[quote=SK in CV][quote=CA renter]
Perhaps it’s because I don’t believe in changing the rules after the game has started, but I think the elimination of the MID should not affect existing mortgages; they should be grandfathered in.
This would probably cause housing prices to fall and local/state governments to see lower revenues, but that’s not really a bad thing, IMHO (I don’t think it would be a drastic change).
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As far as the MID on second homes and rentals, I think that should be eliminated entirely.
If you think about it, the mortgage interest is an expense that the LL **chooses to add** to the legitimate expenses of owning and maintaining rental properties (repairs, maintenance, advertising, management fees, etc.). A leveraged landlord should not be entitled to more deductions than a LL who owns a property outright. This means that taxpayers are subsidizing a LL’s use of leverage. Leverage is their problem, not ours.
The only way I would allow the MID on rentals would be if the LL agreed to some form of rent control. This should also apply to Prop 13 protection — the benefit of the lower property taxes does not usually go to the renter (more affordable housing), it goes to the landlord.
There is no reason for taxpayers to subsidize a landlord’s profits or use of leverage.[/quote]
Changing the rules happens all the time. Near perfect examples are the elimination of the deduction for personal interest, and limitations on deductions for home equity interest. Taxes on cap gains change pretty regularly.
State and local revenues might only drop in CA where property taxes are statutorily tied to values. (I think CA is unique in that regards.) Other states figure out how much they need and set the rates accordingly. I’m not convinced that values would drop significantly even in CA.
You’re opposed to changing the rules mid-game for mortgage interest. But not opposed to changing the rules mid-game for 2nd home interest? And apparently not opposed to changing the rules mid-game for rental property?
Related to the deduction of interest on rental properties, it’s an entirely different issue. Unlikely to happen. It would kill prices way worse than doing away with the home mortgage deduction. Rent control on commercial property? I don’t think either is going to happen, or even be proposed in good faith. (Other than different depreciable lives, I can’t think of any tax differences between residential and commercial rental property. Same tax code sections which determine what is deductible cover both.) Are you going to tell Jerry Jones that he can’t deduct the mortgage interest on his new stadium and someone else is going to tell him how much rent he can charge the cowboys to play there? Nope, that one isn’t going to happen.[/quote]
Agree with you that state/local revenue would probably not change too much.
Good point about my not wanting to change the rules mid-game for primary residences, but not for investments. I should clarify that I differentiate between basic needs/primary residences and wants/investments. IMHO, a primary residence is a basic need; therefore, it should be treated differently than investment RE. While some would make the argument, that people don’t *need* to own, I actually favor responsible ownership of a primary residence for as many people as possible. It’s best for society (IMHO) when people can control their housing costs and control their own property. Ideally, everyone would have a paid-off house before retirement.
For this reason, I believe (primary) home ownership should be encouraged and given preference over RE investment. Prices would fall, ownership rates would rise, and owners’ equity would rise (IMHO).
Commercial RE is another issue entirely, but I would also encourage the ownership of a single commercial/industrial building per person or related entity by giving them Prop 13 protection and also allow the MID on a *single* property (there might be some size limitations). The property should be reassessed any time there is an ownership change. People should not be able to pass on their Prop 13 protection via corporations or LLCs, etc. (which simply increases prices on these properties — the seller gets the benefit, but the taxpayers have to subsidize it).
Additionally, multi-family dwellings (apartment buildings) could retain Prop 13 protection, but I’d like to see a way for tenants to somehow benefit from this as well — a shared benefit of sorts.
