Posted on 11/13/2017 7:36:46 AM PST by Kaslin
If you were to randomly ask a sample of 100 Americans from around the country why the mortgage interest deduction was implemented in the tax code, I'd wager that the bulk of the answers would range from "I don't know" to "they were designed to give a tax break to the rich."
Both answers suggest ignorance of facts, but the former is at least honest. The latter is just regurgitation of a leftist talking point by those feigning knowledge on the subject.
The truth is a bit different than popular perception on this matter.
Few, if any, among that small sample would offer the correct answer. That is, that the mortgage interest deduction has been a part of the tax code since 1913, when the 16th Amendment was first implemented, and that there was fairly sound reason for it.
Essentially, such interest payments have been deductible in the modern American tax era as an effort to preserve market neutrality in the lending market, in spite of taxation. The idea is that if a lender loans money to a borrower and charges interest, the lender will increase lending rates in proportion to the taxes required to be paid on the income earned by lending the money. This income is taxed at the corporate tax rate, which is currently 35%. This inflates the cost of investment to the borrower relative to the cost of taxation to the lender, which might act as a disincentive to invest in a home, or more practically in 1913, a farm.
(Excerpt) Read more at americanthinker.com ...
I thought it was to promote homeowner-ship.
so we pay loans back with after tax dollars? Meaning we have to earn that much more, gross income, in order to have the money to pay back the loan? Is that what this article is about?
I read the article, and just don’t quite understand what this writer is getting at.
A more practical reason is that home ownership creates economic stability in local, regional, and likely the entire country. It promotes all kinds of jobs supporting and stemming from the housing market, and it encourages pride in one’s community. It also creates a tax base for local governments and schools (though it’s debatable whether or not property owners are getting a good value for that.)
It’s chief impact is to artificially inflate housing prices for people needing or seeking shelter.
Ps: it also forcibly transfers wealth from
Many workers who can’t afford homes to a much smaller number who can.
Bookmark
He wallows in impenetrable prose until the very end
where he says the only solution is smaller government.
A whole lot of wash water for such a tiny baby.
Paying interest is the negative of receiving interest.
If one should have to pay income tax on “earned” interest by adding it to one’s income, one should have to deduct interest paid from one’s income before calculating the Income Tax.
Eazy Peazy. The paid interest is someone else’s Income.
As soon as the deduction was eliminated, credit card interest magically started to decline.
I have a feeling that if they eliminated the tax deduction for mortgage interest then that would have a similar downward effect on mortgage interest.
The market adjusts to changes in the tax code.
Banks win
The reality is that this tax break is both good and bad. The good is that homes are owned by the people who live in them. This is very important. As you saw in the last recession companies came in and started buying property. And anyone who lives on a block where 9 out of 10 homes are owned by the person living in it. You know that the tenth home is not kept up and the residents don’t add to the community. America is better off when homes are owned by the residents. As long as residents can get more tax incentives than companies. Residents will own the bulk of the homes.
However, homes are expensive. And one of the reasons they are so expensive is because home loans are cheap. Part of the loans being cheap is Fannie Mae. But the other reason is the tax write-offs which makes these loans cheap to carry.
Another bad is the rentals to condo conversions that occurred in the past 30 years. Rental buildings that should have been torn down were gutted and sold as condos, leaving old buildings with lots of structural problems that can never go away because their ownership is so complex. Management firms are making big money on these buildings. Which is not understood by most condo associations until its too late.
The reality is that having the government put a little thumb on the scale is ok. Just enough to keep home ownership. Maybe lowering the tax write offs to just $500K in loans. And not having the government underwrite loans over $500K. As it stands now, I tell my children not to buy until they have kids. Save your money. It keeps your optionality higher.
Mortgage rates will definitely go down when the tax subsidy is eliminated. But rates also are influenced by several additional factors — d Manx, costs of funds , etc. also all the duplicative and burdensome regulatory expenses and “the costs of having to make politically - mandated losing and bad loans” get passed thru the rate structure to all the rest of us. This is not an inconsiderable cost of borrowing these days
Yes, the author of the article is not able to write an articulate article.
The mortgage interest deduction is meant to subsidize banks and realtors. It’s that simple.
If that were true, then mortgage terms would be set up to penalize people for pre-paying their mortgages. In fact, I believe this sort of arrangement is specifically prohibited by law in the U.S.
The way it works now, the whole system is set up to incentivize homeowners to continuously refinance their mortgages or relocate to another home as long as interest rates are falling, and to sit on their mortgages only if interest rates are rising.
To get back to a Constitutional governance, they need to clean it all up and stop taxing us to death and to stop the redistribution of the taxes by giving "tax breaks".
Just like drug dealers and casinos, they found ways to use psychology to addict us to what they told us were "benefits".
Yes, it does. Renters get to subsidize homeowners. However, do people recall what happened when Reagan got lower rates in exchange for the elimination of several deductions? Congress raised the rates later, but the deductions were gone for good. We are being set up for another hosing.
What a bogus article.
Banks are only taxed on the income from lending after expenses are deducted—just as with any other business service or product provided.
The special treatment given was done so as long explained — to promote home ownership. More government meddling that should never have been initiated.
We may not only get set up for another hosing ( later), it sounds like congress may be doing it to us right now. McConnell even acknowledged that many working or middle Income people will have their taxes increased ?!!!!! I don’t trust him or congress
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