(12-06-2010 01:59 PM)I45owl Wrote:  

(12-05-2010 09:51 PM)amber34 Wrote:  it encourages over-consumption of housing, and thereby energy to heat/cool them, relative to other goods,

The choice of words seems unfortunate here insofar that the alternative to over-consumption of housing would seem to be more homeless people.
But the reasonable choices seem to be (1) single-family housing or (2) apartments. Is the difference in energy consumption really that much? Especially considering that only a fairly small proportion of families would be influence by the mortgage tax deduction alone?

The alternative to over-consumption of housing would be 2000 square foot houses instead of 3500 square foot houses. The average American on welfare lives in a larger dwelling space than the average European. That is not only a much larger space to heat and cool, but also larger lots to set those larger houses on (or single-family detached housing instead of multi-family housing), meaning they have to be further apart, meaning longer commutes, using more energy.

The rate of home ownership in the US is 69%. The rates of home ownership in Canada, UK, and Australia--none of which have a home mortgage tax deduction--range between 67% and 70%.

(12-06-2010 03:34 PM)Owl 69/70/75 Wrote:  

(12-06-2010 01:59 PM)I45owl Wrote:  

(12-05-2010 09:51 PM)amber34 Wrote:  it encourages over-consumption of housing, and thereby energy to heat/cool them, relative to other goods,

The choice of words seems unfortunate here insofar that the alternative to over-consumption of housing would seem to be more homeless people.
But the reasonable choices seem to be (1) single-family housing or (2) apartments. Is the difference in energy consumption really that much? Especially considering that only a fairly small proportion of families would be influence by the mortgage tax deduction alone?

The alternative to over-consumption of housing would be 2000 square foot houses instead of 3500 square foot houses. The average American on welfare lives in a larger dwelling space than the average European. That is not only a much larger space to heat and cool, but also larger lots to set those larger houses on (or single-family detached housing instead of multi-family housing), meaning they have to be further apart, meaning longer commutes, using more energy.

The rate of home ownership in the US is 69%. The rates of home ownership in Canada, UK, and Australia--none of which have a home mortgage tax deduction--range between 67% and 70%.

But there's a lot more at play than just the mortgage tax deduction. I doubt that the Europeans are living by choice in 1500 sqft houses on .5 acre lots. They are living in much dense cities where I imagine the real estate prices for the land footprint are much larger than rural America. When you're talking about the mortgage tax exemption, you may be talking about only 1/2 of the mortgage payment being in play to begin with, so maybe $100-$200/month for a typical home (in my case, I expect it works out to $50/month). The difference between suburban/rural housing and urban housing alone has to dwarf the effect on housing size by far.

(12-06-2010 05:19 PM)I45owl Wrote:  

(12-06-2010 03:34 PM)Owl 69/70/75 Wrote:  

(12-06-2010 01:59 PM)I45owl Wrote:  

(12-05-2010 09:51 PM)amber34 Wrote:  it encourages over-consumption of housing, and thereby energy to heat/cool them, relative to other goods,

The choice of words seems unfortunate here insofar that the alternative to over-consumption of housing would seem to be more homeless people.
But the reasonable choices seem to be (1) single-family housing or (2) apartments. Is the difference in energy consumption really that much? Especially considering that only a fairly small proportion of families would be influence by the mortgage tax deduction alone?

The alternative to over-consumption of housing would be 2000 square foot houses instead of 3500 square foot houses. The average American on welfare lives in a larger dwelling space than the average European. That is not only a much larger space to heat and cool, but also larger lots to set those larger houses on (or single-family detached housing instead of multi-family housing), meaning they have to be further apart, meaning longer commutes, using more energy.
The rate of home ownership in the US is 69%. The rates of home ownership in Canada, UK, and Australia--none of which have a home mortgage tax deduction--range between 67% and 70%.

