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Median net worth in the United States falling

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Re: Median net worth in the United States falling

Postby gargantua » Wed Nov 28, 2012 12:10 pm

snoqueen wrote:I say we totally get rid of the mortgage deduction so it's more expensive for the takers to own a house. Then they'll have to rent from us, and we can jack up the rent some more.


There we go! That's the kind of thinking that will make this great country even greater!

Along those lines, we should increase taxes on food, and clothing that is purchased from non-profits such as St. Vincent de Paul and Goodwill.

And no subsidies for any form of public transportation!
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Re: Median net worth in the United States falling

Postby ArturoBandini » Wed Nov 28, 2012 12:14 pm

fisticuffs wrote:What policies has Obama enacted that are contributing to the national debt?
It's not just new policies that contribute to the debt, but continuation of irresponsible policies and mismanagement of existing programs and liabilities. Obama and current and future Congresses don't get a pass on the deficit/debt because tax policies and spending programs were largely set into motion by previous governments. While the people in charge now are not responsible for causing all the problems, they are responsible for at least addressing, if not solving them.

But some Obama policies have contributed to the national debt - for example, there was that stimulus that cost around $787 billion. And I'm not necessarily saying that that program failed, I'm saying that it added to the debt.
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Re: Median net worth in the United States falling

Postby ArturoBandini » Wed Nov 28, 2012 12:20 pm

fisticuffs wrote:What policies has Obama enacted that are contributing to the national debt?
Here is Fact-Check on this issue. The basic conclusion is that Obama's tenure is responsible for 69% of the ~$5T in new debt incurred since his term began. The remainder is attributable to pre-existing policies.
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Re: Median net worth in the United States falling

Postby ArturoBandini » Wed Nov 28, 2012 12:24 pm

snoqueen wrote:I say we totally get rid of the mortgage deduction so it's more expensive for the takers to own a house. Then they'll have to rent from us, and we can jack up the rent some more.
Thought experiment - if you were designing tax policy today with a blank slate, would you include something like the mortgage interest deduction? What indirect effects might this policy have?

I would eliminate the mortgage deduction, but I would do it gradually in order to minimize transaction costs.
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Re: Median net worth in the United States falling

Postby snoqueen » Wed Nov 28, 2012 1:20 pm

I agree with the idea if we get rid of the mortgage deduction it needs to be phased out gradually, over time, top-to-bottom, or both.

Was it a good idea to begin with?

I'm not sure I have a yes-or-no answer. In the end, it helped a lot of people get overinvested in their homes, and we know how that turned out. At the same time, it helped a lot of people (including me) buy a home that turned out to be the best decision we ever made. I don't think you can write tax policy that guides best practice at the individual level -- that's better handled by counseling, reading, analysis, and other individual initiatives because everyone's life is so different.

We can weed out tax policy that's clearly harmful in greater measure than it's helpful, and that can be done after the fact or at the time the laws and codes are formulated. I don't count the mortgage tax deduction as clearly harmful or clearly helpful -- at one time it was valuable, and then it got exploited and may have tipped toward harm. Conditions change and policies have to change with them.

On the macro level, it first helped underwrite a profitable period for mortgage banking. Then financial regulation changed and the deduction got exploited in the aftermarket in ways probably not foreseen by the deduction's creators. Again, conditions changed and now it may be time to change policies in response (only this time I'd start with bank regulation, which is not part of your question. I'd say mortgages should be held in-house for the life of the contract, to start with).

In other words, I think writing the tax code and tax policy is aiming at a moving target and always will be. All legislation has unintended consequences, and (especially in the financial world) those consequences get discovered and exploited as fast as possible. Legislation has to stay on top of this process, but it'll never control it and it'll never be airtight.

I don't think the mortgage deduction was poorly conceived, but it may have completed its cycle of usefulness.

We can also question whether at this time, home ownership is the best way to get working poor people into safe, satisfactory living conditions, and whether that goal is usefully conjoined with helping (or just allowing) people to accumulate financial resources for retirement or another future need. I'm starting to think the two goals ought to be considered separately: the adequate-old-age goal should be part of what we call the "social safety net" and not a matter of individual net worth, since in the end we have to acknowledge we won't actually throw old people out in the snow. We'll end up paying one way or the other, and to do so by pooling our resources will be more efficient than hoping everybody manages to invent and implement his/her own support structure and then picking up the pieces when they don't.

That's not the same thing as writing tax policy that gives everyone a clear best choice. It's making a net so nobody falls out regardless of how poorly they chose, how unlucky they were, or what loopholes were found to exploit their choices after the fact.

So would I include things like the mortgage tax deduction in a blank-slate tax rewrite? Not right now. Instead I'd look at more options with the reach of Social Security and Medicare, intending to set a bottom line of security on which individuals could rely, freeing them to build more for their future or, alternately, invest in the present day with confidence that no matter what personal risks they took, they'd be safe and reasonably secure at the end.

