View Poll Results: Should we end the tax deduction for mortgage interest?

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Thread: Should we end the tax deduction for mortgage interest?

  1. #21
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    Re: Should we end the tax deduction for mortgage interest?

    Quote Originally Posted by DiAnna View Post
    My husband and I don't have a mortgage, so the point is moot for me personally. However, mortgage interest is usually the largest single deduction any family has, and to lose it would be devastating to the average family. Even owning a home in this economy is a struggle for millions of people. This is not the economy to strip those struggling to keep a roof over their heads of their single largest tax deduction.
    I'm estimating that the average mortgage in the country is about $150,000. The current 30-year mortgage rate is about 4.5%, so the average person pays about $6,750 per year in mortgage interest. This is the amount that's tax deductible...IF, and only if, you itemize your deductions, which most middle-class people do not. And even then, it would net them a couple thousand dollars per year. Nothing to sneeze at, but hardly devastating for most people.

    Quote Originally Posted by DiAnna
    I can see slowly lowering the percentage of interest that can be deducted over a period of ten years or more, but even then this is not the time to start doing so.
    I agree that it should be phased out rather than suddenly eliminated. The housing market certainly doesn't need any more shocks.
    Last edited by Kandahar; 03-07-11 at 12:06 AM.
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  2. #22
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    Re: Should we end the tax deduction for mortgage interest?

    Quote Originally Posted by TurtleDude View Post
    the biggest deductions or loopholes is the fact that almost half the country doesn't pay any income tax

    the rich contribute far more than most-indeed the top 5% pay more Income tax than the rest of the country combined

    only a moron would claim that the rich avoid contributing to their country

    its the bottom 20% who are more likely deadbeats than the rich when it comes to positive contributions
    Yea.. poverty, that's a loophole everybody chooses over being rich and comfortable..

  3. #23
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    Re: Should we end the tax deduction for mortgage interest?

    Quote Originally Posted by MaggieD View Post
    Kandahar, I'm not at all sure that interest rates would fall. Interest rates are governed and driven by things other than the fact that mortgage interest is tax deductible.

    You say home prices would fall. I would agree with you. Why would they fall, though? They would fall because there would be less buyers. And because there would be less buyers, there would be less homeowners. Home ownership, rightly or wrongly, has long been an integral part of the American Dream. Should it be? I think so. Buying a home is a way of fixing one's living costs. When one lives in an apartment or other rental property, one is controlled by, and at the whims of, a landlord. Home ownership promotes personal pride. Encourages having a personal stake in the neighborhood and the schools. The American Dream of a white picket fence deserves to be there. For all that our government chooses to subsidize, surely home ownership is one of the more worthy.
    Then maybe the government should do low interest financing instead of banks?

  4. #24
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    Re: Should we end the tax deduction for mortgage interest?

    Quote Originally Posted by Kandahar View Post
    That is one component of it. The mortgage interest deduction is, in part, a subsidy for mortgage-lending banks. If mortgage interest is tax deductible, that increases the demand for mortgages, which drives up the price (i.e. the interest rate). The banks know that the government will foot part of the bill, and so they can charge more than they otherwise would.
    I can't argue this point as I'm not well informed.

    Your costs are far more fixed if you rent than if you own. They are essentially limited to your rent (fixed cost), your renters' insurance (fixed cost), and your utilities (variable cost). These costs are known well in advance, are subject to market forces, and typically only change once per year. If you own a home, you have your mortgage (fixed or variable), your home insurance (fixed), your property taxes (fixed), your utilities (variable), the financial cost of repairs/maintenance (variable), the time cost of repairs/maintenance (variable), and the risk that your home will depreciate (variable).
    I can pretty much count that my rent's going to go up every year depending on the same variable repairs/maintenance costs I would see in my home as well as my landlord's decision that he'll raise the rent "just because." The last risk, that your home will depreciate, is a brand new phenomenon. And a frightening one as well. Puts a whole new spin on home ownership...

    I see no evidence of this, and even if it's true, subsidizing personal pride isn't worth $130 billion of federal revenue per year.
    As a Realtor, I see this every time a client buys a home. Probably the happiest stress of their lives.

    That would be a matter for local governments then. If they think that homeowners are better for their community than renters, they can subsidize the mortgages themselves. I don't see how it's a federal issue since (with few exceptions) people aren't going to pick up and move out of the country as a result.
    That's an interesting take. Here in Illinois, several communities are (were, not quite sure now) subsidizing home ownership in their towns with a $15K downstroke provided the homeowner stayed in the home for five years. You may have a point.

    I can think of a lot better ways to spend $130 billion than subsidizing dreams of white picket fences.
    Oh, yeah. And a lot worse.

    I think you've made some excellent points, actually. I would still be very nervous about making any such change at the present time...maybe gradually phasing in a change, but not cold turkey.

    When we're looking for all kinds of ways to save money, it's unfair to take anything off the table. I'll have to think some more about this...good post.
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  5. #25
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    Re: Should we end the tax deduction for mortgage interest?

    Quote Originally Posted by SheWolf View Post
    Then maybe the government should do low interest financing instead of banks?
    a thousand times no. we have that already, it is called Fannie Mae and Freddie Mac, and it has put us hundreds of billions into the hole.

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