I can certainly see removing the mortgage deduction in the long term. But adding that to the batter housing market right now would be a very bad idea.

I just quickly ran some numbers based on when I bought my place and for the first year it would be like the place cost ~27% more. It is late, hopefully I did the calculations correctly.

This and tuition aid should be scrapped or capped.

But they are political hot potatoes.

They should set a cap, then phase out over 15 years.

My problem is when someone says a deduction costs the government money. How does ME keeping MY money cost the government? Using this logic, when I take my personal exemption, that costs the government money. When a self-employed individual deducts the cost of their health insurance, that costs the government money. Or when my employer doesn't take taxes out of what I pay for health insurance, that costs the government money.

A deduction costing the government money means the money is the government's, and they are just letting us keep a portion of it. If we can figure out a way to keep more than what they have decided we can keep, we are cheating them.

Is the home mortgage deduction fair to all people? Probably not, but please don't use the argument that it is costing the government money. It's not their money to begin with!!

Ian - why does a renter not get to deduct their housing costs?

As I said, "Is the home mortgage deduction fair to all people? Probably not..."

I am not arguing what is fair, I am saying the argument of costing the government money is wrong.

"Why should the rest of us pay for your home?"

This is just another variation on playing the"rich vs. poor" argument. This can be extended. Why should I pay for your personal exemption as "head of household", which gives you a favorable position vs mine?

You're actually making a great argument for the Fair Tax on consumption. But, about your question:

First: do you not recognize that your rent will go up when your landlord loses that deduction?

Sending more money to government does NOT do you more good. The problem with government is not tax revenue, it is overspending, and feeding a fat man more is not the way to make him fitter!

Now, is your goal a nation of propertyless people?

Have you looked up what "republic" means?

This is a bizarre argument now, anyway. Aren't we looking at a hyped "housing crisis" because there are too many homes on the market, after mortgages were offered to millions of people who flatly couldn't pay for it?

And, Amy, you rent because buying in LA is too expensive. Changing the tax rule will...?

To reiterate, tax deductions, much like tax cuts, do not "cost" the government. The deductions and cuts are a mechanism to provide that people get to keep that which they have earned. Earners keeping that which they have earned may be a foreign concept to some. The left, socialists, the "welfare voters" may have trouble understanding the concept of earning and profitting from ones own efforts, but it's time for an education. Perhaps the government should tailor spending to actual tax receipts instead of using estimates with no basis in reality.
Now, back to the original topic, perhaps we should consider the mortgage deduction a "reward" for making a more substantive investment in a neighborhood. As opposed to renters ,whom tend to be more transient, particularly outside of urban centers. And, despite arguments to the contrary, home owners provide greater tax receipts to taxing authorities than renters. Finally, for those whom rent, are you really "subsidizing" anything ? Or is this just a deduction for which you do not qualify, much like many other deductions ?

Loosing the mortgage interest deduction would be no big deal for most of the middle class. You need to know some tax history to understand why but it used to be in the 80's and before, there was no standard deduction, that you could take against your income if you did not have a mortgage. That means that every dollar of your income was taxable from the get go. This was grossly unfair to renters who did not have a mortgage so the government created a standard deduction that everyone could take and it was based on the average itemized deductions for the country. Right now the standard deduction is right around 11k for a married couple filing jointly. That means if your itemized deductions are not more than that you do not realize any benefit from itemizing, and if you do itemize, you only benefit from deductions over that amount so if you are married filing jointly, and have 14k worth of itemized deductions, you get the benefit of 3k worth of deductions, not 14k worth. So if you itemize and the income you are taking that deduction against is in a 28 percent marginal rate, you will save 840 dollars on your taxes.
IN addition Radwaste, a rental property owner is not taking an interest deduction for the mortgage he has on his rental properties, he is balancing it against his rental income as an expense of owning the property. So if he pays taxes, insurance and mortgage interest of 1200 dollars a month on his rental property, and he rents the property for 1500 a month, he has a profit of 300 dollars a month which he pays taxes on, in a rough nutshell.

