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Post by Christine on Jan 5, 2018 18:00:54 GMT -5
Nope. Again: "there's no evidence that the MID incentivizes home ownership at all." I can't provide evidence, as a matter of course. The lack of evidence--that the MID incentivizes home ownership--is my evidence. It's not the above statement, though I disagree with it completely, that I'm calling pot/kettle on. What I'm pointing out is that you have gone beyond a general statement that there's no evidence, that you disbelieve the claim. Beginning on page 1 of this thread, you have been making your own claims. You are essentially claiming that because there's no evidence to support the original claim, its opposite must be true. But just because you believe A is not supported by evidence, it does not follow that the opposite of A is true by default. Look: Almost all of the tax credits and deductions should be eliminated, including nonsense like deductions for mortgage interest. Hey, I use that deduction year after year after year, and it's a big one. But it's stupid, imo. Get rid of the credits and deductions, simplify the codes, lower the rates, and the tax revenues will be the same or higher. The mortgage interest deduction benefits the wealthy end of society, along with banks and people in the housing industry. It's not a boon to middle and lower income classes at all. It never has been, imo. By the same token, no one should be making arguments about how the MID encourages home ownership or the like, because it just isn't true. Similarly, an adoption tax credits doesn't encourage adoption, imo. Indeed, I'd argue that ultimately it discourages it, by making adoption more expensive and--at the same time--actually discouraging adoptions from the foster care system, in favor of private and international adoptions.The MID doesn't encourage home ownership and doesn't make homes more affordable. So again, there's no evidence that the MID incentivizes home ownership at all. Yet, that's the rationale/justification behind it (now). I submit--and here's where Don and I absolutely do agree--that good intentions mean squat when it comes to government policy. Bad policy is bad policy, regardless of intentions. And ineffective policy is ineffective policy, regardless of intentions. At best, the MID is the latter. I happen to think it's very much the former. But either way, it doesn't do what people who want to keep it claim that it does. Look here, at the graph showing ownership rates since 1966. And remember, the MID has been around since 1913, but the "encourage home ownership" aspect was really expounded in 1986. This is silly, imo. All sorts of conditions affect home buying and selling. No one has claimed the MID is the only thing that incentivizes (or deincentivizes) people. It's a factor, as I said, and not an insignificant one, in my experience with middle-income taxpayers. What we need to settle this is a nationwide poll. "Was the MID a factor in your purchase of a home?" / "How, and to what extent, did the MID impact your decision to buy a home?" And of course demographics - location of residence, price paid for home, AGI, etc.
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Post by Christine on Jan 5, 2018 19:32:33 GMT -5
Did you give up a cash incentive to get zero interest? If so, that's what you paid for "zero interest." If not, you can bet it's in the price of the car somewhere else. Unless you're very, very, very good friends with either the sales person or someone higher up the chain in the dealership, they did not lose money so you could have zero interest. I put a good bit down in cash. There was no cash incentive. No good friends were involved. I haggled down from $46k list price (before sales tax) to $43k out the door. I assume the financing is kind of "baked in" to the price of the car. I am very curious what would happen if I walked in ready to pay in cash and offered like $15k below list price, take it or leave it. Would they go for it?
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Post by Don on Jan 5, 2018 19:40:06 GMT -5
As rob's quote points out, there are actually two issues here. He and I agree only on one of them.
"The MID doesn't encourage home ownership and doesn't make homes more affordable."
The MID certainly does not make homes more affordable. To the contrary, it provides an inflationary pressure on home prices. We've been over all the reasons for that already.
OTOH, I think it does act as an incentive. Most people buy the faux economic arguments. Many people think they're getting a cheaper house because of the MID, because they can see the deduction on their tax form, but not the unseen increase in purchase price. Many people believe they will be better off if they buy the biggest home they can afford, even the ones paying ridiculous prices the day before any particular bubble pops.
