Comments on: House GOP Unveils New Homeowner Subsidy Policy

By: Drew

Drew — Thu, 26 Mar 2009 21:12:41 +0000

I haven't had a mortgage in over 10 years. But I'm think'n. $5K credit?

Can you say unintended consequences.

By: charles austin

charles austin — Thu, 26 Mar 2009 18:45:04 +0000

Just for posterity, please note that many of the Obama critics here are just as disgusted with these Republican proposals as the Obama cheerleaders are.

By: Stormy Dragon

Stormy Dragon — Thu, 26 Mar 2009 16:56:13 +0000

They need a 'statists anonymous' for GOP congress critters to join. "Hello, my name is John Boehner and it's been three days since I last tried to expand the government in order to buy votes."

By: odograph

odograph — Thu, 26 Mar 2009 16:49:37 +0000

I think they fell off the free market wagon too there Stormy.

By: Stormy Dragon

Stormy Dragon — Thu, 26 Mar 2009 16:46:08 +0000

Wow, it's amazing how quickly the GOP fell off the smaller government wagon again.

By: Below The Beltway » Blog Archive » The Republican’s Dumb Plan To Reinflate The Housing Bubble

Thu, 26 Mar 2009 16:41:38 +0000

[...] H/T: Alex Knapp [...]

By: Dave Schuler

Dave Schuler — Thu, 26 Mar 2009 16:38:14 +0000

The mortgage interest deduction isn't the only subsidy on home ownership but one of several. The capital gains rules governing sales of primary residences changed in 1997 and again in 2008. Although the revision reduces the incentives for speculation put in place in 1997, home ownership remains a method of accumulating wealth.

Federal subsidies for road-building also constitute a subsidy to real estate developers and, consequently, home purchasers.

A good place to start in reforming the mortgage interest deduction would be by capping it. A cap of, say, $20,000 on deductible interest would probably pass.

By: DC Loser

DC Loser — Thu, 26 Mar 2009 15:50:33 +0000

In my 20 years of home ownsership I've often wondered about the supposed benefit of this choice. Granted, the tax deduction was an inducement, but it was more than offset by the annual maintenance costs (lawn care, gardening supplies, paint, replacing AC and furnace, etc...) Not being independently wealthy enough to have other people do that for me, I was basically tied to my house on the weekends instead of going out with my wife and enjoying other things. Frankly, the best time I can recall we had together was when we lived in an apartment without all the maintenance headaches.

By: Bill H

Bill H — Thu, 26 Mar 2009 15:43:55 +0000

When I first entered the workforce, owning a home was something that one aspired to. You worked your way toward that goal, and gained it by becoming established as an accomplished adult; one who could, among other things, save up enough money for the down payment.

When my nephew graduated from college at age 19, still a bachelor, he bought a 3-bedroom, 2-bath, 2000 sqft home as a matter of course. It simply never occurred to him not to do so.

By: Raoul

Raoul — Thu, 26 Mar 2009 15:34:52 +0000

Steve and PD: we may add the fact that other countries without the subsidy (e.g. Canada) have the same rate of ownership. As to the so called advantages- yes, they exist, but so do the disadvantages. When it comes to government policy, it easier to take without acknowledging the adverse effects.

By: PD Shaw

PD Shaw — Thu, 26 Mar 2009 15:20:28 +0000

Steve Plunk,

I think the primary beneficiaries of the deduction are not middle class. Look at the statistics from the article Phil Smith linked to:

More than 70 percent of tax filers don't get any benefit from the deduction at all. O.K., many of them are renters. But even among homeowners, only about half claim the deduction. And for the 37 million individuals and couples who do, the rewards, at least on average, are surprisingly modest — just under $2,000 per return. (Figure it like this: the median home, as computed by the Bureau of the Census in 2003, is valued at $140,000. If you finance 80 percent of it with a 6 percent mortgage, your interest bill is $6,720 a year. A taxpayer in the 25 percent bracket would save one quarter, or $1,680.)

Note: something like 13% of people don't file, so clearly a large group of people in the median income range do not benefit from this deduction.

By: Steve Plunk

Steve Plunk — Thu, 26 Mar 2009 14:43:00 +0000

Spending on fancy clothes is better than spending on a home? I fail to see the logic in that one.

Let's look again at the benefits of home ownership. Historically it has been the best way to increase wealth for the middle class. It represents a wealth pool that can be accessed through equity loans for a variety of uses. Home owners are better neighbors leading to better communities leading to better places to live. Owning a home gives the owner intangible benefits like a sense of place, higher feelings of security, and the rewards of being responsible for something.

Home ownership may lead to higher unemployment by making workers less mobile but that creates a more stable atmosphere for raising children. Homeowners are more likely to be involved with PTA's and other community organization.

So there are things on the plus side as well as the minus side. From my point of view the benefits outweigh the costs and the mortgage deduction reflects society's acknowledgment of those benefits and it's desire to increase home ownership.

By: Raoul

Raoul — Thu, 26 Mar 2009 14:42:00 +0000

Truer words have never been stated: "Not only are we encouraging people to spend too much on housing when they could be spending it on other things, but that rootedness of homeownership limits people’s flexibility in adjusting to more localized economic downturns." I repeat it because it really needs to be emphasized to new young home buyers. Ironically, at least in the DC area, it is a pretty good time to buy. As to the interest deduction- the way you do it is to get rid is through a multi-prong approach- 1) adjust downwards the deduction 2) reduce income taxes proportionally 3) make it happen through a five year process.

By: PD Shaw

PD Shaw — Thu, 26 Mar 2009 14:30:06 +0000

Perhaps we can start with baby steps and end the deduction for home equity loans.

By: steve

steve — Thu, 26 Mar 2009 14:18:29 +0000

Agreed. The home mortgage interest rate deduction should go. It has too many negative economic consequences. However, which party will get rid of it? Neither IMO. Taking anything away from the middle class is political suicide.

Steve