buying insurance. That’s what happens when you let government give out targeted credits, like for higher education, or electric cars, or mortgage interest.
Rents go up on the poor and everybody else.
Until Obama showed up you could rent an apartment in Fairfax County ~ 2 bedroom 2 bath lr kit ~ for about $2,000 a month ~ give or take a few bucks. Now you can rent an apartment of comparable features for $3,700 a month.
At the same time we have a large overhang of unsold empty houses.
The people paying rent can pay rent but they can't qualify for those homes because ~ you guessed it ~ they went bankrupt! Banks won't loan to them. Not only that, the banks ~ even in the DC area ~ find it difficult to find funds to loan. Even banks accepting foreign deposits on 0% interest, and charging the depositors for the favor, don't have money to loan. That's all short term stuff. Home loans are long term.
We force banks to lend money at 3.5% the old fashioned way ~ put a cap on interest and infate M1