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Well as housing continues to struggle -- tax hikes hang over our heads.
The debate over mortgage related tax deductions is heating up does -- tax policy favor the rich.
That it contributed housing crisis or is it good for the mythical middle class Stephen Meister is the founding partner of -- Selig and -- Jerry Howard.
-- CEO the national association of homebuilders.
Stephen is a tax policy.
Work it's not working look we had -- homeownership rate.
In this country in the 45 to 47%.
Range prior to World War II.
And then ever since then but particularly in the 1990s.
We've pushed it from.
-- the low sixties and finally took over 69%.
The mortgage interest deduction.
Is part of that push.
Not everyone should be owning a home in this country there's nothing wrong with renting and it has this mortgage interest tax deduction which they don't have for example in Canada.
Where they have 120 of defaults we have.
And so we need to rethink entirely this policy of pushing homeownership rates the tax deduction for the mortgage interest is part of that.
-- -- actually say this is a terrific incentive especially for young first time homebuyers.
Yeah I'm not sure worst he's coming up with that argument the mortgage interest deduction.
Has been part of the tax code since its inception in 1913.
So comparing the last quarter century really -- in a holistic picture.
Secondly talks about Canada.
And while Canada may not have exactly the mortgage interest deduction and -- I'm -- a Canadian lawyer.
But I do know that in Canada they have what they call the Smith maneuver which does allow people.
To deduct their mortgage interest -- by by claiming it as a business break somehow so they do do that.
But more importantly the difference in the home ownership rate between here in Canada is negligible if -- were political poll we call it within the margin of error.
There about 68% -- word about 66%.
I believe that the mortgage interest deduction is working not only is it working it's working for the middle class and took him to back me up on that let me just quote the joint committee on taxation.
That says that 68%.
Of the tax benefit.
Taken in the mortgage interest deduction goes to people who make less than 200000 dollars and those same tax filers only pay 43% of the income tax rate.
The mortgage interest deduction stimulate homeownership homeownership is valuable to our society it's a good policy.
We had ninety million vacant homes we don't need to stimulate.
The construction of homes anymore what happens is that when people -- they have 40% combined state and federal income tax bracket.
They're gonna go out and they're going to undertake any mortgage obligation.
Perhaps 3300 a month instead of 2000 a month that they would undertake in the absence of the deduction because the deduction effectively makes that 3300 dollar payment.
You equivalent to 2000 so they end up if you do the math at a 5%.
Mortgage interest rate they end up taking on debt 800000 instead of for a 500000.
And that's driven up.
The price of housing it's contributed to the bubble bubble also.
They allow the the deduction of cash out home equity loans and what's the point of fact what are we trying to subsidize there summit could take out a home equity loan and then go to -- Las Vegas with that they -- the deduct the interest.
You can't the -- for a vote of car you credit card why why are we.
What does government have to do -- is promoting housing as owned why not rent housing what's wrong with that.
All right -- -- in September poll -- something like three quarters of Democrats Republicans independents all favor.
This mortgage industry tax deductions so it's public and -- around now it probably will stay around.
But you know when things go wrong that's a time to look -- contrary it is because what we've been doing doesn't work.
OK so we need a radical restructuring of our policy here it doesn't work look what we've had.
Jerry just seems to me like -- it certainly it's it's helped me before allows the first time home buyer a guided have a whole lot of money to put down 2324 years old.
I did put 20% down what I needed that.
That does deduction this you know it's -- could afford to buy -- -- it's -- I -- helps the younger home buyer would -- the wealthy home -- what do you.
Took down that the cap one million dollars made that more 500000 dollars with smaller amount therefore -- people could say it's not really helping the wealthy anymore.
Percent well the cap put the cap was put in in 1986 as part of the tax reform act that was undertaken back then.
A million dollar in in -- mortgage interest deduction was determined to be.
A reasonable amount and in cities like New York I think that there are still a valid.
Reason not to go down to something as low as 500000 dollars.
No we think the cap is right where it is and we talk about -- home equity loan are the home equity deduction that that -- criticizing here.
I don't know about you guys but I can tell you that many in my family members including my own parents.
He's the home equity loan to help finance my college the notion that people are using it to go to Las Vegas I think -- a little bit extreme and not reflective of the general population.
Any I I I don't I don't think there's any data to support that that they're using it.
People you can -- for those purposes people took out.
Home equity lines they used here how appreciating houses in the heyday like ATM machines and that contributed heavily to a problem.
So I think we have to look at this again and I I think it contributed to -- give -- -- -- test as he did mention you wanted to see radical reform here well.
I think what should happen is that the hope that the entire deduction should go away.
But the marginal rates have to be adjusted because that -- I think.
Is is attributed is responsible for about 600 billion dollars of lost tax revenues so what you need to do if you get rid of the deduction is give that 600 billion back to the same.
Marginal bracket people who are losing it by virtue of eliminating the deduction so that you don't affect the progressivity -- -- aggressive that he.
As it exists now in the coat and then if you had lower marginal rates Chris you wouldn't do you know -- have both lower marginal rates in lieu of a deduction.
-- Stephen guys he appreciated thanks for tomorrow thanks for the discussion okay even nicer carried out as well.
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