From the NYT:
Homeowners Have Had It Good. Too Good, Says the Tax Bill.
For decades, the tax code has been filled with rewards for homeownership. Tax breaks encourage people to get into first homes and to trade up as they get older, building a national mind-set that you’re never quite middle class until you’ve qualified for a mortgage.
It amounts to a vast social engineering project that assumes society is better off with owners instead of renters. But the tax bill making its way toward final passage is upending that premise.
The bill will increase many homeowners’ monthly housing costs by scaling back deductions that allow them to reduce mortgage interest and property taxes. And by roughly doubling the standard deduction, it reduces the incentive to buy homes by making far fewer homeowners eligible for preferential tax treatment.
Today, a little under half of American homes are worth enough to justify itemizing mortgage interest and property taxes. Under the tax legislation, that figure would fall to close to 14 percent, according to an analysis of the plan by the online real estate marketplace Zillow.
The Republican plan, in short, is tinkering with subsidies so entrenched in the social fabric that they have become entitlements in all but name.
“It suggests a limit in the federal government’s willingness to subsidize ownership,” said Edward Glaeser, an economist at Harvard. “It’s also a reflection of just how expensive housing has become, and how it feels problematic to be using the tax code to support people buying houses that are this expensive or, even worse, to be encouraging housing prices to rise further.”
Both parties have long championed homeownership as a way to help people build wealth and keep neighborhoods more stable. But economists like Mr. Glaeser have been critical of the resulting subsidies.
In their view, the government has made homeownership and its financing artificially cheap through the tax code and mortgage backers like Fannie Mae. As a result, people are encouraged to take on more debt than they might otherwise — to buy bigger homes and second homes, and to plow the equity they accrue into renovations and personal spending.
This distorts the economy in a number of ways. For starters, it’s unfair: Since the benefits of these deductions get bigger with larger and more expensive homes, the bulk of the benefits accrue to wealthier homeowners in pricier markets. This alters the landscape by encouraging more single-family homes and suburban sprawl. That, in turn, prompts the government to spend more on roads and infrastructure and makes housing a bigger portion of the economy than it would be in the absence of federal help.
…
All this has made homeowner subsidies, in particular the mortgage interest deduction, one of the rare tax breaks with critics across the political spectrum. Matthew Desmond, a Princeton sociologist who studies how eviction wreaks havoc on the lives on the poor, has documented how the deduction became the “engine of American inequality” because it favors higher-income homeowners.Edward J. Pinto, co-director of the conservative American Enterprise Institute’s Center for Housing Markets and Finance, has described the interest deduction and other homeowner subsidies as a wasteful giveaway that inflates home prices and encourages people to borrow excessively.
“My basic view is if you subsidize something you’ll get more of it, and as a country we’ve been subsidizing debt,” he said.
These individuals are wrong. Housing isn’t expensive because of these subsidies, housing is expensive because people are competing over a limited product, driving up the price. Not exactly rocket science, but people overthink it. This is what capitalism does…..creates market pricing based on competition.
If they were indeed correct, you would see housing across the board go up, but that’s not the case. Housing is only going up in places where people want to live and are competing to live there….ask Sussex county.
Robert Reich: The Three Big Lies About Trump’s Tax Plan
The tax cuts will reduce demand, widen inequality and increase the national debt by at least $1.5 trillion.
Here are the three main Republican arguments in favor of the Republican tax plan, followed by the truth.
1. It will make American corporations competitive with foreign corporations, which are taxed at a lower rate
Rubbish.
(1) American corporations now pay an effective rate (after taking deductions and tax credits) that’s just about the same as most foreign based corporations pay.
(2) Most of these other countries also impose a “Value Added Tax” on top of the corporate tax.
(3) When we cut our corporate rate from 35 percent to 20 percent, other nations will cut their corporate rates in order to be competitive with us â so we gain nothing anyway.
(4) Most big American corporations who benefit most from the Republican tax plan aren’t even “American.” Over 35 percent of their shareholders are foreign (which means that by cutting corporate taxes we’re giving a big tax cut to those foreign shareholders). 20 percent of their employees are foreign, while many Americans work for foreign-based corporations.
(5) The “competitiveness” of America depends on American workers , not on “American” corporations. But this tax plan will make it harder to finance public investments in education, health, and infrastructure, on which the future competitiveness of American workers depends.
