I think that the problem isn't that some people should never have owned any house, it's that they shouldn't have owned the houses they bought because the banks gave them more money than they could possibly afford to pay back and they didn't stop and say "Hey. I can't afford a $3000 a month payment when I only make $70,000 a year". I know when we started our house hunt we were offered $100,000 more from the bank than we were comfortable borrowing. We were smart enough to know that we couldn't afford a mortgage payment that high and were disciplined enough to stay on budget when we bought our house. But, many people didn't do that, and it wasn't just the poor. There are new neighborhoods with $250,000 houses all over littered with foreclosure signs and for sale signs. It's not just low income people or neighborhoods.
The reason home ownership is good is because it encourages people to take a greater interest in their community, schools, and economy. If people are living in a constant habitat, they are more likely to be contributing members of their immediate society, as opposed to those who rent and move every year. There is a more at stake for a homeowner and greater reason for him to take care of the property and the community in which the property resides. This is why schools in neighborhoods where there are more homeowners and fewer renters are better. This is why the government offers the mortgage interest deduction. It's worth it to encourage people to own a home in order for the government to reap the benefits of responsible home owners.
Results 21 to 30 of 177
Thread: Taxes
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05-31-2011, 09:52 PM #21Xavier Basketball: We're Not Scared of Anyone!
Zip Em Up!
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05-31-2011, 10:22 PM #22
Encouraging home ownership is a good idea!
The mortgage tax deduction does more to encourage debt (and bank profits) than it does to directly encourage home ownership. It is a bank subsidy.
If encouraging home ownership is the goal of the program, why should someone who has their home nearly or completely paid off get nothing in tax breaks while someone else who has their property highly leveraged get thousands in breaks?
If the govt wants to use tax breaks to encourage home ownership...eliminate the mortgage interest tax break and create a deduction for single family home ownership.How sweet it is!
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05-31-2011, 11:08 PM #23
I've heard the mortgage interest deduction referred to as welfare for the wealthy.
It's regressive. The government is giving larger deductions to wealthier people in this program. It encourages people to take on more debt.
That's not a "safety net". At least section 8 is more of a true safety net.Last edited by GuyFawkes38; 05-31-2011 at 11:51 PM.
"I am at this moment writing a lengthy indictment against our century. When my brain begins to reel from my literary labors, I make an occasional cheese dip."
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06-01-2011, 07:04 AM #24
Larger deductions to wealthier people does not necessarily mean regressive. With 43% of Americans paying no federal income tax, you will not be able to convince me that any non-refundable deduction is regressive. Wealthier people pay more taxes in terms of percentage and gross dollars. That is not regressive.
Do some critical thinking for yourself sometime instead of just parroting what you read once in the NYTimes opinion pages."Give a toast to my brother, hug your family, and do everything possible to live the life you dream of. God Bless."
-Matt McCormick
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06-01-2011, 08:20 AM #25
Do you dispute these numbers:
Problem #3: The deduction is wildly regressive. The tax savings for households earning more than $250,000 is 10 times the tax savings for households earning between $40,000 and $75,000 a year, according to recent research by James Poterba and Todd Sinai. If there ever was a case for small-government egalitarianism, then this is it. Eliminating the home mortgage deduction and replacing it with an across-the-board tax cut would equalize after-tax incomes without a single new government program.
The IMF considers the mortgage deduction regressive.
http://blogs.wsj.com/developments/20...on-regressive/
Notice the end of that article:
The deduction is generally disliked by economists, who say it mostly encourages wealthier Americans to take on more debt. The deduction applies only to the roughly one-third of taxpayers who itemize their returns, typically those with higher incomes.
Milton Friedman considered it regressive. He's not a commie.Last edited by GuyFawkes38; 06-01-2011 at 10:50 AM.
"I am at this moment writing a lengthy indictment against our century. When my brain begins to reel from my literary labors, I make an occasional cheese dip."
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06-01-2011, 09:34 AM #26
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Encouraging home ownership was not the problem that caused the financial meltdown. It was simply a lack of lending standards by financial institutions combined with outright fraud and easy money from the Fed. The government definitely played their role with the minimal downpayments required by the quassi government agencies. That being said most financial institutions were waiving downpayments completely and some were even giving loans exceeding the value and cost of the home. Without a sizeable downpayment there is no reason for someone to stick with the loan when the price declines.
I'm strongly in favor of a tax code that has 0 deductions. Taxes should be pulled straight from paychecks based on income level and no filing should be required. Those that had gaps in employment or experienced extreme fluctuations could file at year end or maybe the government just processes final W-2's from corporations to make appropriate adjustments.
