Slog
News & ArtsMonday, April 16, 2012
2012 Robert Reich Explains Bain Capital (Rmoney)
Posted by Charles Mudede on Mon, Apr 16, 2012 at 8:14 AM
America subsidizes petrol, car infrastructure, mansions, rural voters, capital gains...
America is a massive nanny state for those on the right. Seriously, why do we offer tax deductions for the interest paid on mortgages? How is this the true spirit of capitalism? The struggle is not about small or big government; it's about who gets the largest and smallest share of the benefits of social governing.
1
I'm reluctant to agree w/ Charles about anything, but I think he has a point. The mortgage interest deduction is a huge government hand out, yet the tea baggers don't seem to have a problem with it.
2
We give deductions on mortgage interest because we decided to encourage home ownership in this country. And that's a good thing - the housing bubble notwithstanding (caused by banks looking to exploit high-risk loans and the Fed's constant lowering of the prime), home ownership is a better long-term investment than most. It used to be one of the major ways people funded their retirements.
Granted, it probably should be eliminated for extra homes. But don't throw the baby out with the bathwater.
Granted, it probably should be eliminated for extra homes. But don't throw the baby out with the bathwater.
3
Um, just making an argument here, but we offer tax deductions for mortgage interest to foster the American dream of home ownership.
Are there unforeseen consequences? Sure. But it's not 100% evil, and given the point of Robert Reich's little film, kind of a non sequitur.
Are there unforeseen consequences? Sure. But it's not 100% evil, and given the point of Robert Reich's little film, kind of a non sequitur.
4
I'm stunned by what 2 and 3 have said about homeownership. stunned. ideology at work. ideology doing its thing.
5
With our mortgage interest deduction, American home ownership rates are at about 66%. Canada, without a deduction like ours is at about a 59% ownership rate. Mexico (which shows how pointless own versus rent rates are as a metric) is currently at about an 85% ownership rate.
6
Not stunned by Charles' non-response. Talking out loud, ain't sayin nuthin...
Charles, I stated a fact. You asked why we allow deductions on mortgage interest, and I gave you the reason. It IS how this was justified back when they passed it. You could look it up.
Now, if you KNOW different, then take it on. If you believe this is some terrible thing, go ahead and tell us why, the floor is all yours. But if you're just ranting and didn't expect contradictory answers, well, that's why your reputation isn't all that sterling.
Charles, I stated a fact. You asked why we allow deductions on mortgage interest, and I gave you the reason. It IS how this was justified back when they passed it. You could look it up.
Now, if you KNOW different, then take it on. If you believe this is some terrible thing, go ahead and tell us why, the floor is all yours. But if you're just ranting and didn't expect contradictory answers, well, that's why your reputation isn't all that sterling.
7
6) you really cannot see how this tax deduction is seriously flawed and benefits the rich? you really think this tax deduction has nothing to do with suburbanization? you cant also see how it encourages borrowing? sorry, i can not talk about the monocycle if you all you know is the tricycle.
8
@4, I know, right? Here's classic Krugman outlining the economic problems caused by this federal policy of providing what he terms an "enormous subsidy" to get people into mortgages. He urges a leveling of the playing field so long tilted away from renters (long quote because paywall):
More...
Even Democrats seem to share the sense that Americans who don’t own houses are second-class citizens. Early last year, just as the mortgage meltdown was beginning, Austan Goolsbee, a University of Chicago economist who is one of Barack Obama’s top advisers, warned against a crackdown on subprime lending. “For be it ever so humble,” he wrote, “there really is no place like home, even if it does come with a balloon payment mortgage.”http://www.nytimes.com/2008/06/23/opinio…
And the belief that you’re nothing if you don’t own a home is reflected in U.S. policy. Because the I.R.S. lets you deduct mortgage interest from your taxable income but doesn’t let you deduct rent, the federal tax system provides an enormous subsidy to owner-occupied housing. On top of that, government-sponsored enterprises — Fannie Mae, Freddie Mac and the Federal Home Loan Banks — provide cheap financing for home buyers; investors who want to provide rental housing are on their own.