But there's a lot more at play than just the mortgage tax deduction. I doubt that the Europeans are living by choice in 1500 sqft houses on .5 acre lots. They are living in much dense cities where I imagine the real estate prices for the land footprint are much larger than rural America. When you're talking about the mortgage tax exemption, you may be talking about only 1/2 of the mortgage payment being in play to begin with, so maybe $100-$200/month for a typical home (in my case, I expect it works out to $50/month). The difference between suburban/rural housing and urban housing alone has to dwarf the effect on housing size by far.

There are a lot of factors. What I think you'd see here, without the home mortgage deduction, is an end to the proliferation of McMansions. You'd have about the same percentages of homeowners and renters, largely because that's determined a lot by factors which are probably relatively common among US, UK, Canada, and Australia. But those homeowners would be owning more townhomes and smaller homes.

One problem I think we had is that, after 9/11, the Bushies wanted to do anything they could to prevent the economy from falling into the chasm that many were predicting, and stimulating home sales was the best idea they had. The best way to do that was to let people who had no business buying homes go ahead and buy them anyway. That's where Messrs. Dodd and Frank came in.

I recently read an interesting article propounding the theory that our movement to ever larger houses has had a very harmful effect on the economy because people invested money in houses rather than in productive elements of the economy, so that a shortage of investment capital is one of the things that led American companies and jobs overseas. It'd need to be fleshed out a lot more before I'd buy it, but it is an interesting idea.

What part of the cost of owning a house or other living space is actually borne by the government through the agency of the mortgage deduction? I suspect that if this was taken away, after a short adjustment, there would be little change in the numbers of people wanting and getting houses, and no more than than a small decrease in the size of the average house.

Should property taxes also not be deductible?

When I was younger, the conventional wisdom was that owning a house was the best way to protect oneself from inflation. I guess that now a house as investment is not as big a deal.

What I think is interesting is that the democrats and republicans are currently arguing violently about whether the top individual tax bracket should be 35% or 39%--at the same time that the Deficit Reduction Commission is advocating 26%. Somebody is not paying attention.

(12-06-2010 05:42 PM)Owl 69/70/75 Wrote:  There are a lot of factors. What I think you'd see here, without the home mortgage deduction, is an end to the proliferation of McMansions. You'd have about the same percentages of homeowners and renters, largely because that's determined a lot by factors which are probably relatively common among US, UK, Canada, and Australia. But those homeowners would be owning more townhomes and smaller homes.

One problem I think we had is that, after 9/11, the Bushies wanted to do anything they could to prevent the economy from falling into the chasm that many were predicting, and stimulating home sales was the best idea they had. The best way to do that was to let people who had no business buying homes go ahead and buy them anyway. That's where Messrs. Dodd and Frank came in.

I recently read an interesting article propounding the theory that our movement to ever larger houses has had a very harmful effect on the economy because people invested money in houses rather than in productive elements of the economy, so that a shortage of investment capital is one of the things that led American companies and jobs overseas. It'd need to be fleshed out a lot more before I'd buy it, but it is an interesting idea.

I fully agree with the last two paragraphs, while noting that interest rate manipulations are what has driven the bubble of th 2000s. I'm perfectly willing to give up the mortgage tax deduction and see what the resulting affect is. I'd rather do that with a simplified tax code, but it's not a big enough deal that I would miss it.

(12-06-2010 03:34 PM)Owl 69/70/75 Wrote:  The average American on welfare lives in a larger dwelling space than the average European.

Wow, that is atrocious. We really need to get busy making sure our people, and especially our poor people, are more crowded. It should be an easy sell, since for the last 500 years humans have clearly and consistently expressed their preference to live in more crowded conditions than their parents.

(12-06-2010 10:57 PM)georgewebb Wrote:  

(12-06-2010 03:34 PM)Owl 69/70/75 Wrote:  The average American on welfare lives in a larger dwelling space than the average European.

Wow, that is atrocious. We really need to get busy making sure our people, and especially our poor people, are more crowded. It should be an easy sell, since for the last 500 years humans have clearly and consistently expressed their preference to live in more crowded conditions than their parents.

Ah, therein lies the rub.

I certainly don't think we should be forcing people into crowded quarters, but at the same time, I'm not sure we need to take things quite THAT far to the other extreme.

