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(former)FormerSanDiegan
Participantbearishgurl –
That’s another interesting observation. I think you are right that the long-term equilibrium result is the concentration of property ownership into fewer, more corporate hands, since rental owners would have an unfair tax advantage over owners who live in the property.
Participant[quote=briansd1][quote=FormerSanDiegan]
The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.
I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.
[/quote]Let’s assume for a moment that what you said is true.
The Federal government collects $19k more in taxes.
For property taxes, $19k at 1.1% equates to a property value of $1.7 million. How much would value your example house lose in value?
The federal and state governments would increase revenue more than local government would lose in property taxes.[/quote]
You missed my main point, which is that all the owners will NOT pay 19K more in taxes to the federal government. People will make adjustments to avoid it. New owners will pay less since it will put downward pressure on prices.
Intelligent owners would convert it to a rental and rent another property. (or other similar tactics).
The property values would surely be less without the deduction. So, the Feds do not get the full 19K and CA takes less in property tax.
Exactly where the net result ends up, my guess is fewer proceeds to the Government.
And what about those who go ahead and pony up the additional 19K ? That’s 19K less per mortgage holder going into the economy. The direct impact might be ~ $1900 of sales tax revenue lost.
Indirect impacts are reduciton of GDP and job loss.The law of unintended consequences applies here.
It’e never as simple as “hey here’s a 20K tax loophole, let’s close it and get $20K in additional revenue”. It never works out that way.Participant[quote=briansd1][quote=FormerSanDiegan]
The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.
I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.
[/quote]Let’s assume for a moment that what you said is true.
The Federal government collects $19k more in taxes.
For property taxes, $19k at 1.1% equates to a property value of $1.7 million. How much would value your example house lose in value?
The federal and state governments would increase revenue more than local government would lose in property taxes.[/quote]
You missed my main point, which is that all the owners will NOT pay 19K more in taxes to the federal government. People will make adjustments to avoid it. New owners will pay less since it will put downward pressure on prices.
Intelligent owners would convert it to a rental and rent another property. (or other similar tactics).
The property values would surely be less without the deduction. So, the Feds do not get the full 19K and CA takes less in property tax.
Exactly where the net result ends up, my guess is fewer proceeds to the Government.
And what about those who go ahead and pony up the additional 19K ? That’s 19K less per mortgage holder going into the economy. The direct impact might be ~ $1900 of sales tax revenue lost.
Indirect impacts are reduciton of GDP and job loss.The law of unintended consequences applies here.
It’e never as simple as “hey here’s a 20K tax loophole, let’s close it and get $20K in additional revenue”. It never works out that way.Participant[quote=briansd1][quote=FormerSanDiegan]
The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.
I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.
[/quote]Let’s assume for a moment that what you said is true.
The Federal government collects $19k more in taxes.
For property taxes, $19k at 1.1% equates to a property value of $1.7 million. How much would value your example house lose in value?
The federal and state governments would increase revenue more than local government would lose in property taxes.[/quote]
You missed my main point, which is that all the owners will NOT pay 19K more in taxes to the federal government. People will make adjustments to avoid it. New owners will pay less since it will put downward pressure on prices.
Intelligent owners would convert it to a rental and rent another property. (or other similar tactics).
The property values would surely be less without the deduction. So, the Feds do not get the full 19K and CA takes less in property tax.
Exactly where the net result ends up, my guess is fewer proceeds to the Government.
And what about those who go ahead and pony up the additional 19K ? That’s 19K less per mortgage holder going into the economy. The direct impact might be ~ $1900 of sales tax revenue lost.
Indirect impacts are reduciton of GDP and job loss.The law of unintended consequences applies here.
It’e never as simple as “hey here’s a 20K tax loophole, let’s close it and get $20K in additional revenue”. It never works out that way.Participant[quote=briansd1][quote=FormerSanDiegan]
The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.
I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.
[/quote]Let’s assume for a moment that what you said is true.
The Federal government collects $19k more in taxes.
For property taxes, $19k at 1.1% equates to a property value of $1.7 million. How much would value your example house lose in value?