In effect, U.S. policy is based on the premise that everyone should be a homeowner. But here’s the thing: There are some real disadvantages to homeownership.
First of all, there’s the financial risk. Although it’s rarely put this way, borrowing to buy a home is like buying stocks on margin: if the market value of the house falls, the buyer can easily lose his or her entire stake.
This isn’t a hypothetical worry. From 2005 through 2007 alone — that is, at the peak of the housing bubble — more than 22 million Americans bought either new or existing houses. Now that the bubble has burst, many of those homebuyers have lost heavily on their investment. At this point there are probably around 10 million households with negative home equity — that is, with mortgages that exceed the value of their houses.
Owning a home also ties workers down. Even in the best of times, the costs and hassle of selling one home and buying another — one estimate put the average cost of a house move at more than $60,000 — tend to make workers reluctant to go where the jobs are.
And these are not the best of times. Right now, economic distress is concentrated in the states with the biggest housing busts: Florida and California have experienced much steeper rises in unemployment than the nation as a whole. Yet homeowners in these states are constrained from seeking opportunities elsewhere, because it’s very hard to sell their houses.
Finally, there’s the cost of commuting. Buying a home usually though not always means buying a single-family house in the suburbs, often a long way out, where land is cheap. In an age of $4 gas and concerns about climate change, that’s an increasingly problematic choice.
There are, of course, advantages to homeownership — and yes, my wife and I do own our home. But homeownership isn’t for everyone. In fact, given the way U.S. policy favors owning over renting, you can make a good case that America already has too many homeowners.
O.K., I know how some people will respond: anyone who questions the ideal of homeownership must want the population “confined to Soviet-style concrete-block high-rises” (as a Bloomberg columnist recently put it). Um, no. All I’m suggesting is that we drop the obsession with ownership, and try to level the playing field that, at the moment, is hugely tilted against renting.
And while we’re at it, let’s try to open our minds to the possibility that those who choose to rent rather than buy can still share in the American dream — and still have a stake in the nation’s future.
9
@ 7, Your premise is this:
"The struggle is not about small or big government; it's about who gets the largest and smallest share of the benefits of social governing."
Lots and lots of ordinary people benefit from mortgage deductions. I don't think I'm the one not getting that.
Now, the only flaw is that mortgage deductions may be taken on multiple homes. You might have missed where I mentioned that @ 2. THAT benefits the rich.
At least @ 8 has an answer (albeit not in his own words). Why don't you, Charles? Didn't do your homework, I'm guessing.
"The struggle is not about small or big government; it's about who gets the largest and smallest share of the benefits of social governing."
Lots and lots of ordinary people benefit from mortgage deductions. I don't think I'm the one not getting that.
Now, the only flaw is that mortgage deductions may be taken on multiple homes. You might have missed where I mentioned that @ 2. THAT benefits the rich.
At least @ 8 has an answer (albeit not in his own words). Why don't you, Charles? Didn't do your homework, I'm guessing.
10
Reich didn't mention that the investors, along with the partners of the private equity firm, also enjoy the 15% rate on capital gains.
11
Personally, I'm undecided about whether the mortgage interest deduction is a good thing or a bad thing. I was just making the point that it is a public subsidy that encourages certain lifestyle choices and behaviors. Slog's own Seattle Blues is always going on about how the government should be an impartial referee that keeps the peace and ensures contracts are honored but doesn't pick winners. Yet he never bitches about the mortgage interest deduction, probably because it benefits him personally.
12
@ 11, guys like SB would argue that it's all their money anyway, the gov't shouldn't have any of it, and they'll take any and all deductions they can because it's their money dammit. To them, all taxes are bad and all ways to avoid paying them are good. Not much you can say to that.
13
@7
"you really cannot see how this tax deduction is seriously flawed"
I cannot. But I'm willing to listen to suggested improvements.
"and benefits the rich?"
Sure it does. And the middle class. And anyone in the "buying a home" category.
"you really think this tax deduction has nothing to do with suburbanization?"
"Nothing"? Of course not. But buying a condo in the city also gets you a deduction. So it applies both ways.
"you cant also see how it encourages borrowing?"
