I think if they really wanted to have an incentive for home ownership the deduction wouldn't just be for the mortgage interest but should also reward homeowners who have paid off their mortgage.
A simple way to do this would be to have a table that listed the allowable deduction for homes owned without a mortgage. That table would be based upon the home's locally assessed value. This would have the added value of creating a trade-off where higher local assessed value creates value for both the homeowner and local government (which provides many of the services needed by the homeowner). Say a home has a valuation moved from $200,000 to $250,000 - the homeowner gets a higher value deduction while the community gets more local tax revenue to pay for a new school, additional police details, a new fire truck, etc. That could be an equal trade-off money wise for the homeowner but an increase in the number or quality of local services.
Just a thought.
EDIT: There's a much more elegant solution proposed in the comments.
Nix. Better I think to valueownership as the equivalent of two dependants, a hefty exemption that is already cooked into the tax code to phase out as income rises.
ReplyDeleteSo you're saying to treat your house as two dependents? And get the same deduction as that? That could easily be used whether you have a mortgage payment or not.
ReplyDeleteCorrect, and it could actually replace the mortgage interest deduction making it fairer since there's no reason for the government to prefer larger/more expensive houses- which the current structure does, the concept of house is what's important. Also, since it's a pre- tax deduction and not a credit, it is aimed solidly at the real tax paying middle class that politicians love, not the rich who can afford to organize our the poor who are zeroed out already.
ReplyDelete*afford to itemize
ReplyDeleteAlso, locally addressed value is a pot choice, since it encourages hijinks by local politicians to game better exemptions for their constituents - which is why New York, California and the other blue hellholes are screaming over the removal of the state and local tax deduction - it was a subsidy of their nonsense of no benefit to the federal government or the general citizenry.
ReplyDelete*assessed value is a poor
ReplyDeleteSuch a plan also doesn't time out like the mortgage deduction does and it doesn't encourage debt. The more I think about it the better it is.
ReplyDeleteIf you're want the pocketbook value of it, two exemption, prior to this year, had a 'value' of @8000$, which in a tax bracket of 30% is worth 2400, which for most people will cover their insurance for the year and basic upkeep - rewarding their for ownership in a tangible way.
ReplyDeleteI like your idea better than mine.
ReplyDeleteMy thought was the current incentives are not for home ownership but instead designed for people to be shackled to mortgages. The days of a mortgage burning party are over but that's something I think would be great to see return. Thus my post this morning.
I would also make a primary residence exempt from any death taxes to allow a home to be passed down though the family for generations. That could help create a greater sense of community as well - something I think is sorely missing these days.
What's the old saw, subsidize something and you get more of it? It's high time to subsidize homes rather than mortgages, and benefit citizens rather than banks. Damn. Know any pols who need a speechwriter?
ReplyDelete