NYT: Limiting Mortgage Deduction Wise, Unlikely
Hal Varian, a professor of business, economics and information management at the University of California, Berkeley, weighs in on Bush’s proposal to limit the mortgage interest deduction in an editorial in the New York Times: An excessive subsidy on one asset means that less will be invested in other assets. The money put into building…
Hal Varian, a professor of business, economics and information management at the University of California, Berkeley, weighs in on Bush’s proposal to limit the mortgage interest deduction in an editorial in the New York Times:
An excessive subsidy on one asset means that less will be invested in other assets. The money put into building those huge villas on the hillside could have been put into factories, office buildings and schools. Investment in physical capital and human capital makes the economy as a whole more productive, unlike investment in housing.
Given the huge subsidies to housing, it is likely that we as a country have overinvested in this area. Cutting back some of those subsidies would be good economic policy. That being said, I hasten to add that this is unlikely to happen anytime soon. People have put substantial amounts of their wealth into housing in large part because it has been so highly subsidized. The housing tax subsidy has been built into housing prices, to some degree, and cutting back could lead to painful capital losses on home values.
If you give a lollipop to a baby, it may make him smile, but you will pay dearly for that smile if you try to take the candy away. The best thing to do is to distract the baby with other sweets, while you gradually extricate the lollipop from that sticky hand.
An Opportunity to Consider [NY Times]
Exactly. I hate this recent discussion about the merits of mortgage interest tax deduction.
The merits of any tax deduction are questionable.
And whats even more questionable – more than questionable its sinful – is the favored tax rate on capital gains and dividends.
So keep the discussion broader or they’ll chip away at middle class breaks and lessen the taxes on the real wealthy.
Hey Mr. Bush why not cut back on the tax breaks for Texas ranchers. You own a godzillion acres of grass land, stick a couple of cows on it and suddenly it becomes a working farm taxable at a much lower rate. Why not charge a tax on big freakish foreheads. Carl Rove would at least be responsible for paying for this forsaken war he started.
I don’t think I understand much of this.
“People have put substantial amounts of their wealth into housing in large part because it has been so highly subsidized.” – is this referring to investors in apt. bldgs, off. bldgs etc?
Or people buying their own homes?
Because if refer to people buying own homes -how would this ‘capital’ be invested somewhere else?
Vast majority of people allot certain part of their income for housing whether buying or renting and whatever that amt is gets you small studio or expansive loft.
And I have to chuckle when could be invested in factories— factories in what country employing whose neighbors?
I suppose they mean if lenders weren’t lending so much for home mortgages they would be lending to others. I say these corporations (and their stock owning owners) have plenty more tax breaks
than I could ever dream of having.
The baby analogy is fantastic.