Very few people can afford to buy their home outright. So it does encourage borrowing ... to buy that home. But not otherwise. So "borrowing"? No, I don't see that.
"you really cannot see how this tax deduction is seriously flawed"
I cannot. But I'm willing to listen to suggested improvements.
"and benefits the rich?"
Sure it does. And the middle class. And anyone in the "buying a home" category.
"you really think this tax deduction has nothing to do with suburbanization?"
"Nothing"? Of course not. But buying a condo in the city also gets you a deduction. So it applies both ways.
"you cant also see how it encourages borrowing?"
Very few people can afford to buy their home outright. So it does encourage borrowing ... to buy that home. But not otherwise. So "borrowing"? No, I don't see that.
14
umm i am a young first time home buyer and i will pay about $7000 in interest this year on my mortgage. it is the only thing i would have to itemize instead of taking the standard (~$5700) deductible.
why not expand the point to saying the whole standard deductible isn't in the spirit of capitalism?
or just apply the idea to student loan interest -- then you start to realize how dumb of a statement it was.
mudede you've been banned from writing about guns and kids, let's not add real estate to the list.
why not expand the point to saying the whole standard deductible isn't in the spirit of capitalism?
or just apply the idea to student loan interest -- then you start to realize how dumb of a statement it was.
mudede you've been banned from writing about guns and kids, let's not add real estate to the list.
15
We encourage home ownership because people who own homes (in general, by no means exclusively) have a stronger commitment to their neighborhood and community. Would Charles prefer that housing be held only by the rich, to reap massive profits as landlords over the rest of us?
Please, Charles, tell as about all the munificent landlords out there who have the best interests of their tenants at heart.
Renters are always at the mercy of landlords: Will they fix your furnace, will they sell the building or decide to rent to somebody else, forcing you to find a new place to live?
Please, Charles, tell as about all the munificent landlords out there who have the best interests of their tenants at heart.
Renters are always at the mercy of landlords: Will they fix your furnace, will they sell the building or decide to rent to somebody else, forcing you to find a new place to live?
16
@12 I think you're probably correct, although I venture to guess that it would be substantially less articulate coming from SB.
18
Home ownership is encouraged because it benefits the financial institutions which lobby for policy.
Homeowners (with a mortgage) will rabidly defend the deduction since it is one of the few upsides to their underwater mortgage.
Homeowners (with a mortgage) will rabidly defend the deduction since it is one of the few upsides to their underwater mortgage.
19
@ 16, actually, SB excels at dressing up neanderthal ideas in educated-sounding language. You generally have to read his entire post in order to identify the logical flaws and the ways in which he avoids addressing the question in favor of saying what he wants to.
20
This is exactly what people are talking about when they point to the advantages of having a seasoned businessman like Romney at the helm of our great nation. He could apply the same strategies to running our country that he used in the private sector. Here's how: Take over a country with a strong, robust economy. Pump up its bond value with austerity measures, sell off its infrastructure to the highest bidders, pocket the proceeds, and flip it before its economy can crash and reduce its re-sale value.
21
We should do nothing to encourage home ownership and all rent apartments from the large corporations we work for instead. We could cal them "company towns" or something. All the money we save could go to buying stock in these companies, so it would be like we owned our homes indirectly but communily, except without the pride of ownership or commitment to the community.
23
Mudede @4: Wait, wait...now YOU of all people are accusing others of making decisions via ideology? That's seriously rich, man. Seriously.
And what do you have against borrowing, exactly? In a world without borrowing, only wealthy people can afford to buy a home. Or are you against home ownership in general? Just what the fuck are you talking about?
You're not making any sense, dude.
And what do you have against borrowing, exactly? In a world without borrowing, only wealthy people can afford to buy a home. Or are you against home ownership in general? Just what the fuck are you talking about?
You're not making any sense, dude.
24
@23 I think the home mortgage deduction does contribute to urban sprawl. A subsidy on home ownership means people tend to own bigger houses than they would otherwise. That means they tend to live farther out of town where there is room for their McMansions. That means they burn more fossil fuels commuting to work and use a lot of electricity keeping their big houses heated and air conditioned.