The federal and state governments would increase revenue more than local government would lose in property taxes.[/quote]
You missed my main point, which is that all the owners will NOT pay 19K more in taxes to the federal government. People will make adjustments to avoid it. New owners will pay less since it will put downward pressure on prices.
Intelligent owners would convert it to a rental and rent another property. (or other similar tactics).
The property values would surely be less without the deduction. So, the Feds do not get the full 19K and CA takes less in property tax.
Exactly where the net result ends up, my guess is fewer proceeds to the Government.
And what about those who go ahead and pony up the additional 19K ? That’s 19K less per mortgage holder going into the economy. The direct impact might be ~ $1900 of sales tax revenue lost.
Indirect impacts are reduciton of GDP and job loss.The law of unintended consequences applies here.
It’e never as simple as “hey here’s a 20K tax loophole, let’s close it and get $20K in additional revenue”. It never works out that way.Participant[quote=briansd1][quote=FormerSanDiegan]
The interest deduction on a 800K loan is something like 48K per year (at 6%). For someone making 250K per year, that amounts to a deduciton worth somewhere in the neighborhood of 19K.
I personally believe that 19K per year increase in costs is relevant to people who make ~ 250-300K. This will reduce the amount households in the 200-400K income can afford to pay for housing and thus will significantly impact the price of housing in the categories that these people buy.
[/quote]Let’s assume for a moment that what you said is true.
The Federal government collects $19k more in taxes.
For property taxes, $19k at 1.1% equates to a property value of $1.7 million. How much would value your example house lose in value?
The federal and state governments would increase revenue more than local government would lose in property taxes.[/quote]
You missed my main point, which is that all the owners will NOT pay 19K more in taxes to the federal government. People will make adjustments to avoid it. New owners will pay less since it will put downward pressure on prices.
Intelligent owners would convert it to a rental and rent another property. (or other similar tactics).
The property values would surely be less without the deduction. So, the Feds do not get the full 19K and CA takes less in property tax.
Exactly where the net result ends up, my guess is fewer proceeds to the Government.
And what about those who go ahead and pony up the additional 19K ? That’s 19K less per mortgage holder going into the economy. The direct impact might be ~ $1900 of sales tax revenue lost.
Indirect impacts are reduciton of GDP and job loss.The law of unintended consequences applies here.
It’e never as simple as “hey here’s a 20K tax loophole, let’s close it and get $20K in additional revenue”. It never works out that way.Participant“Californians that claimed the mortgage interest rate deduction saved an average of almost $20,000 from their tax bill in 2008, according to a Tax Foundation analysis of new data from the Internal Revenue Service. ”
I suspect that after the deduction is taken away, 20K is enough of an incentive to make changes along the lines of what I suggested, resulting in signficantly less than 20K being received by the Gov’t.
The law of unintended consequences applies here.
Remember the luxury tax from the early 1990’s ?
Enactment of the luxury taxes resulted in a net loss to the Government, primarily due to unemployment benefits paid to employees who were laid off from impacted industries. It was repealed after 2 years.Participant“Californians that claimed the mortgage interest rate deduction saved an average of almost $20,000 from their tax bill in 2008, according to a Tax Foundation analysis of new data from the Internal Revenue Service. ”
I suspect that after the deduction is taken away, 20K is enough of an incentive to make changes along the lines of what I suggested, resulting in signficantly less than 20K being received by the Gov’t.
The law of unintended consequences applies here.
Remember the luxury tax from the early 1990’s ?
Enactment of the luxury taxes resulted in a net loss to the Government, primarily due to unemployment benefits paid to employees who were laid off from impacted industries. It was repealed after 2 years.Participant“Californians that claimed the mortgage interest rate deduction saved an average of almost $20,000 from their tax bill in 2008, according to a Tax Foundation analysis of new data from the Internal Revenue Service. ”
I suspect that after the deduction is taken away, 20K is enough of an incentive to make changes along the lines of what I suggested, resulting in signficantly less than 20K being received by the Gov’t.
The law of unintended consequences applies here.
Remember the luxury tax from the early 1990’s ?
