patrick.net

Effectively- actually but not officially or explicitly

Exactly my point ironbrain. Tax savings are the dollars saved by using the MID over what would be paid if the MID was not available.

If the standard deduction becomes bigger than the MID for the majority of homebuyers, people will get zero benefit from the MID. Even if they still take the MID, the benefit is significantly decreased for the vast majority of people.
Currently, the MID subsidizes homebuyers and refinancers. The MID therefore increases the price of houses by reducing the after tax monthly payments. By increasing the standard deduction, the tax savings offered by the MID decreases. If renters get a big tax cut and new homeowners do not, then renting becomes a better deal. The secondary effects of that will be to reduce the price someone is willing to pay for a house and / or increase the price of the rentals. Probably both will happen, which would be good for landlords and some renters (tax cut will be bigger than rent increase), and bad for people who just bought a house (value of house goes down and tax cut is small relative to others).

This is a good thing.

Ironman says

10% of homeowners who even know how the MID affects their taxes

Yeah. I think that people are not absolute morons. They do take it into account. It will affect house prices.

I still think that the MID should be removed. I'd prefer it to be done over a long time period, so that it didn't have a large and random impact on people who happen to have bought recently. I'm mostly just saying that they ought to be honest about it.

If the standard deduction is increased so much that itemizing really only affects the top few percent, then I'd be in favor of just getting rid of all deductions. Really simplify things and don't save the cherries for the top 5% or however many would still benefit from itemization.

Ironman says

I'd bet you $1000 that if you went out and asked all your neighbors how much the MID reduced their taxes, you'd be hard pressed to even find a few who actually knew the correct answer.

The two neighbors that I've spoken to most recently about it could ball park it, and they pay someone else to do their taxes. They are smart enough to ask for tax advice when refinancing, using helocs or car loans, etc., because they know that they have to quantify the savings to make the right decision.

Even for people who make intuitive decisions instead of quantifying things would be affected. First of all, Realtors lie to people and tell them that they get to deduct the whole thing and fail to mention the standard deduction, so all buyers are getting a sales pitch on the MID savings. In addition, people look around and see how their renter friends and homeowner friends are doing. They talk about things, and if all of the renter friends are getting a big tax cut and their homeowner friends are not, they will take notice and make different decisions. On top of that, people that buy up the loans and insure them would take note of default rates, which would be affected by the tax. This would eventually lead to different underwriting rules. Capitalism is pretty efficient at using real information to set prices whether the individual actors do math or not.

Ironman says

Do you really think people go home shopping and base their purchase decision on the MID???

Yep, they do it because wife is in nesting mode. Rarely another reason. Home buying is seldom rational, unless somebody is doing it as an investment.

Tell me ironman, do you think that taxes don't affect peoples decisions, or do you just think that this one doesn't?

YesYNot says

If the standard deduction becomes bigger than the MID for the majority of homebuyers, people will get zero benefit from the MID. Even if they still take the MID, the benefit is significantly decreased for the vast majority of people.

That's great, since the MID is crony capitalism at its best. Either let everyone take the same deductions or do away with deductions and (income) taxes altogether. Everything else is crony-capitalist wanking.

Tenpoundbass says

He can cut all of the taxes, the last 16 years, Liberals in Washington has sought to use tax money every way possible to fuck me in the ass and dissenfranchise me.

EXPLAIN,"15 minutes GO!", why you use all the infrastructure in the U.S. that you didn't build &
have not paid enough in taxes to pave 100 feet? of Interstate highway.
Fucking SOCIALIST Republican HYPOCRITES will destroy America.
FAILURES!

Ironman says

You need better news sources

This is all pretty basic stuff. If you cannot figure it out from a basic understanding of economics, you can read in plenty of articles. Economists have quantified the expected impact of removing the MID on housing prices. I didn't get it from WaPo.

My mortgage is still pretty big, so I'm against it. Let's revisit this in 5-10 years.

This would provide a needed break for renters, while not actually taking anything from homeowners. Homeowners already get many advantages, and piling on the MID makes them come out far far ahead. Given that in many urban economies, most workers won't be able to buy a house for decades if ever, this proposal would help to level the economic playing field and put money in the pockets of consumers right away. Consumers need money to grow our economy.
This seems like a win win!

YesYNot says

Would effectively kill the MID for most of America.

That's what I thought. Also, ending state tax deduction would be interesting for places like California.

I doubt it will pass.

My prediction:

Tax deferral in 401K and/or IRA will be eliminated or seriously restricted. However, capital gains tax will be lowered.

Mark my words.

That territorial system is YUGE! And will eliminate a massive, massive competitive disadvantage.

territorial system should apply to citizens too...