25
Agree w Chuck @7. Home mortgage deduction is BULLSHIT. It just serves to prop up prices somewhat. It does NOT make anything more affordable, it just is dialed into the price. And who pays for this stupid gimme gimmick? "We do!"
26
@21 FTW. Charles, this is what a world without the mortgage interest deduction looks like. I can only imagine the fits you would be having in that world.
27
@20 Amen. Let's see if enough voters remember this, as opposed to focusing on silly talk like "Obama hates stay-at-home moms!"
(I'm not optimistic.)
(I'm not optimistic.)
28
@24
No.
Because you get the same "subsidy on home ownership" whether you buy a condo in the city for $X or a house in the suburbs for $X.
"That means they tend to live farther out of town where there is room for their McMansions. That means they burn more fossil fuels commuting to work and use a lot of electricity keeping their big houses heated and air conditioned."
Which contradicts your claim about "the home mortgage deduction does contribute to urban sprawl".
Live in the city and pay $X for a condo.
vs
Live in the suburbs and pay $X for a house and $Y for the commute and additional expenses.
No.
Because you get the same "subsidy on home ownership" whether you buy a condo in the city for $X or a house in the suburbs for $X.
"That means they tend to live farther out of town where there is room for their McMansions. That means they burn more fossil fuels commuting to work and use a lot of electricity keeping their big houses heated and air conditioned."
Which contradicts your claim about "the home mortgage deduction does contribute to urban sprawl".
Live in the city and pay $X for a condo.
vs
Live in the suburbs and pay $X for a house and $Y for the commute and additional expenses.
29
@26 As long as it was a government owned corporation, Mudede would like that world just fine. He's against private property because he thinks we'ed all be better off as wards of the state.
30
@ 25, that's as ignorant a comment as I've ever seen on Slog.
NOBODY buys a home for the deduction. They buy homes because they can (or believe they can) afford to, and the only factor there is "Who will give me a loan?" And the ease of loans is what "propped up prices." Not someone's frigging tax return.
NOBODY buys a home for the deduction. They buy homes because they can (or believe they can) afford to, and the only factor there is "Who will give me a loan?" And the ease of loans is what "propped up prices." Not someone's frigging tax return.
31
@28 Some people buy condos, but I think there are more opportunities for home ownership in the 'burbs. The people I know who live in town are mostly renters.
32
@30 you are wrong. During the bubble all kinds of people got sold that for what they are paying in rent they could afford to buy. The deduction is a huge part of the pitch. I heard it a thousand times professionally, and from my own ex-cousin-in-law mortgage broker while we were looking.
33
The market compensates for the PERCEIVED reduction via the mortgage-interest deduction in the cost of buying a home by raising all home prices (because with the mortgage-interest deduction you can "afford" a bigger, better home).
So the mortgage-interest deduction does not save you money; it's a(nother) massive wealth transfer to banks and all the other players in the homes-for-sale racket.
So the mortgage-interest deduction does not save you money; it's a(nother) massive wealth transfer to banks and all the other players in the homes-for-sale racket.
34
@ 31, suburban sprawl is the result of a number of factors. Lots of people want to own a house, not a condo or townhome. Many want a newer home without anything to fix up or remodel. Some believe suburbs are just "nicer" and "safer" than the city.
Maybe a case can be made showing that the deduction enables the decision to buy a bigger home. But most people simply go for the kind of home they want.
Maybe a case can be made showing that the deduction enables the decision to buy a bigger home. But most people simply go for the kind of home they want.
36
@33 You don't think slightly fewer people would buy houses if there was no home mortgage deduction?
37
@ 32, that "pitch" was for the kind of mortgage being sold (usually an ARM that would screw them over later), not for the home itself. Low interest rates was what got them looking for a home in the first place.
39
@36, except in the very short term, no, because elimination of the mortgage-interest deduction would create immediate downward pressure on home prices.
41
@39 I don't think the downward pressure on home prices would last long, because w/o the mortgage interest deduction fewer houses would get built.
42
@31
"The people I know who live in town are mostly renters."
The plural of "anecdote" is not "data".
