patrick.net

That's a great quote, and totally true. It also comes at a cost to owners that don't carry mortgage debt. In other words, the tax system treats you like a sucker for paying off your house. Now be a good American, suck out the equity and spend!

Mankiw: "Economists have long pointed out that tax subsidies to housing, together with the high taxes on corporations, cause too much of the economy’s capital stock to be tied up in residential structures and too little in corporate capital.'"

Mankiw is talking his politics here by tying two independent issues to make his point.

What no economist is willing to recognize is that since the mortgage interest deduction is nothing more than a direct subsidy to homebuyers -- it does not make houses "more affordable", it simply makes them more expensive. This is entirely orthogonal to the corporate tax rate, which does not strike me as too high or too low, really.

Mankiw here is being dishonest:

"Those in the top 1 percent of the income distribution enjoy about twice that gain. Progressives who are concerned about the gap between rich and poor should be eager to scale back tax expenditures"

But if we progressives are worried about tax breaks going to the upper %s we *could* also just phase them out more so they would not be available to high income households. Funny Mankiw doesn't mention that.

This is all really about fighting against that 39.6% top margin that Clinton and the Dem Congress of 1993 rammed down their throats. Our national overlords don't want to pay that rate ever again, and they are doing their utmost in this fight.

http://www.nytimes.com/2010/10/10/business/economy/10view.html

Meanwhile, the rich are getting richer and the poor's standard of living is under great pressure. "Broadening the tax base and lowering tax rates" isn't going to reverse this trend . . . hello Brazil

If you want to "broaden the tax base and lower tax rates", tax rents and land values. This option is, AFAICT, intentionally banished from the policy playbook.

http://homepage.ntlworld.com/janusg/coe/cofe00.htm

My position previously, is there is always something to like and hate about the tax code so I never like to talk about specfic thing on the tax code without addressing the big picture.

Upper class, preferred treatmens of dividends, gains
Upper Middel Class: 401K, pre-tax medical, mortgage interest deduction
Middle Lower class, earned income credit, work opportuntity credit, child tax credit, etc.

You bring up mortageg interest deduction, then you should bring in earned income tax credit subsidy too. Negative refundable tax is a form of subsidy too.

You bring up mortgage interest deduction, then you should bring in earned income tax credit subsidy too

The point is what mix of taxes, at what levels, pays for our government's costs bests.

To propose everything has to rise & fall in lockstep is begging the question, really -- it is fallaciously asserting preserving the status quo is the best policy without any argument in support.

Negative refundable tax is a form of subsidy too.

That encourages people to enter the workforce, a good thing.

If the mortgage interest deduction just encourages people to bid up the price of housing, it is a bad tax break and its absence will not be missed (in the long run).

The "big picture" is that the top 10% own 90% of the assets in this country.

At the end of the day all this paper wealth has to be converted into actual wealth via someone's labor, so the commanding heights of capital we are experiencing now is simply incompatible with what was formerly the American standard of living due to compounding interest on interest being enjoyed by the uberclass.

Something's going to give here.

subsidizing renters by paying their property taxes is the same as penalizing owners
subsidizing renters by allowing them to vote on local parcel taxes is the same as penalizing owners
subsidizing renters by having prop 13 is the same as penalizing new homeowners
subsidizing renters by assuming their asset risk is the same as penalizing owners
subsidizing renters by making a long term commitment in their community is the same as penalizing owners