(12-06-2010 06:02 PM)OptimisticOwl Wrote:  Should property taxes also not be deductible?

When I was younger, the conventional wisdom was that owning a house was the best way to protect oneself from inflation. I guess that now a house as investment is not as big a deal.

In my view, NOTHING should be deductible--broader base and lower rates means a more efficient economy and stronger growth.

And while I don't know exactly how old you were, I'd guess that inflation was a much bigger deal when you were younger. In the 1970s, inflation was an annualized 7.8%; in the 1980s, it was 4.7%. In the 2000s, just 2.5%. For that matter, I'd suggest that owning a house wasn't ever that good an inflation hedge, since interest rates were a lot higher then, too. (My parents' first mortgage was at something like 14.875%.)

(12-07-2010 08:21 PM)amber34 Wrote:  

(12-06-2010 06:02 PM)OptimisticOwl Wrote:  Should property taxes also not be deductible?

When I was younger, the conventional wisdom was that owning a house was the best way to protect oneself from inflation. I guess that now a house as investment is not as big a deal.

In my view, NOTHING should be deductible--broader base and lower rates means a more efficient economy and stronger growth.

And while I don't know exactly how old you were, I'd guess that inflation was a much bigger deal when you were younger. In the 1970s, inflation was an annualized 7.8%; in the 1980s, it was 4.7%. In the 2000s, just 2.5%. For that matter, I'd suggest that owning a house wasn't ever that good an inflation hedge, since interest rates were a lot higher then, too. (My parents' first mortgage was at something like 14.875%.)

65. Kennedy was President when I came to Rice.

Bought my first house in 1970. Built this one in 1978. Paid it off in 2002.

Yes, things have changed. That was the point of my post. You talk of your parent's mortgage, but I remember when the short-term financing for my business was 21.5%, 100% collateralized by everything I owned. We called those the Carter years. And yes, buying a house was the financial refuge of first choice in those days.

I would be OK with no deductions. They have been used by both sides as instruments of social policy and vote pandering for decades.

And I would be fine with a flat tax, for the same reasons.

I would prefer a national sales tax replacing all the income/corporate/estate taxes.

Why has inflation dropped? What worked? Is it going to continue to work? I hope that it is not as big a deal when you are older as it was when I was younger.

What I have proposed is what I call 15-15-15 and is adapted from what the eastern European countries have done.

15% payroll tax (basically like social security now, 7.5% employee, 7.5% employer, but no income cap)
15% across-the-board consumption tax (could be Fair Tax or VAT)
15% tax on business profits (all forms)

Couple this with the Boortz-Linder prefund at 30%, and you'd raise enough net revenues to have eliminated the pre-2007 budget deficit. With the prefund, most if not all of the current welfare structure becomes redundant. Use the money you save there, along with making Medicaid redundant and cutting the cost of Medicare, to pay for French health care. Now cut the expenditures recommended by the debt reduction commission, or by Cato, or any other of several studies that have recommended cuts totaling in the $500-600 billion annual range.

(12-06-2010 03:34 PM)Owl 69/70/75 Wrote:  ...That is not only a much larger space to heat and cool, but also larger lots to set those larger houses on (or single-family detached housing instead of multi-family housing), meaning they have to be further apart, meaning longer commutes, using more energy...

This is a bit OT, but it is an interesting concept: location-efficient mortgages. The basic idea is using savings in transportation costs to qualify for a higher mortgage. There may be associated savings in energy usage.

(12-07-2010 08:38 PM)OptimisticOwl Wrote:  Why has inflation dropped? What worked? Is it going to continue to work? I hope that it is not as big a deal when you are older as it was when I was younger.

the fed became independent, rather than being bullied by presidents (republican and democratic alike) for political gain. Say what you will about Jimmy Carter, but his appointment of Paul volcker, and then letting volcker do his job, was politically courageous and economically beneficial--even though it cost Carter his job.

As to whether the fed will remain independent...sigh. Despite political noisemaking to the contrary, I'm actually optimistic.