"Some people buy condos, but I think there are more opportunities for home ownership in the 'burbs."
Again, no. There are more VARIETIES of home to own available as you move out of the city. The city having ONE option (living in a condo in the city).
Again, which contradicts your previous statement:
"I think the home mortgage deduction does contribute to urban sprawl."
You have yet to show how spending $X on a house in the suburbs is a "subsidy" but spending $X on a condo in the city is not.
"The people I know who live in town are mostly renters."
The plural of "anecdote" is not "data".
"Some people buy condos, but I think there are more opportunities for home ownership in the 'burbs."
Again, no. There are more VARIETIES of home to own available as you move out of the city. The city having ONE option (living in a condo in the city).
Again, which contradicts your previous statement:
"I think the home mortgage deduction does contribute to urban sprawl."
You have yet to show how spending $X on a house in the suburbs is a "subsidy" but spending $X on a condo in the city is not.
44
Every city is different, but in Baltimore there are many home owners that are from wide variety of income brackets in the city, all of whom get a mortgage deduction. We city home owners choose to live in the city because it suits us. People don't decide where they are going to buy a house based on the mortgage deduction.
45
Condos are not the only home buying option in most cities, (I can't even think of one city that only has condos for sale.) I own (okay, I'm paying my mortgage on) a house, and I live downtown.
46
@41, there would be all kinds of diminishing reverberations. A drop in home prices would tend to also put downward pressure on the costs of building materials and construction labor.
But right now we have millions of vacant homes that are being held off the market to prevent a catastrophic fall in prices, and large investors have been buying them for years at prices far below what you or I could ever get. What that will do to the home-as-investment and sale/rental prices for the next half-century, I can't say exactly, but I suspect it's not good.
But right now we have millions of vacant homes that are being held off the market to prevent a catastrophic fall in prices, and large investors have been buying them for years at prices far below what you or I could ever get. What that will do to the home-as-investment and sale/rental prices for the next half-century, I can't say exactly, but I suspect it's not good.
47
My household income is under $200k, but my effective tax rate is also 15%, just like Mitt's, due almost entirely to the mortgage interest deduction. The idea that we should keep it so that people "can fund their retirements" is worrying. And write-offs for second homes is absurd.
48
@43
"Dude, you really need to get back on your meds."
Okay, let's go through this again.
You claim: "I think the home mortgage deduction does contribute to urban sprawl."
But you cannot explain how spending $X on a house in the suburbs is a "subsidy" but spending $X on a condo in the city is not.
"Dude, you really need to get back on your meds."
Okay, let's go through this again.
You claim: "I think the home mortgage deduction does contribute to urban sprawl."
But you cannot explain how spending $X on a house in the suburbs is a "subsidy" but spending $X on a condo in the city is not.
49
@47 Yeah, I tend to think that there should be a home mortgage deduction, but that it should be a bit more limited than it is. I don't mind helping a lower middle class family get a piece of the rock, but the government shouldn't be subsidizing some fat cat's summer home in The Hamptons.
51
@37,
The pitch was for ever-increasing home prices (which people stupidly believed would go on forever) plus low interest rates plus the mortgage deduction. The longstanding belief is that you're a fool for not taking the government up on its offer of tax-deductible mortgage interest.
The mortgage deduction is a contributing factor to how foolish Americans have become vis-a-vis buying a home and the belief that home ownership is the only way to go. A government program encouraging people to save a 20 percent down payment plus three months of living expenses would do more to help the *average* person looking to buy, and would lead to our having a stable housing market, not the series of booms and busts that trash the net worth of the middle class.
As it stands, the vast majority of the mortgage deduction benefits the upper middle class and the rich because there's no limit to how many houses you can use it for, there's no limit to how much money you can deduct, and the mortgage deduction for lower middle class homeowners barely exceeds their standard deduction (assuming it does at all).
Take Swearengen as an example from #13:
He's deducting an additional $1,300 from his taxes. If he's paying a fairly standard, middle class 15 percent effective tax rate, he's saved a whopping $195 on his taxes for the entire year, while assuming the risks of home ownership and paying double his home's current worth to the bank over the next 30 years.
What a deal!