Incentives don't have to be economically sound to have people believe in them and act on them. They only need be an accepted part of the canon. That's as far as most people think. See also: minimum wage laws. Most people never look at the economics or eugenics behind them.
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Post by Christine on Jan 5, 2018 19:56:04 GMT -5
As rob's quote points out, there are actually two issues here. He and I agree only on one of them. "The MID doesn't encourage home ownership and doesn't make homes more affordable." The MID certainly does not make homes more affordable. To the contrary, it provides an inflationary pressure on home prices. We've been over all the reasons for that already. OTOH, I think it does act as an incentive. Most people buy the faux economic arguments. Many people think they're getting a cheaper house because of the MID, because they can see the deduction on their tax form, but not the unseen increase in purchase price. Many people believe they will be better off if they buy the biggest home they can afford, even the ones paying ridiculous prices the day before any particular bubble pops. Incentives don't have to be economically sound to have people believe in them and act on them. They only need be an accepted part of the canon. That's as far as most people think. At first I was agreeing re: incentives, but I've edited here: I think this is a somewhat unfair take on "people." The MID is an economic benefit (and an incentive), since it exists, and market prices are what they are. No individual can change the price of the home they are going to purchase by foregoing their MID. And yeah, probably most people aren't having the conversation we're having, and they don't know, have no way of knowing, nor would they have any reason to consider these sorts of things. That doesn't make them "believers" in "canon." So, a bit harsh, I think. Off yer high horse! But yes, that the MID economically benefits the homeowner doesn't mean there aren't other opposing, non-beneficial (unseen) forces at play. That said, as to the inflationary pressure, I agree to an extent, but I have a question: does the MID really continue to have an inflationary effect? The MID is not increasing; it's been there for decades, static as a percentage (and really, decreasing as interest rates have decreased). Why would it have an increasing effect on market prices? Isn't it kind of "baked in"? See the RCP article I linked to upthread. According to it (and a lot of other articles I've read--NOT by realtors or banks) the repeal of the MID would have a de-inflationary effect on housing prices. This makes sense to me, but it wouldn't make sense to claim that the removal of the MID would be de-inflationary on an ongoing basis. In fact, it would be a temporary effect, right? Because the market would adjust: prices would fall, more buyers would enter the market, then prices would rise. The same market adjustments have likely occurred over the last several decades of the MID. Right?
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Post by robeiae on Jan 5, 2018 21:45:23 GMT -5
It's a factor, as I said, and not an insignificant one, in my experience with middle-income taxpayers. Disagree. At best, it's an insignificant factor. At worst, it's a non-factor. Imo. I do not believe anyone buys a home because of the MID; no one on the "should I or shouldn't I" fence says to themselves, "you know, I think I'll go ahead and buy this house because the MID has just tipped the scales in favor of buying." No one. And imo the MID doesn't make houses more affordable, either. You know, this thread was about the adoption tax credit initially, and you'll note that I linked to a study from the CRS wherein it is admitted that this tax credit simply doesn't do what it's proponents claimed it would do. Again, this is typical stuff with tax credits: there's imagined benefits--well-intentioned for sure--that are never actually demonstrated. And this extends past individual credits; it't true for those big corporate tax breaks, as well, imo. As to you disagreeing completely with this statement: "There's no evidence that the MID incentivizes home ownership at all." ON WHAT BASIS? Where's the evidence that it does? Look at the graph showing home ownership rates since 1966, again.