(6) American corporations already have more money than they know what to do with. Their profits are at record levels. They’re using them to buy back their shares of stock, and raise executive pay. That’s what they’ll do with the additional $1 trillion they’ll receive in this tax cut.
2. With the tax cut, big corporations and the rich will invest and create more jobs
Baloney.
(1) Job creation doesn’t trickle down. After Ronald Reagan and George W. Bush cut taxes on the top, few jobs and little growth resulted.
America cut taxes on corporations in 2004 in an attempt to get them to bring their profits home from abroad, and what happened? They didn’t invest. They just bought up more shares of their own stock, and increased executive pay.
(2) Companies expand and create jobs when there’s more demand for their goods and services. That demand comes from customers who have the money to buy what companies sell.
Those customers are primarily the middle class and poor, who spend far more of their incomes than the rich. But this tax bill mostly benefits the rich.
(3) At a time when the richest 1 percent already have 40 percent of all the wealth in the country, it’s immoral to give them even more â especially when financed partly by 13 million low-income Americans who will lose their health coverage as a result of this tax plan (according to the Congressional Budget Office), and by subsequent cuts in safety-net programs necessitated by increasing the deficit by $1.5 trillion.
3. It will give small businesses an incentive to invest and create more jobs
Untrue.
(1) At least 85 percent of small businesses earn so little they already pay the lowest corporate tax rate, which this plan doesn’t change.
(2) In fact, because the tax plan bestows much larger rewards on big businesses, they’ll have more ability to use predatory tactics to squeeze small firms and force them out of business.
***
Don’t let your Uncle Bob be fooled: Republicans are voting for this because their wealthy patrons demand it.
Their tax plan will weaken our economy for years â reducing demand, widening inequality, and increasing the national debt by at least $1.5 trillion over the next decade.
Shame on the greedy Republican backers who have engineered this.
Shame on Trump and the Republicans who have lied to the public about its consequences.
Robert Reich: The Three Big Lies About Trump’s Tax Plan – Newsweek
https://apple.news/ApY1220fIRcuAmGHmIEWF_g
Reich is all politics, and a terrible economist. Most of his rebuttals are off target. He says Corp tax cuts don’t work, then he says that Europe will immediately copy them anyway. Why would they when EU economists are full of little Reichs?
He doesn’t even pretend to be fair and balanced in his analysis. Like most mainstream news organizations, they detest while barely making an effort to truly understand. I don’t love this bill, I’m one of the detestible rich people who is probably getting an effective tax hike. But even if I do, lazy journalists will claim I’m getting a huge break. They have minimal interest in the facts contradicting their angry narrative.
“A fiat currency is backed by the state and that’s what preserves the value of the currency through the actions that central banks take.
“Bitcoin is not that – it’s not a currency.”
Regulator warns Bitcoin buyers: Be ready to lose all your money – BBC News
https://apple.news/A8drbA2c3RmOzAP2OCvtNJA
Bitcoin might be one of the biggest Ponzi schemes ever.
Reich is supposedly a big labor supporter but backs NAFTA and open borders. Tells you everything you need to know about the midget.
No one,
He makes some very good points. Lowering tax rates to attract business from other countries is retarded. It’s a race to the bottom. They will just lower their too, hurting avg people across the globe, further expanding inequality. Instead focus on educating your citizens so they can out compete other nations on creative products that give you an edge because no one else has it.
My complaint isn’t that the MID and SALT subsidize debt, it’s really a banker subsidy but there are many of those and it seems fair at a macro level.
What bothers me is that it the deductions are used to fund local political machines. My guess there will be reverberations in the state when big Essex liberals understand they will have to start paying the full tab for their feel good programs.
I wouldn’t be surprised to see Abbott fall in the next 10 years when the loss of the deductions is fully realized. “You mean I’m paying for this shlt?!”
@WSJ
Voters increasingly want Democrats to control Congress after 2018 midterm elections, a new WSJ/NBC News poll shows
By Janet Hook
Dec. 17, 2017 9:00 a.m. ET
Voters increasingly want Democrats to control Congress after the 2018 elections, according to a new Wall Street Journal/NBC News poll that offers several warning signs for the Republican Party.
Pumpkin, It is clear that you do not understand the premise of the article concerning inflating housing prices with tax breaks. Even homes in Sussex County which is not experiencing appreciation currently have an additional value baked into the price due to the current tax code. Appreciating or depreciating the value of the tax break is baked into the price.
30 year,
Come on, how much of an impact do you really think this has on prices? It’s a reach to blame these subsidies for expensive markets.