But don't listen to me. Listen to the Nobel Prize-winning economist gloomy gus quotes @8.
More...
The pitch was for ever-increasing home prices (which people stupidly believed would go on forever) plus low interest rates plus the mortgage deduction. The longstanding belief is that you're a fool for not taking the government up on its offer of tax-deductible mortgage interest.
The mortgage deduction is a contributing factor to how foolish Americans have become vis-a-vis buying a home and the belief that home ownership is the only way to go. A government program encouraging people to save a 20 percent down payment plus three months of living expenses would do more to help the *average* person looking to buy, and would lead to our having a stable housing market, not the series of booms and busts that trash the net worth of the middle class.
As it stands, the vast majority of the mortgage deduction benefits the upper middle class and the rich because there's no limit to how many houses you can use it for, there's no limit to how much money you can deduct, and the mortgage deduction for lower middle class homeowners barely exceeds their standard deduction (assuming it does at all).
Take Swearengen as an example from #13:
i will pay about $7000 in interest this year on my mortgage. it is the only thing i would have to itemize instead of taking the standard (~$5700) deductible.
He's deducting an additional $1,300 from his taxes. If he's paying a fairly standard, middle class 15 percent effective tax rate, he's saved a whopping $195 on his taxes for the entire year, while assuming the risks of home ownership and paying double his home's current worth to the bank over the next 30 years.
What a deal!
But don't listen to me. Listen to the Nobel Prize-winning economist gloomy gus quotes @8.
52
@50
"If I explain this to you, do promise to start taking your lithium again?"
I have time. Let's go through this again.
You claim: "I think the home mortgage deduction does contribute to urban sprawl."
But you cannot explain how spending $X on a house in the suburbs is a "subsidy" but spending $X on a condo in the city is not.
"If I explain this to you, do promise to start taking your lithium again?"
I have time. Let's go through this again.
You claim: "I think the home mortgage deduction does contribute to urban sprawl."
But you cannot explain how spending $X on a house in the suburbs is a "subsidy" but spending $X on a condo in the city is not.
53
Add this to the mix: People who buy boats and RVs that have bathrooms and kitchens also qualify for the "second home" mortgage interest deduction.
54
@ 51, this post is only about the mortgage deduction, not the entire housing bubble crisis. And all those points have been brought up - I was the first to say additional homes shouldn't qualify, and closing that loophole would eliminate that advantage the wealthy enjoy. Eliminating the deduction altogether would hurt millions upon millions of non-wealthy Americans.
The role of the deduction in the crisis is greatly exaggerated. It has been around for many decades with zero ill effects, and only came into play in this discussion because unscrupulous lenders used it in their pitch when selling bad loans to vulnerable first-time borrowers.
This whole thing was brought about by two primary culprits - banking deregulation, and infinitesimal interest rates. It was NOT brought about by the mortgage deduction. That is a red herring.
The role of the deduction in the crisis is greatly exaggerated. It has been around for many decades with zero ill effects, and only came into play in this discussion because unscrupulous lenders used it in their pitch when selling bad loans to vulnerable first-time borrowers.
This whole thing was brought about by two primary culprits - banking deregulation, and infinitesimal interest rates. It was NOT brought about by the mortgage deduction. That is a red herring.
55
@54
"This whole thing was brought about by two primary culprits - banking deregulation, and infinitesimal interest rates. It was NOT brought about by the mortgage deduction. That is a red herring."
Exactly.
"This whole thing was brought about by two primary culprits - banking deregulation, and infinitesimal interest rates. It was NOT brought about by the mortgage deduction. That is a red herring."
Exactly.
56
@ 51, one more thing - the quoted article @ 8 has little to do with the mortgage deduction. It's mostly a criticism of how much policy is directed to encouraging home ownership (the deduction is only a part of that), and demonstrates the risks that are real and too often downplayed. As such, I have little to argue there, but I will point out that Krugman cherry-picked data from the housing crisis to make his point. Again - it wasn't the mortgage deduction that made it possible, and it's not what ties people who are underwater down.
57
@54,
So you're not even going to address the fact that the average homeowner @13 gets a couple of hundred dollars PER YEAR off his taxes?