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Post by Christine on Jan 5, 2018 23:25:11 GMT -5
It's a factor, as I said, and not an insignificant one, in my experience with middle-income taxpayers. Disagree. At best, it's an insignificant factor. At worst, it's a non-factor. Imo. I do not believe anyone buys a home because of the MID; no one on the "should I or shouldn't I" fence says to themselves, "you know, I think I'll go ahead and buy this house because the MID has just tipped the scales in favor of buying." No one. Where is your evidence for what "no one" thinks about in this regard? I dunno, rob, I'm kind of giving you the side eye at this point. Do you not think that people use things like budgets? That they do not compare the amount of a mortgage payment to what they can afford each month? That the annual tax deduction for interest, as well as property taxes, doesn't actually factor into cash flow considerations? Maybe you're a little bit too rich for all this nonsense? Maybe you have so much left over that a few thousand bucks seems like a non-factor? When many, many people are thinking about buying homes, they are thinking about the affordability of the mortgage payment. The MID reduces the total cost of the mortgage payment. It can be a significant factor. I don't know how to convince you of this. It's just math, for many people. Believe it or don't. Btw, your link re: the adoption credit didn't work for me, so I never got to read it. That said, I don't think we should be giving people economic incentives, per se, to adopt children. Where people do already want to adopt children, I think it's a good thing to provide financial assistance. As opposed to an incentive. Children are a bit different from real estate. ON THE BASIS OF EVERYTHING I'VE ALREADY STATED, which you haven't responded to; you just pull a sentence from an entire post and make your same arguments again. I did look at the graph. I responded to it and to your claim of what it supposedly proves, above. You can respond to my response, or not, up to you, but I don't see the point of repeating myself.
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Post by Don on Jan 6, 2018 6:23:52 GMT -5
As rob's quote points out, there are actually two issues here. He and I agree only on one of them. "The MID doesn't encourage home ownership and doesn't make homes more affordable." The MID certainly does not make homes more affordable. To the contrary, it provides an inflationary pressure on home prices. We've been over all the reasons for that already. OTOH, I think it does act as an incentive. Most people buy the faux economic arguments. Many people think they're getting a cheaper house because of the MID, because they can see the deduction on their tax form, but not the unseen increase in purchase price. Many people believe they will be better off if they buy the biggest home they can afford, even the ones paying ridiculous prices the day before any particular bubble pops. Incentives don't have to be economically sound to have people believe in them and act on them. They only need be an accepted part of the canon. That's as far as most people think. At first I was agreeing re: incentives, but I've edited here: I think this is a somewhat unfair take on "people." The MID is an economic benefit (and an incentive), since it exists, and market prices are what they are. No individual can change the price of the home they are going to purchase by foregoing their MID. And yeah, probably most people aren't having the conversation we're having, and they don't know, have no way of knowing, nor would they have any reason to consider these sorts of things. That doesn't make them "believers" in "canon." So, a bit harsh, I think. Off yer high horse! People who don't actively examine what they believe in an effort to understand why they believe those things are, indeed, "believers in canon." People who are willing to twist logic into a pretzel to make the known facts fit into their worldview are "believers in canon." People who refuse to accept documented facts when those facts contradict their beliefs are "believers in canon." People who keep believing in the efficacy of a policy when that policy has been shown to not have the impact claimed for it are "believers in canon." That's true whether their belief is in a kindly gentleman who travels the world once a year giving every child a present, the value of a lost tooth concealed under a pillow, Intelligent Design, the efficacy of drug prohibition, jacking up labor costs to keep the unskilled out of labor markets, or a benevolent ruling class. And it's also true of those who accept blindly that the MID reduces the cost of home ownership, reality to the contrary. The only thing harsh about that is the harsh glare of reality. And those beliefs lead to people buying homes when renting would actually make more sense in their particular situation. I know military people who buy and sell homes religiously with every new base assignment, making money in some market and getting screwed in others. The housing game is more of a focus than the actual quality of life that will result from the house they buy, and that's true of a lot of home buyers. Their first question isn't "will my family be happy here," but "will my family make a ton of money off this house." I know working men and women exhausted from keeping up their monster houses because they'll get a pot of gold at the end of the rainbow. They blank on the reality that the