Yes!!! Bye Bye to the mortgage interest deduction

> Initially, interest on mortgage amounts above $500,000. No second home deductions. No home equity deductions. What will this mean for NYC? How will coop mortgages be covered. Why buy now with all this uncertainty?

why buy now with prices coming down anyway? those 2 points that you mention:
* no home equity deductions
* no 2nd home deductions
are excellent changes, simply put a total waste of tax payers dollars that provides the wrong incentives for people.

Bringing down disincentives to work for the 2nd earner is key in a rapidly aging society like USA, otherwise we will be back to 1 income households in the coasts as soon as young households realize that renting for the long term is optimal. Providing free childcare the way many European countries do is also another way to provide incentives to participate in the labor force for the 2nd earner, but this is not feasible in a situation in which spending cuts are needed.

No way this happens. would collapse housing markets everywhere. Not saying whether it's right or not, just saying it won't happen. Imagine the uproar from the brokers!!!! (on second thought, maybe it should happen).

think it will happen SEaddict within hte next few years. maybe not in this reform, but as older baby boomers become dependent of the gov, spending cuts and higher revenue will have to come from somewhere.

it's too much money in a time in which entitlements for the older baby boomers are unaffordable. what do see more likely? to cut these deductions or means-testing SS and Medicare?

i continue to find it fascinating how everyone has their particular axe to grind when it comes to the deficit and spending . for whatever reason you continue to pound away on baby boomer entitlements; i personally cannot fathom why we still have troops in iraq and afghanistan and the howling about the interest deduction is just starting.

the real problem isn't the deficit or the spending; the real problem is that everyone is convinced that they are right and everyone else is a fool.

i wish i knew the answer to that one.

The measures are sensible suggestions; I like the proposal overall. I don't think it's going to tank the NY real estate market, for two reasons: there's no way the mortgage interest deduction will get passed until the housing market is on firmer footing, and wealthy owners will just find other ways to structure financing so that it is maximally tax-effective. If you have a million-dollar apartment and a mortgage for $700k, it might make sense to pay off the mortgage down to the $500k mark, for example. The interest deduction for second homes was always ridiculous and I hope it does get eliminated.

There are many aspects of the plan i oppose but if all the tax hikes can be leveraged off by a massive drop in housing prices due to a combination of an end to the mortgage interest, raise in mortgage rates, and desperation from seller, that could work for me. But the drop would have to go as far as buying being cheaper than renting as in the early 90's when the gross rent multiplier was below 4.0. It happened in the past so it may as well happen again:
http://realestatevaluation.wordpress.com/2009/09/03/a-little-bit-of-history-gross-rent-multipliers-in-new-york-city-over-time/

not going to happen. home prices would drop 30% overnight.

...maybe myabe some second home and caps on amounts introduced but realistically not going to hapen and definitely not going to happen before Jan 1st which is all they care about.

So Dean, when the dot com bubble crashed, how much time do you think dot com stock owners had to think about dumping? Sellers have had all the time in the world to sell their property since the bubble popped 2 years ago....

...if the decide to hang on by greed, it's their fvcking problem!

sounds like sledge wants to be an owner. why don't you just keep renting and be happy? If renting is great, why do you care or want the real estate market to crash so you can buy?

"not going to happen. home prices would drop 30% overnight" - look at the United Kingdom - no drop there. Besides, 33-40% of all homeowners are exactly that - they own their homes outright - no mortgage. I think a cap on deductibility at 500k makes great sense - also would put a limit on the "underwater" home owner. People would tend to put more money down.

I think the drop in top income tax from 35% to 23% with the 500K cap and no 2nd homes deduction would be great.

Being a renter right now is a blessing! I want it to crash for the same reason some people in the early 90's thought it was logical to buy at that point! I'm not against owning, i'm against owning at these absurd current prices.

> I think the drop in top income tax from 35% to 23% with the 500K cap and no 2nd homes deduction would be great.

agree with the 1st, disagree with the second. why give people incentives to get in debt when the gov has to rescue the retards as soon as their gambles (buying overpriced homes with too little skin in the game) they kick and scream to be rescued... if they cannot handle the losses then don't give them incentives to play the game.

> Being a renter right now is a blessing! I want it to crash for the same reason some people in the early 90's thought it was logical to buy at that point! I'm not against owning, i'm against owning at these absurd current prices.

you're a smarty!!! for those of us that want to time it right, recognizing that the gov doesn't have enough revenue to cover not only SS and Medicare, but also public pensions for old baby boomers (don't even think about the young baby boomers) is key i think...

it's not only about home prices not being inflated anymore by the mtg interest deduction. it's also about the assumption that the shortfall on the spending in the elderly being financed... can you imagine how high mtg rates will go if so? cheap credit will stop inflating prices!!! we will find out how this will be unravel not far from now, i'd say during the next 3-5 years if baby boomers keep on retiring at current rates. public pension collapse will come before the reckoning in SS and Medicare, but not by much (2075 as the day of reckoning is total BS).