Enactment of the luxury taxes resulted in a net loss to the Government, primarily due to unemployment benefits paid to employees who were laid off from impacted industries. It was repealed after 2 years.Participant“Californians that claimed the mortgage interest rate deduction saved an average of almost $20,000 from their tax bill in 2008, according to a Tax Foundation analysis of new data from the Internal Revenue Service. ”
I suspect that after the deduction is taken away, 20K is enough of an incentive to make changes along the lines of what I suggested, resulting in signficantly less than 20K being received by the Gov’t.
The law of unintended consequences applies here.
Remember the luxury tax from the early 1990’s ?
Enactment of the luxury taxes resulted in a net loss to the Government, primarily due to unemployment benefits paid to employees who were laid off from impacted industries. It was repealed after 2 years.Participant“Californians that claimed the mortgage interest rate deduction saved an average of almost $20,000 from their tax bill in 2008, according to a Tax Foundation analysis of new data from the Internal Revenue Service. ”
I suspect that after the deduction is taken away, 20K is enough of an incentive to make changes along the lines of what I suggested, resulting in signficantly less than 20K being received by the Gov’t.
The law of unintended consequences applies here.
Remember the luxury tax from the early 1990’s ?
Enactment of the luxury taxes resulted in a net loss to the Government, primarily due to unemployment benefits paid to employees who were laid off from impacted industries. It was repealed after 2 years.Participant[quote=flu][quote=FormerSanDiegan][quote=flu][quote=mike92104]I could support losing the tax credits for second homes. It amazes that that no one ever thinks about spending less money.[/quote]
What tax credits on second homes? I thought the mortgage interest rate deductions only apply the the first. At least, when it comes to AMT calculations.
Maybe I’m wrong. Enlighten me please.[/quote]
The regular tax code allows deduction of mortgage interest on both a primary residence and a second (e.g. vacation) home used for personal use (as opposed to rental property).
http://www.irs.gov/publications/p936/ar02.html
Not sure how a mortgage on a second home is treated for AMT. But, I suppose the majority of second home owners are subject to AMT.[/quote]
So I’m enlightened. Actually, I think AMT allows for deduction on the second too. My bad.[/quote]
You are right that AMT allows for deduction on the second home (but there are limits on second mortgages); unless the second “home” is a boat or trailer (which actually count as second homes under regular tax code and certain limitations, e.g. the boat has to have some sort of kitchen).
Participant[quote=flu][quote=FormerSanDiegan][quote=flu][quote=mike92104]I could support losing the tax credits for second homes. It amazes that that no one ever thinks about spending less money.[/quote]
What tax credits on second homes? I thought the mortgage interest rate deductions only apply the the first. At least, when it comes to AMT calculations.
Maybe I’m wrong. Enlighten me please.[/quote]
The regular tax code allows deduction of mortgage interest on both a primary residence and a second (e.g. vacation) home used for personal use (as opposed to rental property).
http://www.irs.gov/publications/p936/ar02.html
Not sure how a mortgage on a second home is treated for AMT. But, I suppose the majority of second home owners are subject to AMT.[/quote]
So I’m enlightened. Actually, I think AMT allows for deduction on the second too. My bad.[/quote]
You are right that AMT allows for deduction on the second home (but there are limits on second mortgages); unless the second “home” is a boat or trailer (which actually count as second homes under regular tax code and certain limitations, e.g. the boat has to have some sort of kitchen).
Participant[quote=flu][quote=FormerSanDiegan][quote=flu][quote=mike92104]I could support losing the tax credits for second homes. It amazes that that no one ever thinks about spending less money.[/quote]
What tax credits on second homes? I thought the mortgage interest rate deductions only apply the the first. At least, when it comes to AMT calculations.
Maybe I’m wrong. Enlighten me please.[/quote]
The regular tax code allows deduction of mortgage interest on both a primary residence and a second (e.g. vacation) home used for personal use (as opposed to rental property).
http://www.irs.gov/publications/p936/ar02.html
Not sure how a mortgage on a second home is treated for AMT. But, I suppose the majority of second home owners are subject to AMT.[/quote]
So I’m enlightened. Actually, I think AMT allows for deduction on the second too. My bad.[/quote]
You are right that AMT allows for deduction on the second home (but there are limits on second mortgages); unless the second “home” is a boat or trailer (which actually count as second homes under regular tax code and certain limitations, e.g. the boat has to have some sort of kitchen).
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