You all aren't paying more. It's not a zero sum game. That we deduct something doesn't mean you have to add something. Taxes should be less, not more, spending should be less, not more. As to why? Well, homeowners take better care of their properties in general and improve neighborhoods-areas that are largely rental (I'll exclude the coasts since its more common to rent there, given the prices) are pretty crappy in most of the country. They have higher crime. The owners care more about the schools, as they usually are there for the long haul. You, Amy, are the exception in renter-land, not the rule. The rule is trashed out houses left after the lease or sometimes before. The rule is unkempt lawns, lowering everyone's property value. We have 3 rental houses in our neighborhood. You can walk down the street and point to exactly which ones they are. And we live in a nice suburban neighborhood.

As a homeowner -- I have no problem with losing the deduction as long as they implement a flat tax.

The day the government implements a flat tax I will not have an issue with losing any deductions.

As far as what we are taxed on -- look at the FICA tax alone and we are taxed "reasonably". Add in the Medicare and other taxes that aren't in the equation and I consider myself fucked.

And, Amy, you rent because buying in LA is too expensive. Changing the tax rule will...?

I don't base my policy beliefs on how things will affect me personally.

Furthermore, my landlord bought the place I live when it was a steal, and it doesn't pay to raise rent above what tenants can pay and lose good tenants, and I'm a very good tenant, paying on time, letting him know ASAP if anything's wrong on the property, and being involved in community issues in a way that's good for the property.

I'm not sure hugely increasing taxes on the middle class is a good idea at the moment. The phase out idea could make sense, but this is a middle class tax raise and right now...

I've heard that revolutions tend to happen in places where there WAS a wealthy middle class, that suddenly wasn't so wealthy anymore.

You're the rare rentor, Amy. What momof4 said is correct. Rentors generally bring down neighborhoods, so we should encourage home ownership.

Also, your landlord is looking at a substantial capital gains tax if he ever sells, just because he was lucky enough to buy at the right time, but I bet his property taxes are extremely high already if you're in a desirable area.

We own a house in Brooklyn Heights, NYC that my ex bought for almost nothing in the 70s, totally renovated it - poured his sweat and architectural skills into it for years. It has only 5 apts. The highest rental is $2500 per month, three are $2300 per month, and the studio is $1000.

That sounds great, but we are actually thinking of selling it now because the property taxes have gone up to $35,000 per year! Add to that the maintenance, insurance, utilities, and all the other costs, and it's just not as profitable as most people believe.

I don't know what we're doing in this country. Taxes are outrageous for those of us who try to run small businesses or provide housing. It's just getting not to be worth it anymore.

I agree with Jim. We need a flat tax, especially if you're going to remove what few deductions we have left.

Well, good for him, but what's a low rate? Tenants tend to vastly overestimate what their landlords are making off the property. They just look at the rents and never factor in the expenses. Insurance alone - just trying to protect from being sued for every little thing - is huge. Plus mortgage, taxes, maintenance, etc.

But I wish they'd pass a law like that in NY, but they won't. There are more rentors than landlords, which is how rent control got voted in there. It completely wiped out a lot of building owners.

The bottom line is that the numbers have to make sense. A bldg with only 5 apts shouldn't be taxed at $35,000 per year.

My 2 acre marina, with only 11 slips, shouldn't be taxed at $22,000 per year. What, does the government think we're minting money?

This is really a two part debate. The first is the philosophical question: Should conservatives support a mortgage deduction. The second is the practical question: If not, how do we transition away from it.

The answer to the first question ought to be clear. If we do not believe in a government directed "National Housing Policy" -- Fannie, Freddie and all that -- then there is no justification for a home mortgage deduction anymore than other other itemized tax deduction. Gov't should be picking winners and losers in the market. Isn't that a fundamental conservative principle?

The debate is not about whether the government can afford the deduction; the debate is whether the deduction is economically efficient. Like any subsidy, it distorts the market for the item subsidized (housing) and sends false market signals affecting the allocation of resources.

Practically, however, people made decisions based on the deduction and in any transition away from the deduction, care must be given to not distorting the market further (a perpetual problem when correcting past gov't mistakes). That means some type of phaseout of the deduction including a concurrent tax reduction, not just to homeowners, but across the board. Gov't should not pocket the funds from eliminating the deduction.