The government spends billions of dollars per year on a deduction that almost exclusively benefits the wealthy, and not just because of second homes, because they're the only ones who can afford a mortgage rate that significantly lowers their tax burden.
As I already said, if the government were interested in helping average people acquire the American dream of home ownership, it would set up a tax-deferred savings plan intended to lower the amount of money home buyers have to borrow. Singapore mandates that type of savings; we have nothing.
The government also used to let people deduct their credit card interest from their taxes. Should that be re-instituted?
So you're not even going to address the fact that the average homeowner @13 gets a couple of hundred dollars PER YEAR off his taxes?
The government spends billions of dollars per year on a deduction that almost exclusively benefits the wealthy, and not just because of second homes, because they're the only ones who can afford a mortgage rate that significantly lowers their tax burden.
As I already said, if the government were interested in helping average people acquire the American dream of home ownership, it would set up a tax-deferred savings plan intended to lower the amount of money home buyers have to borrow. Singapore mandates that type of savings; we have nothing.
The government also used to let people deduct their credit card interest from their taxes. Should that be re-instituted?
58
@ 57, why should I address that? That one person's testimony, not an average.
EVERY homeowner takes advantage of the mortgage deduction, not just wealthy ones. If swearengen isn't also deducting charitable giving, volunteer time, relocation expenses (hey, that one kind of contradicts one of Krugman's points), and thousands of others, it's because he's not very savvy about how he files his taxes. He likely could be saving a LOT more over the standard deduction.
It's those thousands of deductions (as well as loopholes available to the wealthy) that drastically lower their rate, as well as the generally low rate already set for them. Picking on this one - one that helps millions of non-wealthy, middle class Americans - is dumb. Reform it so that only the primary residence qualifies. But characterizing it as something that benefits the wealthy is a distortion worthy of Karl Rove.
EVERY homeowner takes advantage of the mortgage deduction, not just wealthy ones. If swearengen isn't also deducting charitable giving, volunteer time, relocation expenses (hey, that one kind of contradicts one of Krugman's points), and thousands of others, it's because he's not very savvy about how he files his taxes. He likely could be saving a LOT more over the standard deduction.
It's those thousands of deductions (as well as loopholes available to the wealthy) that drastically lower their rate, as well as the generally low rate already set for them. Picking on this one - one that helps millions of non-wealthy, middle class Americans - is dumb. Reform it so that only the primary residence qualifies. But characterizing it as something that benefits the wealthy is a distortion worthy of Karl Rove.
59
@52 It has been my experience that people living in thinly populated suburbs have a wider variety of housing options available to them than people living in densely populated urban areas. Suburbanites are therefor more likely to be able to avail themselves of the mortgage interest deduction.
60
The mortgage interest deduction can be considered a "regressive tax break" as the actual dollar amount of the benefit increases as you approach the $1 million in mortgage debt limit. To the extent that real estate owned is correlated with income, it does disproportionally benefit high earners.
Whether you like the deduction or not, using a dollar amount, rather than "no second homes" policy is superior. You should get the same benefit if you choose a modest primary plus second home, or one big one.
Whether you like the deduction or not, using a dollar amount, rather than "no second homes" policy is superior. You should get the same benefit if you choose a modest primary plus second home, or one big one.
61
Here's an interesting article on suburban vs. urban living, and the population growth is mostly in the cities.
http://www.dailymail.co.uk/news/article-…
Every home buyer gets the mortgage deduction whether they live in the city or the suburbs. People mostly chose to live in the country because it seems safer, the schools are often better, and it was generally less expensive to buy a house in the past. Economic factors have changed, and the shift is back toward the cities.
http://www.dailymail.co.uk/news/article-…
Every home buyer gets the mortgage deduction whether they live in the city or the suburbs. People mostly chose to live in the country because it seems safer, the schools are often better, and it was generally less expensive to buy a house in the past. Economic factors have changed, and the shift is back toward the cities.
62
I generally agree with most of Robert Reich's economic views, but the mortgage interest deduction should be expanded, not reduced, until we get a real recovery in the housing market.