You know what really pushes people into home ownership, high rents! I know that’s why I bought a house. To save money long term by eventually not having to pay anything except property taxes. Home ownership locks in the cost of inflation. Rents, unless rent controlled, always go up.
I am f#cked by the proposed tax bill. Rate goes from 28 to 32. Price of my Obamacare insurance will explode. Partial loss of SALT deduction. Value of my home will go down. Even if I were a life long Republican I would vote against them forever based upon the impact of this legislation. Where you sit is where you stand!
Pumpkin, doesn’t matter why people buy the home. The impact of the tax benefit is part of the total value. In the most simple terms the current tax law reduces the cost of owning a home. It can be broken down to a specific dollar value. Increase the cost of owning the home and the value will be negatively impacted.
@DLeonhardt
Brutal CBS poll on tax bill:
35% approval
24% say it helps their own family, 69% say it helps wealthy
54% say it favors big donors vs 10% who say average Americans
61% say Medicare/Soc. Security cuts will ultimately pay for it
68% say Afford. Care Act changes shouldn’t be in bill
Check out CNBC’s header.
Seems Senator Corker, just put in an amendment that allows the 20% pass thru deduction to be uses for zero employee real estate holding companies which would benefit Corker and Trump immensely.
Never, never, ever forget people that when the chips are all down, you can always count on the greed, excess, self-centerness, immorality, and over all evil selfishness of all of the present locust boomer leadership of this country.
The idea that a tax rate or deduction should apply to one kind of business but not apply to another in a different line of business is fundamentally unjust. I hope Pumpy is able to shelter his income via the Corker zero employee real estate holding company special treatment, so that he can thank the GOP. My large limited partnership is probably classified as a service business, so I probably won’t get a deduction, and will probably pay more net taxes. One needs to be a tax lawyer to figure out the original text.
I think the reason that the public opposes the bill is that leftist journalists provide 90% of the framing of the topic, and are unwilling to fairly explain what’s in it. When Obama talked about cutting corporate taxes, the lefty journalists thought it was brave. When someone else does it, the go back into Marxist class warfare mode, and look for people who they can quote to the effect that it will have no positive effects. Any lefty news organizations interested in pointing out the tax breaks for the many groups that will receive them. No, of course not, they quote some democrat who says all the tax breaks are minor.
I’m not a huge fan of this tax bill, though it’s probably better than the status quo, overall. But the claim of “fake news” is growing increasingly strong when I see so many news organs totally unwilling to investigate and report information that may conflict with their political prejudices.
Boy, you are dense
The pass thru deduction is for the Big Boys. Georgia Pacific – The Koch’s privately held conglomerate is a pass-thru. Fidelity Investment – The Boston’s Johnson Family’s privately held investment brokerage behemoth is a pass-thru.
They are BBB iii lll iii ooo nnn aaa iii rrr eee ssssss. So they get a 20% deduction off the top tax rate (37% or 35% or whatever) because is a pass thru job creators lol lol.
You poor b a s t a r d that thinks wanna be b boy above. You did not play to pay, so no deduction for you.
—
My large limited partnership is probably classified as a service business, so I probably won’t get a deduction, and will probably pay more net taxes. One needs to be a tax lawyer to figure out the original text.
I think the reason that the public opposes the bill is that leftist journalists provide 90% of the framing of the topic, and are unwilling to fairly explain what’s in it.
Add as Pass thru for the General Partners side, just off top of head
KKR – Kohlberg, Kravis & Roberts LLP
IEP – Icahn Enterprises LLP
Bloomberg LP
Blackstone Group
The Carlyle Group
Likely every Trump subsidiary that he used for money laundering and tax evasion.
I would say most Americans have no idea whether the tax bill will help or hurt them they follow what the media tells them.
What a HS dropout would say:
Come on, how much of an impact do you really think this has on prices? It’s a reach to blame these subsidies for expensive markets.
There’s a Punk’n man with a Punk’n cat
Livin’ in a Punk’n neighborhood
He’s got an Interstate runnin’ through his front yard
You know he thinks that he’s got it so good
And there’s a woman in the kitchen
Cleanin’ up the evenin’ slop
And he looks at her and says
“Hey darlin’, I can remember when
You had a c0ck.”
Oh, but ain’t that America for you and me
Ain’t that America somethin’ to see baby
Ain’t that America home of the free
Little Highway houses for you and me
Elections have consequences
7:33 we will be helped.