tax cuts just promote opulence for those with money

[MRT144]

http://online.wsj.com/news/articles/SB10001424052702303949704579457342129970328?mod=WSJ_hpp_MIDDLENexttoWhatsNewsThird&mg=reno64-wsj

If you have wsj access

[pchang]

Like more bathrooms than people?

[Lorizael]

More bathrooms than people is just smart. What are you supposed to do if everyone has to go to the bathroom at the same time, one of your toilets is clogged, and your Guatemalan handyman has just been deported?

[Dauphin]

Use another room as a latrine. Maid can clean that **** up later.

[100% Wolf]

I used Google to access their top-secret subscribers-only article

Federal tax benefits for homeowners primarily help wealthier people borrow more money to buy larger houses rather than boost homeownership, according to a new study.

The ZIP Code-level analysis of Internal Revenue Service data, conducted by a team of economists for the right-leaning R Street Institute, examined how tax benefits are distributed across income levels and major metropolitan areas. The study estimates that tax preferences, particularly the mortgage-interest deduction, have helped drive up the size of houses by as much as 18% in the nation's most affluent areas while not broadly encouraging people to buy homes.

Policy makers have long supported homeownership in the tax code because it is viewed as having broad societal benefits, and they have been loath to curb the mortgage-interest deduction, which is popular with voters and strongly defended by the real-estate industry. But the new findings add to a growing body of economic research that suggests Americans don't benefit broadly from the tax preferences, which the study estimates cost the government $175 billion annually in forgone revenue.

President Barack Obama has repeatedly proposed curbing the mortgage-interest deduction for most individuals who make more than $200,000 a year, or married couples earning more than $250,000. More recently, House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, has proposed an overhaul that would cap mortgage-interest deductions on new loans at $500,000 of principal from the current $1 million limit.

Despite their popularity, the government's tax subsidies for housing "don't encourage homeownership in any meaningful way. People just end up buying larger homes," said Andrew Hanson, an associate professor of economics at Marquette University who conducted the study along with two other economists.

In the greater metropolitan area of Washington, D.C., the study estimates that tax benefits have contributed to the average home size being about 1,400 square feet larger than if the benefits didn't exist.

The results of the study will be published Monday in the latest issue of National Affairs.

In addition to the mortgage-interest deduction, owners benefit from capital-gains avoidance when realizing a $250,000 gain from a home sale, a provision that benefits households in coastal markets with greater home-price appreciation.

Not everyone agrees that the tax code encourages purchases of larger homes. Robert Dietz, an economist at the National Association of Home Builders, said tax filings also show larger families tend to take larger deductions, and larger families need more space.

The research also found the tax benefits for owner-occupied homes generally accrue to a minority of households. Homeowners with incomes above $100,000 were between three and four times as likely to claim the tax benefit as those earning less than $100,000.

The mortgage-interest deduction is available only to those who itemize deductions on their tax returns, and few low-income households itemize because they generally can have a lower tax bill by taking the standard deduction.

Mr. Hanson's study examined the sharp disparities in benefits by region and income. The average annual savings for households claiming housing tax benefits are $12,300 in San Francisco and $10,700 in Los Angeles, compared with $1,600 in Detroit and $2,900 in Dallas, the study found.

Meantime, residents in San Francisco who earn more than $100,000 save $8,000 annually from the mortgage-interest deduction, compared with savings of $3,700 for residents who earn less than $100,000. In Detroit, higher earners save more than $4,000, while those earning less than $100,000 save $1,600.

The study also found that suburban residents were twice as likely to benefit from the tax code as those in urban areas.

[Hauldren Collider]

It's not a tax cut, it's a tax exemption, and I for one have consistently argued that such exemptions (including the one for higher education, healthcare, and charities) benefit rich people at the expense of poor people and should be eliminated along with cutting the overall rate.

[pchang]

I'm off the chart.

[Kidlicious]

Why should anyone get a tax benefit for owning a house? You shouldn't get benefits for owning things.

[pchang]

Actually you don't get a tax benefit for owning a house. You get one for paying interest on a mortgage (with limits) and for paying property tax (as long as you aren't hit with the AMT).

[Kidlicious]

Actually you don't get a tax benefit for owning a house. You get one for paying interest on a mortgage (with limits) and for paying property tax (as long as you aren't hit with the AMT).

It usually is a matter of being able to buy a house though. That's who gets the benefit, those who are able to buy a house, and the size of the benefit depends on how much house you can buy. So if you can't buy a house you get no benefit. If you can buy a small house you get a small benefit, and if you can buy a large house you get a large benefit.

[pchang]

I'm willing to test the OP. If you guys can get a tax cut through Congress, I will see how opulent I get.

[DinoDoc]

I'm willing to test the OP. If you guys can get a tax cut through Congress, I will see how opulent I get.

Are you a "job creator"? Just ask a Republican for one.

[Sava]

opulence

[rah]

I'm surprised that anyone that has ever bought a home didn't understand this concept.
There are formulas that everyone uses that calculates how much you can afford to spend on a house. Since the tax savings on the interest is part of the calculation, of course the tax savings will allow you to allocate more money towards the mortgage. And square feet is an important component in housing costs.

But yes, I agree that there should be a cap. And since my house will be paid off in 29 months, I have no problem if they eliminate this tax savings
Seriously though, It's real important for first time house buyers that stretch on what they can afford.

[pchang]

Are you a "job creator"? Just ask a Republican for one.

My wife was the one who insisted on hiring cleaning ladies, so I guess she is the real "job creator".