gold in those pots come from the losers in the bubble game, and they could be one of those losers. That's "belief in canon." But yes, that the MID economically benefits the homeowner doesn't mean there aren't other opposing, non-beneficial (unseen) forces at play. That said, as to the inflationary pressure, I agree to an extent, but I have a question: does the MID really continue to have an inflationary effect? The MID is not increasing; it's been there for decades, static as a percentage (and really, decreasing as interest rates have decreased). Why would it have an increasing effect on market prices? Isn't it kind of "baked in"? See the RCP article I linked to upthread. According to it (and a lot of other articles I've read--NOT by realtors or banks) the repeal of the MID would have a de-inflationary effect on housing prices. This makes sense to me, but it wouldn't make sense to claim that the removal of the MID would be de-inflationary on an ongoing basis. In fact, it would be a temporary effect, right? Because the market would adjust: prices would fall, more buyers would enter the market, then prices would rise. The same market adjustments have likely occurred over the last several decades of the MID. Right? See, you're still saying that the MID economically benefits the homeowner, ignoring the fact that markets aren't stupid and housing prices already reflect the net future value of that tax deduction. That's canon talk. The MID's inflationary effect is not general, but specific to the market where the distortion is occurring. As long as the MID is in effect, housing prices will be inflated relative to other goods that do not enjoy that observable "tax benefit." There's an observable financial benefit to buying a house (again, offset by the market in the form of higher prices) that doesn't apply to a car. That makes housing relatively more expensive against the rest of the market basket, compared to what would be the case absent the MID. There is an inflationary distortion in place around the housing market. This is a fine example of those "economic distortions" I assign to government economic policies. And yes, if that inflationary distortion were removed, house prices would adjust out that distortion, and housing would be a bit cheaper relative to the rest of the market basket compared to today. But of course, we'd first go through a huge deflation of housing prices, due to the Chicken Littles who would claim the sky was falling, and the congregations who take their word as gospel. That's "belief in canon."
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Post by Christine on Jan 6, 2018 9:01:30 GMT -5
See, you're still saying that the MID economically benefits the homeowner, ignoring the fact that markets aren't stupid and housing prices already reflect the net future value of that tax deduction. That's canon talk. This is what I said: The MID is an economic benefit (and an incentive), since it exists, and market prices are what they are. No individual can change the price of the home they are going to purchase by foregoing their MID. and But yes, that the MID economically benefits the homeowner doesn't mean there aren't other opposing, non-beneficial (unseen) forces at play. I have acknowledged the effect on home prices. Having acknowledged that, it is still an economic benefit; that is, the MID reduces the actual amount one pays each year with the market prices being what they are. A tax deduction *is* an economic (financial) benefit. Unless you are claiming it's possible to reduce the market price of the house one wants to buy by refusing to take the MID. I think you're focusing on theory here, which is fine, but it does no good to ignore the practical aspects of people's current, actual situations. The MID's inflationary effect is not general, but specific to the market where the distortion is occurring. Yes, obviously. Where I've said "market" I mean the market for housing, since we're talking about housing. As long as the MID is in effect, housing prices will be inflated relative to other goods that do not enjoy that observable "tax benefit." There's an observable financial benefit to buying a house (again, offset by the market in the form of higher prices) that doesn't apply to a car. That makes housing relatively more expensive against the rest of the market basket, compared to what would be the case absent the MID. Yeah, well, guess who gets to depreciate her new car as a business expense? Add that to your "canon" fodder.
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Post by michaelw on Jan 6, 2018 9:09:20 GMT -5
"Canon fodder."
Haha, that was pretty good.
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Post by Amadan on Jan 6, 2018 9:51:46 GMT -5
Anecdata: when deciding to buy a house, I ran through the various rent-vs-buy calculators to figure which was more economically favorable to me, and those generally factor in MID, so in that sense, you could say the MID acts as an "incentive" in that people who run the numbers will factor it into their calculations as to whether or not it makes sense for them to buy a house.
I think rob is using a very narrow sense of "incentive," where it only counts if someone makes their decision on the basis of the MID alone. Probably very few people say, "Wow, I get to deduct my mortgage interest from my income for taxation purposes? Great, in that case, I'll buy a house!" But that doesn't mean it isn't an incentive that adds to other inducements to buy a house.