Trump’s Tax Plan Could Be Painful for New York, New Jersey, and California
https://www.bloomberg.com/news/articles/2017-04-26/trump-s-tax-plan-could-be-painful-for-new-york-new-jersey-and-california

to be read before dancing on the tomb of the MID....

Heraclitusstudent says

territorial system should apply to citizens too...

Absolutely.

Also, we need to tax people like corporations or corporations like people: Either corporations pay a tax on their total revenue, or individuals only pay taxes on their net (disposable) income (ie after food, housing, clothing, etc - their 'operating expenses')

Also passive income and money making money should be taxed more than people earning money via productive labor.

YesYNot says

Currently, the MID subsidizes homebuyers and refinancers. The MID therefore increases the price of houses by reducing the after tax monthly payments. By increasing the standard deduction, the tax savings offered by the MID decreases. If renters get a big tax cut and new homeowners do not, then renting becomes a better deal. The secondary effects of that will be to reduce the price someone is willing to pay for a house and / or increase the price of the rentals. Probably both will happen, which would be good for landlords and some renters (tax cut will be bigger than rent increase), and bad for people who just bought a house (value of house goes down and tax cut is small relative to others).

You're exactly right, and I'm jizzing all over myself just thinking about it. Fuck homeowners.

Lashkar_i_Trumpi says

Also, we need to tax people like corporations or corporations like people

I don't see why corporations & people should be taxed the same. Could you elaborate? I see them as being very different things, and as such, likely to warrant different considerations.

or individuals only pay taxes on their net (disposable) income (ie after food, housing, clothing, etc - their 'operating expenses')

I think we come pretty close to this already with our progressive tax rates and standard deduction - taxes are very low to none for those just scraping by. taxing people based on operating expenses to me sounds like either:
a) very unfair, as people have wildly varying expenses (based on lifestyle choices).
b) if standardized (fixed) operating expense allowances were adopted (which is fair), then it would probably boil down to being almost the same as our current system.

Trump is right. Taxes are outrageous

Blurtman says

Is it real?

Only when a Dem is President.

YesYNot says

If the standard deduction becomes bigger than the MID for the majority of homebuyers, people will get zero benefit from the MID. Even if they still take the MID, the benefit is significantly decreased for the vast majority of people.

Currently, the MID subsidizes homebuyers and refinancers. The MID therefore increases the price of houses by reducing the after tax monthly payments. By increasing the standard deduction, the tax savings offered by the MID decreases. If renters get a big tax cut and new homeowners do not, then renting becomes a better deal. The secondary effects of that will be to reduce the price someone is willing to pay for a house and / or increase the price of the rentals. Probably both will happen, which would be good for landlords and some renters (tax cut will be bigger than rent increase), and bad for people who just bought a house (value of house goes down and tax cut is small relative to others).

Only 30% of taxpayers itemize now. Only 20% of homeowners take the MID and 80% of those have incomes over 100k. The amount of additional purchasing power of the MID at the 150k income level is 1.5%. The changes to house values from eliminating the MID will be negligible. The people truly benefiting from the MID either don't need it anyway or are in over their heads with creative financing.

What big cut do you see for renters in the trump tax plan? I'm not finding it.

FortWayne says

Trump is right. Taxes are outrageous

Go somewhere without them then. Otherwise continue using all the tax paid services and shut up.

anonymous says

Does the GOP Tax Plan Double the Standard Deduction? Not Really – Here's Why

In selling their tax plan, Republicans have been leaning hard on what they say is a provision to cut and simplify taxes for the middle class: doubling the standard deduction that people who pay income tax may take.

"You have to look at the plan in its entirety. It doubles the standard deduction, so in the end, even the lowest rates get a tax cut," Rep. Jim Renacci, a Republican who sits on the tax-writing Ways and Means Committee, told Reuters.

But the document published by Jonathan Swan of the news website Axios shows this is badly misleading — the plan would increase the standardized deductions available to taxpayers by 15% or less.

Meanwhile, taxpayers who still wouldn't take the standard deduction under the Republican plan — those who would instead deduct things like mortgage interest — would pay tax on more of their income than they do now.


Here's the important fine...

Is there a reason that literally none of the articles on this can publish exact deduction and exemption amounts along with tax brackets? Every fucking article has to be politicized even though this is a 100% fact and math based issue.

And you guys keep posting this political CRAP rather than the actual details as compared to 2017 numbers.

What I do know is that when I calculated my taxes under the plan advocated by Trump during the election, I stood to pay about $3600 less in Federal Income Tax. Now that's a headline!

bob2356 says

Only 30% of taxpayers itemize now. Only 20% of homeowners take the MID and 80% of those have incomes over 100k.