Attacking that deduction now, with the housing market still very much in recession, is a very very bad idea.
I generally agree with most of Robert Reich's economic views, but the mortgage interest deduction should be expanded, not reduced, until we get a real recovery in the housing market.
Attacking that deduction now, with the housing market still very much in recession, is a very very bad idea.
63
@59
"Suburbanites are therefor more likely to be able to avail themselves of the mortgage interest deduction."
So it isn't a "subsidy" if people you know do not take advantage of it?
So because you don't know anyone getting a corn subsidy that means that there is no corn subsidy.
In other words, you believe that Reality exists only in what you directly experience and not independent of your perception. What was that you were saying about taking medication?
"Suburbanites are therefor more likely to be able to avail themselves of the mortgage interest deduction."
So it isn't a "subsidy" if people you know do not take advantage of it?
So because you don't know anyone getting a corn subsidy that means that there is no corn subsidy.
In other words, you believe that Reality exists only in what you directly experience and not independent of your perception. What was that you were saying about taking medication?
64
@2, @3, et al:
I don't want to put words in Charles' mouth, but I think I see where he's coming from. There's a (defensible, I think) argument to be made that America's obsession with home ownership was borne out of the Labor Riots at the end of the 19th and beginning of the 20th centuries. The idea being that the federal government began encouraging home ownership for working-class Americans because workers with substantial mortgage debt are less likely to strike or otherwise engage in pro-Labor activism. Thus, home mortgage subsidies are just the government getting involved in Labor Politics on the side of Capital, providing tactical support for the wealthy at the expense of working Americans. (I know, shocking.)
I don't want to put words in Charles' mouth, but I think I see where he's coming from. There's a (defensible, I think) argument to be made that America's obsession with home ownership was borne out of the Labor Riots at the end of the 19th and beginning of the 20th centuries. The idea being that the federal government began encouraging home ownership for working-class Americans because workers with substantial mortgage debt are less likely to strike or otherwise engage in pro-Labor activism. Thus, home mortgage subsidies are just the government getting involved in Labor Politics on the side of Capital, providing tactical support for the wealthy at the expense of working Americans. (I know, shocking.)
65
@64 But there is also a much more defensible argument against yet again creating a renter class beholden eternally to landlords. These used to be known as serfs. Charles is overreaching. Not to mention the irony - no, the absurdity - of a Marxist accusing people who support home ownership as "ideological." Really, Charles?
66
Charles, the post is muddled.
Yes, the mortgage interest deduction is welfare for homeowners. There is some justification for this; it encourages stability and social cohesion. It's a better question to ask how many have used this deduction for decades but bitch about other forms of welfare, which also have beneficial effects.
Yes, the wealthy and corporations are the biggest welfare cases in the land, leeching off the rest of us through the tax code, government contracts, rigged pricing, and escaping criminal prosecution for these and more. As if that wasn't enough, their ingratitude for these opportunities to steal knows no end. As Gore Vidal once said about conservatives, "Law and order means ignore one and impose the other."
Major Mistake: Using Robert Reich to make a populist case is a non-starter. He's a careerist liberal poser, an academic ambulance-chaser who has never hesitated to place his convenience above others' needs. He's neoliberal scum that delayed for weeks before attending the Occupy demonstration a brief walk from his campus office.
Yes, the mortgage interest deduction is welfare for homeowners. There is some justification for this; it encourages stability and social cohesion. It's a better question to ask how many have used this deduction for decades but bitch about other forms of welfare, which also have beneficial effects.
Yes, the wealthy and corporations are the biggest welfare cases in the land, leeching off the rest of us through the tax code, government contracts, rigged pricing, and escaping criminal prosecution for these and more. As if that wasn't enough, their ingratitude for these opportunities to steal knows no end. As Gore Vidal once said about conservatives, "Law and order means ignore one and impose the other."
Major Mistake: Using Robert Reich to make a populist case is a non-starter. He's a careerist liberal poser, an academic ambulance-chaser who has never hesitated to place his convenience above others' needs. He's neoliberal scum that delayed for weeks before attending the Occupy demonstration a brief walk from his campus office.
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