Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Is the U.S. Home Mortgage Interest Deduction Worth Keeping?

Housing-Market / US Housing Aug 02, 2013 - 02:45 PM GMT

By: Money_Morning

Housing-Market

Garrett Baldwin: Don't Just Cut the Mortgage Deduction... Cut All Deductions and Lower Taxes

If home ownership is the American Dream... then why do we need government to subsidize it?

The home mortgage interest deduction (HMID) is a lopsided tool of economic alchemy that favors the rich, and artificially increases housing prices due to the "stimulus" it creates.


According to the Congressional Budget Office, this tax break will "cost the government" more than $1 trillion over the next decade. The HMID mostly benefits households earning $75,000 to $500,000 a year. According to the Tax Policy Center, this range of Americans earns 77% of the tax savings from the HMID.

Now, I don't think it "costs" the government anything.

It's your money, since you put in the time to earn it.

But this mortgage deduction also creates a false incentive.

The reality is that mortgage lenders and real estate companies pitch more expensive houses based on a person's ability to use this "free money" to finance a home. Many Americans artificially rely on this tax credit in order to finance a house that they couldn't afford, or wouldn't purchase, otherwise.

Of course, this is a benefit that no reader wants to concede. But it amazes me that people oppose one subsidy, but then bark like hell to keep something in their own self-interest.

Sure, people love to complain about subsidies to pay for healthcare and food, and everything else under the sun. Big oil gets tax breaks, and failing solar companies, too. I hear people complain that ordinary Americans don't receive that sort of treatment...

Well, they do -- to the tune of more than $1 trillion over 10 years. That's a massive tax break... That's the U.S. annual budget deficit. And it's not just for the first house... People can take this deduction for their second home, their third home, their boats, anywhere that they can claim they sleep, there's a tax break for that.

But if Americans want to make a statement about self-sufficiency, then give up the extra bedroom and live within your means. If you don't like the government subsidizing corporations, then stop having the government subsidize you.

If we are going to really talk about a true free market, then let's live it. Let's lower income taxes and carve away all these deductions that only favor one particular class level.

Then we can let the market decide who really wants a house. We can have a more stable housing market that is closely tied to what people can truly afford. This will help curb speculation and set real prices for housing instead of one that has artificial tax deductions baked in.

You can say I'm out of my mind. You can defend the "good" kind of stimulus, which only finances false demand and helps build a bubble.

You can say that I am unconcerned about current homeowners - that it would "destroy the housing market." Well, there's a prescription for that. I would hope this deduction could be phased out over 10 years with a gradual reduction in income taxes to complement the move.

The fact that people are complaining that removing this tax incentive would "hurt" the housing market proves that it is artificially supported by government incentives.

And then there is the completely irrational argument that pushing dollars into home ownership equity is the best long-term option, particularly when appreciation is not guaranteed.

The greatest myth to help inflate the housing bubble was that home prices would always keep going up. This message was tossed around the world by our own public policy experts who helped facilitate the mortgage crisis.

If we're going to champion free market economics... then let's commit to free market economics.

Lower income taxes for everyone and remove the deductions for the few.

Then, if someone wants a house, they will buy one.

Frank Marchant: Preserve the Middle Class, Save the Mortgage Rate Deduction

If you don't care about the middle class or the viability of U.S. housing markets, by all means do away with the home mortgage interest deduction.

One of the few perks the middle class has is the mortgage interest deduction. Dating back to 1894, then ratified by Congress in 1913, it allows homeowners to deduct the amount of their mortgage interest from their annual income for tax purposes.

The benefits are numerous. For some new homeowners it makes their burden a little lighter while giving them the satisfaction of home ownership. For veteran homebuyers it affords them the opportunity to buy a more expensive home.

The mortgage interest deduction means your monthly payment is actually less than it appears.

A portion of your house payment will come back to you as a lower tax bill. Since interest is mainly paid down first in your mortgage, it means the largest write-offs for homeowners come during the first years of their mortgage.

The mortgage interest deduction has been in place for 100 years. Congress and the president are looking for ways to end or curtail this deduction to collect more tax revenue.

If successful, the ramifications will be traumatic for all existing and potential homeowners. The elimination of this deduction will immediately hurt the sales of all homes.

The jolt to an already-fragile housing market will be felt across the board. This could easily destroy the housing market before it has had a chance to fully recover.

There was a time the government wanted the middle class to buy homes. It was felt home ownership made for stronger communities.

I still feel the same way. When a homeowner plants roots in a community they usually plan to stay. They care about their schools and neighborhoods, their lawns are manicured and they take pride in ownership.

In fact, we need the home mortgage interest deduction now more than ever.

The middle class, while it isn't disappearing, is becoming increasingly less visible.

Two-thirds of the benefits from this deduction go to middle class households earning less than $200,000. That's 34 million taxpayers representing more than 90 million citizens who benefit from this deduction.

Take it away and you hurt all of us!

This is a middle class tax shelter that has helped Americans for 100 years. Hopefully it will continue to do so.

George Bailey said it best when talking about his father to Old Man Potter, in Frank Capra's Christmas classic, "It's A Wonderful Life:"

"But he did help a few people get out of your slums, Mr. Potter, and what's wrong with that? Why... here, you're all businessmen here. Doesn't it make them better citizens? Doesn't it make them better customers? You... you said... what'd you say a minute ago? They had to wait and save their money before they even ought to think of a decent home.

"Wait? Wait for what? Until their children grow up and leave them? Until they're so old and broken down that they... Do you know how long it takes a working man to save $5,000? Just remember this, Mr. Potter, that this rabble you're talking about... they do most of the working and paying and living and dying in this community. Well, is it too much to have them work and pay and live and die in a couple of decent rooms and a bath?"

"Well said, George Bailey!"

The mortgage interest deduction has worked for the American middle class for 100 years.

Without it, we all will end up in Potterville.

Source :http://moneymorning.com/2013/08/02/fight-club-is-the-home-mortgage-interest-deduction-worth-keeping/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in