It is inevitable that some people will get the dirty end of the stick in any transition. But shouldn't conservatives be resolved to ending all subsidies sooner rather than later?

It's not a subsidy. It's simply a tax break on money that the property owner paid out. It's still money the property owner made, not money given him by the government. Same as the deductions taken for maintenance expenses allow the business or property owner to keep more of his/her own money. It's not the government's money.

It's a reward for acting responsibly, creating housing and jobs. A tenant doesn't create jobs or add to the economy. Investors, who own their own bldgs and property, in which to conduct their businesses, and home buyers, who invest in the improvements and construction of their homes create jobs.

Now would be the worst possible time to try to deter home ownership. After the recent homebuying tax credit died in June, real estate sales have consistently dropped most places, and home starts are struggling.

"Why should the rest of us pay for your home?"

I don't know why you should, but that was the deal when I took out the note, and was one of the factors I took into consideration when I made that financial decision. If the deduction is removed, there should be a grandfather clause.

Deductions meant to encourage particular spending or savings are a bad idea. Granted. The problem with this recommendation is it's a huge tax increase on the middle class. They have vague promises of making up for it elsewhere, but the way they talk about this increasing tax receipts tells you all you need to know about where the burden of paying for this government's excess will lie.

What I have always hated most about the mortgage interest deduction is that it provides an incentive for people to borrow more than they should. This, in turn, raises the price of housing. The deduction had its own part to play in creating the housing bubble.

The mortgage interest deduction should never have been enacted in the first place. If you don't want to live in a neighborhood with lots of renters, local covenants can address that issue. Craig Westover is absolutely right that this kind of tinkering distorts markets. Count me in the camp of people who think a government-directed national housing policy (complete with Freddie and Fannie) is pure bullshit and offensive on every level. It is simply none of the government's business and should be left to private, free markets and local neighborhood zoning.

Since I don't believe we should ever have gotten the mortgage interest deduction in the first place, I believe we should get rid of it. Keeping a bad thing around is still a bad thing. But I agree with phasing it out over time. And then learning our lesson about this kind of government meddling. For chrissake, when will people learn.

LS: "Rentors generally bring down neighborhoods, so we should encourage home ownership."

Which is what the government has done off and on over the last century starting back at the last depression. This is just the latest political game with lax lending standards pushed by government/Fed Reserve. Dems and Repubs supported it (and some fought it over the years and failed) and then now blame anyone but themselves. All to get more people in houses. Encouraging home ownership is a good idea but you do that through education and setting a good example in managing your finances etc..

You don't do it by forcing banks (and making it rather attractive financially since the gov will backstop the loans ultimately aka Fanny/Freddie) to make loans to poor/minority/low credit groups who likely can't pay the bills. The FDIC has gone after banks, even POST real estate/economy CRASH who had managed to stay above water and have no or few risks with subprime etc. type loans.

Amy, regarding the CA property tax law, your neighbor may be talking about Prop. 13. IIRC, that freezes property tax rates at the time the property was purchased.

A good primer on the basics of the real estate nightmare is Sowell's "Housing Boom and Bust".

Sio, I agree with you that you don't encourage banks to loan to irresponsible borrowers, but that wasn't the case until these bank started reselling and repackaging these loans into different financial instruments. What did they care, then, whether the borrower could pay? They made their money up front and passed the risk along in increasingly complex derivatives, which basically amounted to a Ponzi scheme. That's mostly what created this mess. It's not the mortgage tax credit.

Like I said, I'd be happy to do away with all deductions, if we went to a flat tax. But, until that happens, if we're going to allow deductions, one that rewards savings and home ownership is sound. We just have to return to the old days of sane lending practices, which required substantial percentages down...which required people to work hard and save that money to buy a home...which encouraged them to have a real stake in their communities.

Lending has basically returned to that kind of practice now. Hardly anyone can get loans. It's gotten too strict, which is one of the main things that's inhibiting recovery. Businesses can't grow and hire more workers when they can't borrow money.