What happens when you look at only new homeowners? Many homeowners don't have a mortgage or are in the 2nd half of a 30 yr, and their interest payments don't add up to a lot. If you look at new homeowners in metro areas, they have 300-500K mortgages with big interest payments/deductions. In those regions (where rent is expensive), new 'starter' house prices will come down. Also, renters stand to benefit from both a tax decrease (bigger standard deduction in exchange for the mid), and a lower tax relative to their house owning peers. The relative tax is important, because tax cuts for home owners do not benefit renters directly and they starve the government of finances, which means a higher tax/lower standard of living for everybody (including renters) down the road. Removing that tax cut doesn't impact renters directly, but does provide a benefit through higher government revenue from someone else.

Fucking White Male says

What I do know is that when I calculated my taxes under the plan advocated by Trump during the election, I stood to pay about $3600 less in Federal Income Tax. Now that's a headline!

The elections over didn't you get the memo? The rest of us can only go with what is being proposed now.

Want to give us the calculation and walk us through how this savings works.

I wish he had cut the mortgage interest deduction.

It does not benefit anyone but banks and realtors. It just gives buyers the ability to bid more against other buyers who are also bidding more, making a house more expensive.

Canada does just fine with no mortgage interest deduction.

YesYNot says

What happens when you look at only new homeowners? Many homeowners don't have a mortgage or are in the 2nd half of a 30 yr, and their interest payments don't add up to a lot. If you look at new homeowners in metro areas, they have 300-500K mortgages with big interest payments/deductions. In those regions (where rent is expensive), new 'starter' house prices will come down

Based on what? Where are the numbers? Which markets are these and what percentage of the overall housing market do they represent. New home sales are less then 10% of home sales You have gone from a blanket statement about the housing market to a couple outlier super expensive markets that represent a very small part of the housing market.

Let me repeat. The changes to house values from eliminating the MID will be negligible. It may affect a couple super expensive markets slightly at best.

Patrick says

It does not benefit anyone but banks and realtors. It just gives buyers the ability to bid more against other buyers who are also bidding more, making a house more expensive.

You guys really, really need to step outside the bay area bubble once and a while. There is another world out there east of the sierra.

Anyone that is in favor of any tax,fee or tariff that cost me one cent is a
FUCKING REDISTRIBUTION SOCIALIST.

I'm to the Right of Rightwing Extremist.
DIE infrastructure! Why should my money go to make any
Rep/Con/Nazis' life easier. LOSERS can't even pay cash for their personal healthcare.
This trash have really enjoyed the benefits that Ronald Reagan's tax increases created & they have paid so little in taxes that they shouldn't be allowed to put one foot on an Interstate highway.
How many of this sewer sludge are on some form hand outs & subsidies?

HEY YOU is the only true Rightwing Conservative making everyone else look like losing failures.

Patrick says

It does not benefit anyone but banks and realtors. It just gives buyers the ability to bid more against other buyers who are also bidding more, making a house more expensive.

That's a real stretch.

YesYNot says

Would effectively kill the MID for most of America.

The MID does absolutely nothing for your average W2 employee.

HEY YOU says

Anyone that is in favor of any tax,fee or tariff that cost me one cent is a
FUCKING REDISTRIBUTION SOCIALIST.

I'm to the Right of Rightwing Extremist.
DIE infrastructure! Why should my money go to make any
Rep/Con/Nazis' life easier. LOSERS can't even pay cash for their personal healthcare.
This trash have really enjoyed the benefits that Ronald Reagan's tax increases created & they have paid so little in taxes that they shouldn't be allowed to put one foot on an Interstate highway.
How many of this sewer sludge are on some form hand outs & subsidies?

HEY YOU is the only true Rightwing Conservative making everyone else look like losing failures.

You're being pretty stupid here. Of course that's to be expected from an alcoholic that doesn't work or pay federal income tax.

bob2356 says

Based on what? Where are the numbers? Which markets are these and what percentage of the overall housing market do they represent. New home sales are less then 10% of home sales You have gone from a blanket statement about the housing market to a couple outlier super expensive markets that represent a very small part of the housing market.

I am talking about somewhat expensive metro areas, where most of the Patnet readers live. I'm not talking about only new homes. My house is over 30 yrs old, but I still save by deducting mortgage interest and state taxes. You are talking about percentages of homeowners, which is completely irrelevant. Most people (70% or so) buy their first new house at some point in their lives. During the first 5 yrs or so, they save a lot on their taxes, and this increases the price of that first home, because they talk with bankers/mortgage people, and because the amount they are allowed to borrow is impacted by default rates, which depend on total monthly cost after taxes.
I don't mind getting rid of the MID, but it should be phased in, because it will otherwise arbitrarily damage people who recently made decisions based on the previous structure.