THERE'S NO REASON TO BUY before those variables find the new 'normal' levels.

Notadmin, its not going to happen. Obama can't even get rich people to pay full taxes (see today's back pedaling on Bush Tax Cuts). How do you think he'll get a tax increase on the middle class as well? You're wasting your time on proposals outside the solution set.

News all over the place have said you have a better chance of winning a Mega million lotto than this taking its place.

Agreed, this would raise tea party membership by at least 20 million.

HAHA. this should happen but it NEVER WILL. EVER. at least not in the next 4 years.

> You're wasting your time on proposals outside the solution set.

by solution set you mean the commission's proposals or other possibilities like adding VAT, means-testing of entitlements and the like?

don't make the mistake of confusing middle class in nyc that owes an obscene amount of money on a tiny co-op with the real middle class in the country. that real middle class doesn't even itemize. wake up!

cc
' i personally cannot fathom why we still have troops in iraq and afghanistan'

the question is, who gains from a prolonged conflict?

Military–industrial complex

Eisenhower said it best...

Until the latest of our world conflicts, the United States had no armaments industry. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security more than the net income of all United States corporations. American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions.

This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence – economic, political, even spiritual – is felt in every city, every Statehouse, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

28,000 us troops in korea. send them home.

we must not fail to comprehend its grave implications

FAILED

what do you think the purpose of those troops (Korea) might be against a 1M man standing army?

cannon fodder

of course.

We military in Germany right now because?
Cuba because?
Panama...to defend a canel too shallow and narrow for today war ships or super tanker/cargo ships.
Maintaining a military this size is draining our present and future resorces.
Better learn manderin as to curry favor with the new boss.

We have military

the real problem is that everyone is convinced that they are right and everyone else is a fool.

You are a fool Mr. Kiyosaki. Can you actually say something that has meaning?

brought this identity back?

So how many who took out a mortgage got the full deduction anyway?

ridiculous.

talking to yourself again.

If they take away the mortgage deduction, but lower my rate to 23, I'll be even better off. Bring it!!

What is the actual revenue benefit of eliminating the deduction above 500K when it already sunsets above $1MM? At least in NY, it also has little relevance to say the deduction does not apply to second homes since the $1MM is culmulative and if you own an apartment more than likely any second home mortgage is not deductible.

Once again the financial ninnies show themselves. 30% hit on a 10x leveraged asset.... Maybe 3 or 4 yrs of annual income is an easy give against a change from 35 to 23 marginal tax rate. Omfg. Ernie how old are you? You'd have to work 20 more years for it to net out in your favor. Take Econ 101. Pls.

> HAHA. this should happen but it NEVER WILL.

You don't think the $500k cap is sellable? Its easy "WHY ARE WE GIVING TAX BREAKS TO THE RICH!"
see, I just did it.

They should open with a $250K cap (I think that's about double the national average home price, no?).

Lowering marginal rates and eliminating deductions so the net effect is revenue-neutral is good tax policy. It makes it harder to cheat on taxes. It makes the tax code more fair.

Furthermore, government policies to encourage people to borrow money to buy homes has turned out to be a bad idea. Pulling back on the incentives to borrow as much as possible will be beneficial int he long run.

@swe - interestingly, the most vociferous objections to cutting the mtge int deduction have come from the left, like Krugman, who see it as raising taxes on the middle class (of course, a $500k mtge would imply 175k of income which is around top 5% or so), not to mention the whole matter of those who use the standard deduction and don't even itemize. they are so knee jerk against this plan b/c it dares to touch the 3rd rail of soc security, and places a cap on revenue, that they can't see clearly.

Actually that's not true -- Krugman's problem is not with the mortgage interest deduction but the fact that all the cuts are not going to be used by the "deficit reduction commission" to reduce the deficit but to lower taxes.

except that taxes, you know, go up under the plan. Krugman's issue is this: He wants gov't to be bigger, so any plan which caps that he is against. He puts aside his ability to analyze rationally like an economist in favor of his left wing ideology. At one point he was rational, but he's literally gone off the deep end the past few years.

And your support for that is where? I think you've gone off the deep end. His whole argument today is that this is a deficit reduction commission and that is their number 7 goal. His mention of the mortgage interest deduction is in passing and you made it sound like its his primary concern a couple of posts back.

A lot of the left is against it and a lot of the right is as well. That's what happens when guys who don't hold and aren't going to seek political office are asked to weigh in on things like this.

Krugman is without a doubt a European-socialist thinking big government supporter.

lets see, is there anything worse than that?

"lets see, is there anything worse than that?" A liar marxist like obama,

of course.

a liar marxist --- why didn't i think of that?

malthus,

agreed the mtge interest deduction is not his main concern - it is, however the topic of this discussion which is why I was focussed on that in my post.

>You don't think the $500k cap is sellable? Its easy "WHY ARE WE GIVING TAX BREAKS TO THE RICH!"
>see, I just did it.
I'm sold but who is going to sell this? Republicans? Nope. And they are the only party with a sales team and marketing strategy so I guess its not getting done.