will cancelling the mortgage deduction crash the housing market

[GTS]

Quote from Satan's Helper:

Actually MID is deducted from your income level. For example:

W2 Income of 100K

Deduct Interest Paid on Mortgage 30k

Deduct Expenses (job and health related) 10k

Taxable Income = 60k

You need to remember that most American home owners who are employees use their tax return to pay their property taxes at the end of the year.

Most homeowners with mortgages have escrow accounts that pay property taxes, so they don't pay it lump sum.

Considering when you receive your income tax refund and when property taxes are due I find your claim to be highly unbelievable.

Do you have any facts to back up your assertion that most home owners that are employees pay their property taxes with their tax return? (assuming you meant refund here)

 

[Scataphagos]

Whenever there are major changes in policy, SOMEBODY's oxen "gets gored". And of course that group screams blood murder.

America NEEDS a new, more fair tax code. Hard to image how that could be accomplished above the cries of the ones who have to take it in the neck on the change. (Politicos don't want to piss off anybody, except for the high earners, for fear of having them vote for the other guys. The high earners are too few in number to have a political voice.. all they get to do is lump it and pay the freight.)

 

[Satan's Helper]

Quote from GTS:

Most homeowners with mortgages have escrow accounts that pay property taxes, so they don't pay it lump sum.

Considering when you receive your income tax refund and when property taxes are due I find your claim to be highly unbelievable.

Do you have any facts to back up your assertion that most home owners that are employees pay their property taxes with their tax return? (assuming you meant refund here)

I was flipping houses and notes during the bubbly so I got to know the market and what people do very well. A lot of people at that time did not escrow their taxes because they could not afford to. It has become customary to use the extra money from the tax return to pay your taxes. I know these peoples finances. They spend every penny they have and rely on there tax return for major bills and credit cards.

I hope this does not come off sounding as racist (I do eat at Taco Bell) but these people would rather spend their money on cars and clothes rather then education, health care or paying down their mortgage.



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[GTS]

Quote from Satan's Helper:

I was flipping houses and notes during the bubbly so I got to know the market and what people do very well. A lot of people at that time did not escrow their taxes because they could not afford to. It has become customary to use the extra money from the tax return to pay your taxes. I know these peoples finances. They spend every penny they have and rely on there tax return for major bills and credit cards.

Most lenders require escrow unless you have a lot of equity, it isn't something that the borrower can just unilaterally decide.

Your statement contradicts itself, you say that these people are bad with money and yet somehow manage to hang on to their tax refund that they receive in March-April until their property taxes are due in December?

 

[Martinghoul]

Quote from Scataphagos:
The high earners are too few in number to have a political voice.. all they get to do is lump it and pay the freight.

How do you figure that? High earners are few in number, indeed, but they wield a disproportionate amount of influence on the political process and the media. Maybe it's in order to maintain this (probably fair) balance that the Supreme Court really ruled the way it did in the Citizens United case.

 

[Satan's Helper]

Quote from GTS:

Most lenders require escrow unless you have a lot of equity, it isn't something that the borrower can just unilaterally decide.

Your statement contradicts itself, you say that these people are bad with money and yet somehow manage to hang on to their tax refund that they receive in March-April until their property taxes are due in December?

It all depends on the lender! I have seen some who escrow the taxes and pay it for the home borrower but many don't.

Where I live you can pay your property taxes until March. The only catch is you pay a bit more.

This is from the property appraisers office:

"The COUNTY TAX COLLECTOR (note: NOT part of our office) mailed the annual tax bills during the first week of November. Tax bills become delinquent if not paid in full before April 1 of the following year. Discounts are available for early payments. Also, you may make partial payments of your current year taxes until the March 30 statutory payment deadline. After that date, any taxes still owing become delinquent."

 

[Scataphagos]

Many lenders charge an extra 1/4 point on the mortgage if you DON'T escrow for taxes. I guess that's their compensation for dealing with those who don't escrow but have a hard time/default on paying property taxes.

 

[trefoil]

Quote from doublet83:

I disagree. Homeowners today who had to purchase a home today or decades ago already paid a higher price than they would have paid without the deduction. Obviously they are sitting on a higher valued asset thanks to the deduction as well, so the overall effect is neutral.

As to brokers, that is an industry with limited barriers to entry, so any additional commissions they would have received from higher priced housing has long been competed away by new entrants.

So yeah, the people who have benefited from the deduction directly are long dead. You can argue that their decendents who may have inherited their wealth, indirectly benefits from the MID.

Not too much disagreement between us.

1 - Brokers competing away the add'l commish would be a recent development, since they only started competing on price a few years ago. Not sure the excess has all been competed away.
2 - Do you disagree about homebuilders? They're certainly getting a higher price than they would without the deduction.
3 - Homebuyers wind up with a larger expense during the time they are paying for the house. If it gets made up for by selling that comes a lot later, so young folks saving for a house are dealing with two higher barriers: higher down payment, and in effect paying taxes as renters that are higher than they would otherwise be (as pointed out above) since the homebuyers are paying less.

 

[dandxg]

Quote from billyjoerob:

MID really only helps people who itemize, only the wealthy itemize, and so only the wealthy benefit. If we figure marginal tax rate of 33%, $3000 monthly interest, eliminating MID would result in $1000/month higher taxes. That would be a significant hit at the top end of the housing market.

Some form of alternative minimum tax is probably a better strategy. Politically it is easier too.

Wrong, I have itemized for the last 15 years whether it was due to being in outside sales, where you can write a lot off, or trading under an LLC where you can likewise write a lot off. Half the time I owned a house and the other half not.

 

[GTS]

Quote from Satan's Helper:

It all depends on the lender! I have seen some who escrow the taxes and pay it for the home borrower but many don't.

Where I live you can pay your property taxes until March. The only catch is you pay a bit more.

You made the statement "You need to remember that most American home owners who are employees use their tax return to pay their property taxes at the end of the year. " and now you are backing that up using anecdotal evidence from where *you* live? Most people don't live where you live.