(And speaking of economic rationality, I wish I had a $0.05 tax deduction for every person I've met or read online who thinks "tax deductable" means "I can deduct X from my tax bill"...)
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Post by Christine on Jan 6, 2018 23:44:10 GMT -5
Anecdata: when deciding to buy a house, I ran through the various rent-vs-buy calculators to figure which was more economically favorable to me, and those generally factor in MID, so in that sense, you could say the MID acts as an "incentive" in that people who run the numbers will factor it into their calculations as to whether or not it makes sense for them to buy a house. I think rob is using a very narrow sense of "incentive," where it only counts if someone makes their decision on the basis of the MID alone. Probably very few people say, "Wow, I get to deduct my mortgage interest from my income for taxation purposes? Great, in that case, I'll buy a house!" But that doesn't mean it isn't an incentive that adds to other inducements to buy a house. (And speaking of economic rationality, I wish I had a $0.05 tax deduction for every person I've met or read online who thinks "tax deductable" means "I can deduct X from my tax bill"...) Agree. The "$0.05" deduction made me chuckle. Your humor is officially accountant-approved! Though that's probably not a compliment. Sorry.
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Post by robeiae on Jan 8, 2018 9:33:08 GMT -5
"Canon fodder." Haha, that was pretty good. Yeah it, was. Beyond that, yes Amadan is right--to a degree--that I am using "incentive" narrowly. But I'm using it narrowly with respect to the claim that the MID encourages home ownership, incentivizes it in fact, that somehow the MID helps the lower and middle classes become homeowners. Perhaps we should focus on that last version of the concept, because then Don and I will probably be on the same page completely... Anyway, again there's no evidence that more people become homeowners because of the MID. There just isn't. And again, imo the MID drives up the cost of homes, though it does so indirectly over time. It is not a boon for lower and middle income classes at all; indeed, if one allows that it drove ownership at all, one would have to allow that therefore it led to so many people being underwater on their mortgages and forcing them to default and/or declare bankruptcy during the previous financial crisis (which of course was partly driven by runaway inflation on home prices and on easy access to what was imaginary home equity). And ultimately, that would mean the MID actually led to a decrease in home ownership. On balance, I fail to see a net benefit from the MID at all (and again, this is true of most tax credits, including the one that was the initial subject of this thread) for society as a whole. I linked to these graphs before, but if you really want to see something, look at this one. Now look at this one that shows home prices in constant dollars. I mean, it's straightforward economics, prices go up because demand is up, but it's worth seeing, imo. Because it indicates just how foolish people can be (I include myself here, fwiw).
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Post by Don on Jan 8, 2018 11:10:20 GMT -5
So basically, if you adjust for inflation, home ownership since the crash has been a losing proposition.
Except for the banks, of course.
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Post by Amadan on Jan 10, 2018 16:35:34 GMT -5
Well, if you're treating your house like a stock investment, yes. Not everyone buys a house planning to flip it in a few years, though.
(Ironically, for various reasons, I may be looking at selling and rebuying a - more expensive - home soon, and my current house, which I was planning to stay in until I retire, has lost value since I bought it. :\)
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Post by Don on Jan 10, 2018 16:59:23 GMT -5
Well, if you're treating your house like a stock investment, yes. Not everyone buys a house planning to flip it in a few years, though. (Ironically, for various reasons, I may be looking at selling and rebuying a - more expensive - home soon, and my current house, which I was planning to stay in until I retire, has lost value since I bought it. :\) People who have their nest egg tied up in their house are treating their house like a stock investment, whether they realize it or not. It's no more immune to downturns than the stock market, and there's no diversification at all. I know people still working now who had planned to retire off their house sale. It was more common than not, IMO. Had they been diversified the story could be quite different. If the sale of your house is factored into your retirement plans, you're treating it as a stock investment. If you're planning to stay there after retirement, that's a different story.
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