I have excellent credit, yet I can barely qualify for a home loan, and only because I've had a 20+ year borrowing history with my local bank.

"I don't base my policy beliefs on how things will affect me personally."

Whoa, you're thinking too fast.

Other people also rent because buying in LA is too expensive. Changing the tax rule will...?

Again: do not be distracted here by who is or is not the target of tax changes. Remember that the premise is a ploy to feed the Fat Man, who cannot get enough of your money because he's too fat!

But, until that happens, if we're going to allow deductions, one that rewards savings and home ownership is sound.

But the mortgage interest deduction doesn't encourage savings; it encourages people to borrow more money to buy a house with. I am not even convinced that home ownership is always a great thing. People who don't have oppressive mortgages tying them down are more mobile, something that pretty much everyone trying to find a job right now can appreciate.

I don't understand why you view home ownership as a bad thing, Pirate Jo. Do we really want a more transient society?

And, anyway, if the deduction is cut, who's going to own/build all the rental houses that'll be needed for a population of rentors, and don't you think they'll just raise rents?

The way I see it, as a landlord, it's going to make things harder on those who rent. The demand will surpass the supply of rental homes, most of which are second homes bought or built specifically for that purpose, as well as the tax incentives. If people stop buying second homes to rent out, current landlords will be calling the shots as far as rental rates.

All my rental houses are technically additional homes, so if I lose the interest deduction, I'll just have to pass the costs along to my tenants in the form of higher rental rates. Actually, if everybody stops buying and starts renting, it'll be great for my business, but I still don't see that as a good thing for communities. Home owners pay property taxes, and therefore care a lot more about what happens in a community and controlling the local spending.

"Home owners pay property taxes, and therefore care a lot more about what happens in a community and controlling the local spending."

A point that needed to be made, LS!

If you don't want to live in a neighborhood with lots of renters, local covenants can address that issue. - Pirate Jo

I believe those types of covenants are illegal. Ok, I did some research and they are not inherently illegal but are often times. I didn't find any that were upheld besides in a Condo type situation.

Being tied by a mortgage does make it difficult to move for a job (I have experienced this personally). On the other hand renters are more likely to cause problem...as a condo board member, almost all of our complaints have against renters. Considering we have less then 5% of units as rentals that is a statement.

I have no problem giving up the mortgage interest deduction, as long as they do the tax rate cuts that the deficit commission recommended as well. Otherwise, like it or not, the economy goes into even deeper doodoo.

How about this - a 9% tax on income, however derived. A 9% flat tax, on individuals, corporations, everybody. And everybody pays. The paperboy, the welfare recipient, the surgeon and the lawyer - we are all in this together. No deductions save for a charitable deduction. That's it, 9%. Pass a constitutional amendment.

> They should set a cap, then phase out

Move back to the States, and we'll take you seriously.

> I'm also against tax breaks for some
> to foster policy some in the government
> find advantageous.

Point taken, but nothing improves one's sensitivity to neighborhood happenings than haiving a hy-ooge portion of one's corporeal wealth sluggishly parked there. The weather here in my westside neighborhood is really nice... Teenage Beach Boys write songs about it, and Frenchmen philosophers envy it (however ironically). But hookers would ply their wares on the corner if I weren't willing going to go down there and expel them by my own hand.... Which saves the rest of the community a lot of money in police expenses.

Works better, too. A story goes with this, but it's difficult to tell in reasonable anonymity. Concerned citizens are much more powerful than constabulary forces.

I agree with you in principle Amy, but principles are often overwhelmed by virtuous practicalities.

I have no problem wit a 9% tax. But is it a reasonable amount to get us out of the whole?

For the most part, renters suck. Renters have a totally different mindset than owners. And not in a good way. Very transient. Very "not my problem." Long term investments in schools with bonds and tax levies are not approved my renters, even if they have kids in the school!

Think about how people drive rental cars!

We finally and thankfully sold our rental properties. Managing the properties and the tenants was a huge expense and headache. I'll never do it again.

