I just had a thought recently, when I was driving in rush hour traffic. As I’m sitting on the freeway looking at two streams of traffic going in opposite directions, the first thought was, “If we swapped houses we would already be home by now.”
The second thought was that most of the people I know at work that rent, live much closer to work. I know several within a mile of the office. The people with long commutes all own the homes. When you rent, I guess it is just easier to move when your lease is up. If people had shorter commutes that would save a lot of energy.
When I bought my first house, it was only a few miles from my office. After I was laid off I ended up with a commute that 25 miles each way. It would be a lot easier if all I had to do was find a new apartment when I changed jobs. Even when I worked in downtown St. Louis, I lived pretty far from work, but I had a flat that was on a bus line that took me straight to the office.
Maybe people wouldn’t be so quick to own their own home if there won’t so many tax advantages and credits for doing so. Apartments are smaller and more energy efficient and create smaller neighborhood that consume less energy for commuting and shopping. I can understand why families with children will want a house, but is there a good reason for the government to encourage single people and DINKs to own their own homes?
Does this mean that you believe the state should encourage (with tax benefits etc) private home ownership for families? If so, why? What collective action problem is there when a family rents rather than owns that isn’t present for DINKs and singles? If private home ownership is particularly useful to families with children, why shouldn’t they pay the full cost, just like DINKs and singles? “I really want it” doesn’t amount to “somebody else should pay for it”.
You can probably guess my answer to your question. If anything, the government should discourage it through fuel and land taxes. Private home ownership does a lot to contribute to higher fuel use and urban sprawl, both of which present collective action problems.
In case anyone else is puzzled, apparently “DINKs” stands for “Dual Income, No Kids”.
And while I see the OP’s point, another approach to the same problem might be to encourage job stability, so when people buy a home close to where they work, it stays close to where they work. Of course, that would likely have its own set of unintended consequences.
I agree, this isn’t a tax exactly, but the deduction for home mortgage interest rather blatantly favors the well off. It leads to a distortion of home prices and adoption of mortgages that never should have been underwritten.
I can’t claim that I really want the deduction to go away as I benefit from it, but as a matter of public policy I don’t think it makes much sense.
Although there might be some psychological effect, does anyone really think that the market price doesn’t reflect the expected tax savings the buyer is going to get? Now, it’s impossible to know in advance the exact savings the eventual buyer is going to get, but it can’t be hard to get pretty close.
One problem we’d have with eliminated the tax breaks would be a precipitous drop in housing prices.
For reference, the cost of the Mortgage interest tax deduction to the federal gov’t is something like 100 billion/yr. So its a pretty sizable chunk of change that we’re spending (or not collecting, if you prefer) to encourage home ownership.
I’m not sure this is true. I seem to recall that average housing prices adjusted for inflation have actually been almost flat in the post-war US.
IMHO, we should toss the mortgage tax credit. Its a large expense to our not particularly flush with cash federal gov’t and creates a huge distortion in the housing market.
I don’t think private home ownership has anything to do with that (unless you are referring to privately owned single-family detached housing built on inappropriate land, in a traditional curvilinear single use fashion). Fuel use and urban sprawl are a function of land-use decisions, building types, building uses, insanely cheap energy, government policy and a whole host of other items. A home is not a house.
Home ownership is also viewed as a form of forced saving.
I mention families since most people that I know with kids are reluctant to move once their kids start school. I’m single myself, but I don’t have a problem with subsidizing people raising children and trying to provide a stable environment to raise them. As far as I’m concerned, you shouldn’t even be able to file a joint return unless you have children living at home.
We already provide tax-deductions for children though. If we want to increase help for such families, it seems much more straight-forward to just increase that deduction rather then through the much less targeted method of subsidizing home ownership. After all, not all families with children are in a situation where they can or would want to own a home even with the subsidies, and of course not all home-owners have or will have children.
You’re right, I conflated home and house. I should have made explicit my argument which is that subsidising home ownership will increase house ownership, since most private homes are houses and that most future private homes are likely to be houses as well.
The home mortgage interest deduction actually seems to favor single people since the standard deduction for singles is smaller, so they have a lower threshold to itemize deductions.
I have no problem with encouraging ownership, but I do agree that, all things being equal, people should live in apartments rather than houses. Obviously this would not appeal to many people, which is fine, but there are a lot of folks who buy a house because it’s the only thing they can buy.
Edit: That is, in places where purchasing apartments is not a standard practice, the government should take appropriate actions to make it at least possible.
You’ve got it backwards. You percieve the citizens earnings belonging to the government, and then the government making up rules to decide how much the citizents will get to spend for their personal use. Typical socialist thinking.
Taxes and rules are arbitrary. The government and policy makers attempt to be logical and fair about the rules, but when push comes to shove, the government will find a way to generate tax revenue to pay its bills. Whether that be by eliminating deductions or raising rates. The better way is to reduce the amount of government spending.
I don’t perceive it that way. But tax breaks undeniably cost money, regardless of how you want to parse the symantics. Or if you’d like, if we’re not taxing peoples income if they use it to buy a house, then we’re taxing income that doesn’t go into buying a house more. Either way, its costing someone money.
And its as textbook anti-free market as anything conservatives call “socialist”. The gov’t is pressuring people to spend their money in a particular sector of the economy, instead of trusting in individuals judgement about how to spend that money. It lets the gov’t pick winners (in this case, the real estate market) and losers (landlords) rather then let the market decide.
If US conservatives spent more time going after actual anti-free market practices such as the mortgage tax deduction and less time worrying about the tax rate and muttering about the gold standard, I might actually vote for them occasionally.
Also, is there a word for “non-free market” that works in the US? I’d use “illiberal”, but that seems to mean something different to Americans then it does elsewhere. “Socialist” isn’t what I want, as that a) refers to a particular type of illiberal economic policy and b) seems to have become sort of a weird catch-all term for “stuff we don’t like” amongst US conservatives.
I guess I’ll just use illiberal with a paranthetical explanation in the future, unless someone has a better term.