Businesses could still deduct expenses so the filing process for corporations and businesses wouldn't change other than the elimination of special subsidies and other tax loopholes. All corporations should be treated the same with a 20% income tax rate.
Regarding the article on individual tax rates needing to go higher for the middle class, it depends on how much spending is cut. If the government gets serious and cuts military spending and takes care of future liabilities for medicaid/medicare then fewer tax hikes will be necessary. As I mentioned previously tax hikes at certain income levels lead to less economic activity which negatively impacts government revenues. The impact could result in less total tax revenue if economic activity drops more than the rate increase. The $1M level I suggested could likely be lowered significantly without causing much of an economic impact but I do not have the data to determine the exact income level. I feel $1M is very safe but suspect it could be as low as $500K or even lower.
I know when my income went above $50K a year I could have easily paid a much higher income tax rate without changing my spending habits (actually I've always banked a huge percentage of my salary even at $30K) but I believe I am an aberation and not the norm. It is my belief from data I've seen and seeing those around me that most people anywhere near that income level spend everything they make other than possibly what they put into a retirement account. Anytime taxes go up on a class of people that basically spend everything they make, discretionary spending is forced lower or debt rises. This can lead to recessions which can actually lower government revenue even though rates went higher. The primary reason the US economy is growing is because Obama lowered the payroll tax (which is paid by everyone working) by 2% this year. The other big growth factor is exports. The decrease in payroll tax is set to expire at year end if I recall correctly. That will certainly negatively impact the economy next year.
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06-01-2011, 10:48 AM #27
The general tanking of the job market has a lot to do with the crazy foreclosure rate, too. My wife and I are a prime example. We were approved for a 250K loan but only borrowed 165K. With our income it should have been easy enough to make our mortgage payments even if one of us lost our job. Well, guess what? I lost my job and my wife took a significant pay cut.
We had to move to Cincinnati from Columbus for both of us to find jobs again and rented out the house, thinking our problems were solved at least temporarily. They were until the renter stopped paying and squatted on the property. He also did tens of thousands of dollars worth of damage to the property and committed identity theft against me, throttling my credit rating until I go things sorted. By the time we were able to evict him and fend off his malicious housing discrimination lawsuit we had fallen behind and entered foreclosure. Luckily we were able to sell the house--at a substantial loss--before the foreclosure was finalized. Many in our neighborhood were not so lucky. Last time I was in Columbus I drove through and every house on the street was for sale, including our old home.
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06-01-2011, 11:01 AM #28Do you dispute these numbers:
Quote:
Problem #3: The deduction is wildly regressive. The tax savings for households earning more than $250,000 is 10 times the tax savings for households earning between $40,000 and $75,000 a year, according to recent research by James Poterba and Todd Sinai. If there ever was a case for small-government egalitarianism, then this is it. Eliminating the home mortgage deduction and replacing it with an across-the-board tax cut would equalize after-tax incomes without a single new government program.
I don't necessarily dispute the numbers since I can't see the data or methodology, but I do see a data set cherry picked to produce a desired result. I can't even tell from this statement if they are comparing home owners to homeowners, or just income bands in total.
It is absolutely ridiculous to compare households making $40,000 - $75,000 to those making $250k. A family of four making $40k gets a federal tax refund right off the bat. They pay less than zero tax before any itemized deductions. A mortgage interest deduction can not result in any "tax savings" for this family, because there is no tax.
A family of four making $75k has a maximum tax liability of $4,516 before any deductions or credits of any kind other than the child tax credit.
A family of 4 making $250k starts with a tax liability of $51,701, strictly on the tax tables.
So you're comparing a population that ranges from a negative effective rate to a maximum of a 6% tax rate to a population that starts at a 20.6%. Do I dispute that the value of the mortgage interest deduction is higher to those people? Of course not. Does that make it regressive? Nope.
I guess it depends on you define the term "regressive"
Do they not teach critical thinking anymore?"Give a toast to my brother, hug your family, and do everything possible to live the life you dream of. God Bless."
-Matt McCormick
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06-01-2011, 11:07 AM #29"Give a toast to my brother, hug your family, and do everything possible to live the life you dream of. God Bless."
-Matt McCormick
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06-01-2011, 11:19 AM #30
The easiest solution is just to get rid of the IRS and have a national sales tax. It isn't fair to tax someone more just because they have been able to make more.
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