I think that kind of confidence frees people to take risks. I do not believe it fosters indolence.
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Re: Median net worth in the United States falling

Postby DCB » Wed Nov 28, 2012 1:48 pm

fisticuffs wrote:Or we could raise the minimum wage, close the loopholes that allow the exec to get paid in tax minimizing stock options, cap the amount execs can pay themselves versus the average worker, mandatory profit sharing, something anything to get these guys to invest in their employees, and their businesses instead of just themselves. Not a single one of them is worth 400 times the average worker.

These are all good ideas for addressing the growing income inequality. As a bonus, we'd likely reduce the federal budget deficit, without having to kick all the old people to the curb.

Candidate Obama talked about growing the economy from the middle out. Too bad President Obama isn't taking that advice.
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Re: Median net worth in the United States falling

Postby Crockett » Wed Nov 28, 2012 4:22 pm

ArturoBandini wrote:
fisticuffs wrote:What policies has Obama enacted that are contributing to the national debt?
Here is Fact-Check on this issue. The basic conclusion is that Obama's tenure is responsible for 69% of the ~$5T in new debt incurred since his term began. The remainder is attributable to pre-existing policies.


Let's not forget about allowing The Fed unparalleled powers in an attempt to monetize the debt on the backs of the poorest Americans.

Oh, and the little thing about zero interest rate policy (ZIRP). And all the bank programs that allow banks to borrow from the govt at 0% then buy govt bonds (thus driving down rates for the govt, nice symbiosis huh?) at a marginally higher rate than 0%. Pretty sweet risk-free arbitrage, if you can get it.

Don't think this stuff matters? It makes the other aspects of the budget look like your kid's piggy bank. But let's go ahead and debate funding for PBS...jesus...
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Re: Median net worth in the United States falling

Postby gargantua » Wed Nov 28, 2012 4:47 pm

ArturoBandini wrote:
snoqueen wrote:I say we totally get rid of the mortgage deduction so it's more expensive for the takers to own a house. Then they'll have to rent from us, and we can jack up the rent some more.
Thought experiment - if you were designing tax policy today with a blank slate, would you include something like the mortgage interest deduction? What indirect effects might this policy have?

I would eliminate the mortgage deduction, but I would do it gradually in order to minimize transaction costs.


If I had a blank slate, I would take a critical look at all tax policies that the government uses to incentivize a particular behavior. I would not provide tax credits for ethanol production, for example. As a thought experiment, I would not include the mortgage interest deduction because the decision to buy a home ought to be based on whether or not owning a home is a good idea. In the world that we live in, I would support a gradual phaseout. To do otherwise would not be fair to people who relied on the deduction to help them afford their housing.

I think the housing market could weather a gradual phaseout. An abrupt phaseout might be too much of a shock to the system.
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Re: Median net worth in the United States falling

Postby cloudy » Wed Nov 28, 2012 5:49 pm

The home mortgage deduction doesn't really do much for lower and middle income people. It's regressive in nature and largely benefits the wealthy. http://taxfoundation.org/article/who-be ... -deduction
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Re: Median net worth in the United States falling

Postby Ned Flanders » Wed Nov 28, 2012 6:33 pm

I think all of this will be cleared up during "Recovery Winter 2012-13"!

Sit back and watch the magic happen.
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Re: Median net worth in the United States falling

Postby Detritus » Wed Nov 28, 2012 8:47 pm

ArturoBandini wrote:Thought experiment - if you were designing tax policy today with a blank slate, would you include something like the mortgage interest deduction? What indirect effects might this policy have?

1. Preserve the personal income tax, and keep it progressive. However, the first, zero income tax bracket goes from no income up to the U.S. household mean. No distinction between sources of household revenue (i.e. salary, wages, tips, investment income, inheritance, "transaction fees," creating a "non-profit foundation" that owns all personal assets, or whatever latest dodge is currently enjoyed by Bain & Associates). Minimal or non-existent deductions depending on national quality-of-life factors (e.g. if no universal health care, then health care costs deductible). All deductions have sunset clauses, forcing them to be reconsidered regularly.

2. Preserve the corporate income tax (or "restore" it, depending on your point of view) to encourage investment and innovation and discourage speculation, acquisition-disection-curettage to boost stock market earnings, etc. Yes, I know some cases are in the eye of the beholder--so corporations have to make the case. This might mean deductions for capital investment, workforce training, etc. but because this is evidence-based reform, they have to prove they actually engaged in these activities or face tax penalties. Other deductions depending on national quality-of-life factors (eg., no universal health care and employer subsidizes employee health care, then those subsidies deductible). Sunset clauses for all deductions here as well. I would make corporate rates progressive, so major corporation don't end up paying 9% (or get a tax credit) while small businesses get shafted.

As for the mortgage interest deduction, I am agnostic. I see no problem with the government decided in the postwar era that encouraging private home ownership was a good thing to do, and I see no problem with using the tax code to try to accomplish this. The big problem with the mortgage situation in this country is not the mortgage interest deduction, but the abuse of the mortgage system by the banks, mortgage holding corporations, and brokerage houses. That has nothing to do with the mortgage interest deduction.
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Re: Median net worth in the United States falling

Postby Beaver » Wed Nov 28, 2012 10:17 pm

Ed Asner has a nice story that explains it well.

Tax the Rich: An animated fairy tale
http://www.youtube.com/watch?v=cwg4DB-EeEA
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