I think it would be a huge mistake to remove the mortgage write off. After all, the people that DID manage to stay solvent and keep their homes during 'these uncertain economic times' probably budgeted that write off in order to make the payment. It will be sure to throw even more people out on their ears, through no fault of their own. After all, it is a 30 year commitment. I know I ran the numbers several times before committing and the write off was one of the numbers we crunched.

> For the most part, renters suck.

I always tried not to suck. But when thinking of R.E. as investment, only business properties seem attractive.

Anyone got any stories?

In the early 2000's, when the standard deduction was raised and I still owned a house it became foolish to take the interest deduction as the standard deduction was larger.

Now, I suppose if I'd been married with children, and I could also claim other deductions (dental, medical) it might have been the other way.

For LauraGr: as a renter, my landlord/I get no homestead exemption - we pay the full freight on our property taxes. And given Florida's screwed up property tax laws, that's no small thing.

So, yes, I'm generally opposed to any increase in property taxes. Not only do I pay my fair share, I usually pay more than my fair share.

Recently, I had to go before the local sewer board, which has been set up here to oversee a very expensive project. I had to wait awhile before I could speak, so I listened to the meeting. It was held at 4 pm on a weekday, too early for most working people to attend.

What struck me was the handful of little old ladies and men there with notepads, challenging the board, and keeping watch over every dollar that might be wasted.

They were all homeowners. In fact, most belonged to a homeowner federation. They have a real and quantifiable stake in this project because their taxes are footing the bill.

And I just thought thank goodness for these people because, without them, the government would have a blank check.

I doubt you'd get that kind of participation and oversight from rentors. In fact, rentors tend to want to spend money. They're not paying for it, so why not?

So, when rentors think it's so unfair that they don't have a tax write-off, why don't they consider how unfair it is that they get to vote and financially encumber property owners with community projects without having to pay the costs?

If it was fair, we'd do away with property tax, and charge a community tax that everyone, rentors and homeowners would have to pay. If rentors are enjoying the benefits of a community - great schools, parks, etc - why should only homeowners foot the bill?

Rentors generally don't pay property taxes, maintenance, insurance, and all the other expenses of ownership, so why begrudge the property owner a mortgage deduction?

Amy, that's different. It was a meeting about abuse of rentors. Of course, rentors will show up. And if there's any expense they can add to the property owner, they'll vote for it...whether it's a new park, civic center, service, or whatever. Rentors can vote to encumber property owners with their whims because they don't have to pay for any of it, which really isn't fair.

You're the ideal tenant. For the most part, I have good tenants too because I started paying for extensive background checks. Even then, the occasional bad tenant gets through. Background checks only tell you so much, and many current landlords are so happy to get rid of a bad tenant, they'll give a good reference.

"Rentors generally don't pay property taxes, maintenance, insurance, and all the other expenses of ownership." LS...

um, don't I pay for all that in my rent? I'm thinking like most businesses flow down expenses to the consumer, yes? Huh, when property taxes go up, my rent goes up.

Heh, since my ex got the house and all that, I get bupkis in terms of tax deductions, while she gets head of house hold and on and on... so she gets a net gain in terms of taxes, while I pay full price... as if 60% of my take home doesn't get paid to her tax free.

No, you usually don't pay for it all in the rent, Swiss. Maybe in places where property taxes are very low, or in properties bought purely for investment purposes, where those numbers have been carefully crunched, but most people who have second homes they rent out are usually just able to recoup a portion of the real expenses of ownership. They're banking on the property itself going up in value over the long-term.

I'm guessing that in most places, maybe not where you are LS, but most places people live in apartment buildings, not houses. The guy that owns my building also lives in one of the 8 units, but it's not a second house or anything. There are far more apt. buildings than houses for rent. It's a nice place, even if it's old... we call it the divorce club because all the tenants are divorced. Renting a house would be too expensive... though I know people who do, besides Amy of course.

I don't understand why you view home ownership as a bad thing, Pirate Jo. Do we really want a more transient society?

I DON'T view home ownership as a bad thing. It's just another thing that works out great for some people and not for others.

