Viewing a single comment thread. View all comments

marigolds6 t1_it8m76d wrote

Reply to comment by pmmbok in Many countries have a "hidden welfare state" for incumbent homeowners, as governments subsidize homeowners through the tax system. The homeownership welfare state is strongest in the US and other Anglophone countries, but weakest in the Scandinavian countries. by smurfyjenkins

The catch is that it is much more difficult now to take the mortgage interest deduction and lower your taxes, thanks to the changes in the standard deduction combined with the principal caps on the mortgage interest deduction itself. It's down to under 18% of home owners now who can actually take the deduction and lower their taxes.

The real subsidy, which is what the paper is referring to, is the tax exemption for imputed rent. When you pay rent, your landlord pays income tax on that rent you pay. A homeowner pays no tax on the imputed rental income of the house, which they functionally pay to themselves by owning the home.

12

Smooth_Imagination t1_it8swy8 wrote

Ah, thanks.

I don't think renters would find it so hard to get their own home if there were less landlords so it would be more the solution to tax landlords to pay to construct affordable housing for local workers, than to give the landlord a tax break on their owning extra houses. I don't see the argument that it would be 'fairer' to anyone to tax homeowners on a hypothetical income if they were renting.

3

Drisku11 t1_it9wzhp wrote

Imputed income is a nonsense concept that seeks to destroy natural incentives to invest in tangible, concrete ways to make one's life sustainable and affordable. It's morally the same as taxing you for raising your own children instead of sending them to daycare, or plunging your toilet instead of calling a plumber. It's essentially a tax on agency and non-participation in ultra-consumerism.

3

pmmbok t1_it8qjsn wrote

You inspired me to read more of the article. My unschooled opinion is that taxing imputed rent takes away all, or most of the motivation for owning. I guess that is the point. The same logic can be applied to cars. I own a home because I can't get what I have by renting. And it's a cost of housing stabilization system. I hate home ownership. It's a pain. I suppose, if I paid taxes on imputed rent, I would be able to deduct all of my repairs.

I am glad to hear that mortgage susidies have declined.

2

grundar t1_it9n2la wrote

> When you pay rent, your landlord pays income tax on that rent you pay. A homeowner pays no tax on the imputed rental income of the house

Sure, but the homeowner also does not get to deduct operating expenses or depreciation in the way a landlord does.

Looking only at imputed rent as untaxed income without looking at building maintenance as offsetting expenses is fundamentally misrepresenting the comparison between homeowners and landlord+renter pairs.

> It's down to under 18% of home owners now who can actually take the deduction and lower their taxes.

Yup, and even that 18% are seeing a much smaller benefit than before.

Previously, an expensive ($1.5M) house could increase overall deductions by $40k+:

    • $40k/yr for mortgage interest
    • $15k/yr for real estate tax
    • $13k for standard deduction
      Net: +$42k

Now, even an expensive house like that might get 1/10th the benefit from itemizing:

    • $25k/yr for mortgage interest (capped)
    • $5k for real estate tax ($5k space already filled by state income tax)
    • $26k for standard deduction
      Net: +$4k

The tax changes in 2018 more-or-less killed the mortgage interest deduction in the USA. (Which isn't necessarily a bad thing.)

0