YesYNot says

I don't mind getting rid of the MID, but it should be phased in, because it will otherwise arbitrarily damage people who recently made decisions based on the previous structure.

Or just cap it at a certain amount.

YesYNot says

I am talking about somewhat expensive metro areas, where most of the Patnet readers live. I'm not talking about only new homes. My house is over 30 yrs old, but I still save by deducting mortgage interest and state taxes. You are talking about percentages of homeowners, which is completely irrelevant. Most people (70% or so) buy their first new house at some point in their lives. During the first 5 yrs or so, they save a lot on their taxes, and this increases the price of that first home, because they talk with bankers/mortgage people, and because the amount they are allowed to borrow is impacted by default rates, which depend on total monthly cost after taxes.
I don't mind getting rid of the MID, but it should be phased in, because it will otherwise arbitrarily damage people who recently made decisions based on the previous structure.

Where are your numbers? Percentages are the only thing that is relevant. You say percentages are completely irrelevant. You say not only new houses. But throw in 70% of people buy new houses at some point. WTF? You can't have it both ways. They save a lot on taxes? Who is they? How many? How much? For how long? What is their income? How much more expensive house could "they" afford over the lifetime of the loan?

Why is it only people in expensive metro area's count? The rest of the country is expected to subsidize you because you choose to live in one of the expensive metro areas that represents a small portion of homeowners? Screw that. I'm a rural area, why should I help pay for your 10 times more expensive house? Plus all the people writing off vacation homes. How does that work?

Where is your analysis of how all this will reduce rents, your original point? Other than it's true because I believe it should be true.

bob2356 says

Only 30% of taxpayers itemize now. Only 20% of homeowners take the MID and 80% of those have incomes over 100k. The amount of additional purchasing power of the MID at the 150k income level is 1.5%. The changes to house values from eliminating the MID will be negligible. The people truly benefiting from the MID either don't need it anyway or are in over their heads with creative financing.

Bob's right here. The MID is really not that important in 90% of all cases. Unless you're in the 39.5% tax bracket ($470k plus income) or near it AND itemizing substantially over the standard deduction, there isn't all that much savings for the average American. I'd guess most here are in the 25-28% tax bracket income wise. Let's say you saved up the down payment for a $1M house, $800K loan with 80% LTV. You're paying approximately $32,000/yr in interest with a 4% interest rate. I'd venture to guess less then 5% of people can even do this, probably less.

These are just completely basic numbers for married filing jointly and feel free to catch me making an error. I don't claim to be right 100% of the time. And I know there are other things to itemize, this is just strictly a look at the MID. Standard deduction (now) $12,600. So take your $32k in interest on the $1M home and subtract out what you would have gotten regardless. So you're at $19,400 over the standard deduction (current standard deduction). The rosy picture has you saving $5,432/yr because of that interest deduction on those last dollars earned in the 28% tax bracket. Take the same situation for the $470k earner in the 39.5% bracket. They saved $7,633/yr in taxes.

While those savings are real, they very likely have very little impact on what a potential homeowner is going to buy or pay for a house, especially at that price point. So I just don't see the argument for it impacting home prices. So now let's bring it down to the more realistic level. These 25-28% tax bracket people are much more likely getting the $500k house ($400k loan). Halve the interest to $16k/yr. You're not only $3,200 over the standard deduction. You're now saving $896/yr with itemizing due to the MID. And we're still talking about a fringe case here. Not that many people are buying $500k houses. In fact substantially less then 50% of the population if you go off median national home prices.

MID a tool for the wealthy or extreme high COL areas. A doubling of the standard deduction is essentially pretty close to ending the MID anyway for I'm guessing 70% of people that currently use it. This is why I'm not a fan of this tax plan. While most people won't notice a difference in $5,432/yr savings vs. $896/yr at this income level. It's essentially a tax increase, from my understanding of what I'm hearing and based on these numbers (could be wrong), on middle to upper middle class people. These are the people that most likely have small businesses or could potentially start one. This is the group that is most likely to create jobs in my opinion (good to better jobs, not an Amazon order packer). While this isn't a massive hurdle for them to clear, it definitely doesn't help.

And yes, I do realize that some people barely itemize now, so this tax plan is probably a benefit to them a little bit with the standard deduction potentially doubling. Overall though, I personally won't benefit from this tax plan. And I'm in the category most likely to vote republican based on income and location. So 2018 could get interesting. If the tax plan passes and is retroactive, there should be some data before the election. If it's bad, good luck republicans. I personally don't like this proposal. Workers/families making $100k-$250k are the one's that spend money, develop new ideas and businesses. This tax plan will hurt them in my opinion, even if it's just minimal. If I had all the answers though, I wouldn't be making comments here. So I could be an idiot.