Pretend for a minute that we lived in a land free of all government incentives for home ownership. The real benefit to owning a home is that you get to the point where you don't have to make payments anymore. The downside is that you have a big chunk of your assets sunk into a place to live. And what if you live in Detroit?

Jobs are transient, so if you live in a place that is losing all its jobs, you would be better off if you could pack your stuff in a van and head to someplace with more job opportunities.

It isn't that home ownership is intrinsically bad and a transient society is good. It all depends on the circumstances. I am a home owner myself.

"My 2 acre marina, with only 11 slips, shouldn't be taxed at $22,000 per year. What, does the government think we're minting money?

Hmm. Wow, I missed this. My folks owned a marina in Florida from 1951 until 1983. You can see it now via Google Earth; just look at the condos, right where SR 520 hits Merritt Island, FL, crossing the Indian River from Cocoa. Wow, that was heaven, growing up there. It's an empty harbor now. For 76 years there were docks there. No more.

But yes, the public DOES think you're minting money. I have actually been to a County Commission meeting where somebody said the marina operator was rich - look at all the boats in there!

As if the boats were ours. (No, idiot - they belong to your neighbors!)

In the '70s, the peculiar and insane notion of the "attractive nuisance" arrived in Florida. Suddenly, you could have your property seized by a trespasser who broke their leg on your property. Now, here's a boatyard. Boats bobbing around, tied up to the dock... what could happen?

Why, clueless people, that's what. Fall in and drown? You can really do that? Wow!

Insurance killed us. That's why it's condos now, full of fat people reclining. The condos don't even make enough money to put in a slip for one boat, even though each of the 200 or so units sell for more than the entire marina did in 1983.

Pirate Jo, I agree that home ownership isn't for everyone, and may not be the best choice for many individually, but as far as promoting stable communities, it is. Especially given the way the system is set up to tax property owners for community services, schools, and improvements.

Like I said, if we did away with property taxes and went to a "community tax", with both rentors and homeowners paying for those things, it would be more fair. Yet, as it stands, property owners foot the bill and have the greatest stake in a community and its local government.

Having a community made up of mostly rentors, as exists in places like NYC, is why property taxes on a single house can rise up to $35,000 per year. The rentors way outnumber the landowners and can basically get them to pay for whatever they want. It's quite inequitable when you have the majority voting for what the minority must pay for. That's not a good situation.

Besides, somebody has to own the rental properties, and if we create a disincentive for people to build/purchase single family homes, the only thing that makes sense for investors will be apt bldgs and condominiums. They can make so much more money with less square footage, but that will vastly change the landscape of our neighborhoods.

Rad, that's exactly what's happening here in the Keys. The mom and pop businesses are being killed by property taxes and insurance, and all the other regulations.

We try to hang on, but we're not making the kind of money people think we are, so, sooner or later a big condo/hotel developer comes in and buys us out. Then, the community cries about how the "big developers" are taking over and changing the quaint atmosphere. Well, guess why?

My kids have grown up here, on the water. It's been a wonderful experience, and I hope to be able to give the marina to them someday, but, honestly, if taxes keep rising, and a big developer drops by and offers us a way out, I'd be tempted. We already sold 2 acres to a hotel developer (whose financing fell through during the crash, so the property, which used to be our trailer park and provided affordable housing, sits empty). the vast majority of citizens don't understand how overburdening property/small business owners changes their communities.

LS, you're not the only one looking at empty promises. Banana River Marine, run by old family friends, agreed to a contract for rumored millions and then a bank collapse left them owing a holding company for their own property.

The public is exactly as Agent K said: "A person is smart. People are dumb, dangerous, panicky animals and you know it." They think you're rich, too, and they'll fight to have your land seized for them, by turning to an agency that makes sure no one gets it while the agency grows more powerful. That public will then not notice. They've done their job. Anything which stands out must be mown down.

They'll claim you have a luxurious existence, dreaming of relaxing in the sun on a nearby beach... wait. Is that a hurricane? What do you mean, I will be killed if I stay? What do you mean, I have to earn enough to pay insurance? Even on Merritt Island, once a paradise, life turns mean as the pavement is spread.