Quote:
Originally Posted by RIJIMMY
Jim - allow me to play devils advocate. Why is it the govt. business if you buy a house? Why should homeowners get a benfit others do not? Isnt the mortage deductions just a payoff from the govt to the banks? You dont really "benefit", tax money in the form of a deduction gets funneled to the banks to pay for outrageous interest. If housing prices plummet, wont they reflect the real market value and not an inflated price due to government intervention. I know it would be painful, but I'm for across the board cuts. Maybe if there is no deduction, people will save up for for down payment, borrow less and in the long run, provide a more stable housing market?
I think there has to be some pain spread across the board.
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RIJIMMY, you definitely raise some good and interesting points...
"Why is it the govt. business if you buy a house?"
A few things come to mind. First, at least here in CT, town governments (and schools, police, etc) are funded by property taxes, so the more people who own homes, the larger the tax base, which is a good thing.
Second, the government has a keen interest in keeping the economy from genuinely collapsing. Eliminating this deduction will (1) immediately reduce the net income of millions of folks, and (2) it will have a catastrophic effect on housing values, which impacts many other things like ability to retire, ability to pay for kids' education, etc... Just the shock value of eliminating a long-standing deduction bothers me.
"Why should homeowners get a benfit others do not?"
Because I pay property taxes, and renters do not. Government, particularly municipal government, benefits from increased homeownership. Renters use the same services i do (send their kids to public school, etc) but pay no taxes to fund those things. Maybe that entitles me to some relief?
"You dont really "benefit", tax money in the form of a deduction gets funneled to the banks "
I believe I do benefit, as I realize some real, tangible tax savings. The tax savings from that deduction goes right in my pocket. If that deduction is eliminated, I pay more taxes, that's a "real" impact. My current mortgage is 3.75%, hardly outrageous.
"If housing prices plummet, wont they reflect the real market value and not an inflated price due to government intervention."
If housing prices drop, they will reflect the value of the house, EXCLUDING the benefit of the tax break. Problem is, when I bought my house, like most people, the value at that time reflected the tax benefit.
It would sort of be like buying a house in a nice area, and 5 years later the town decides to put a landfill adjacent to my property. I get hurt because of something I could not have foreseen.
"I'm for across the board cuts"
I know my taxes are going up (unless I move to New Hampshire). But as someone else pointed out, the number of federal employees making over $150k has DOUBLED IN THE LAST 2 YEARS. There are a lot of places where there is an awful lot of fat. Let's cut the fat before we cut a vital organ.
"I think there has to be some pain spread across the board"
OK, when ALL municipal employees have 401 (k)s instead of pensions (like the rest of us), if we still need more tax revenue, I'll pony up.