patrick.net

ja says

You seem to have a granny. I don't. And I don't want to subsidize grannies. But if you are so fond about it, promote another tax exemption for them, an elderly earned income credit, or some like that.

So more legislations, more taxation, more lobbying for special interest groups. You are precisely the type of wannabe busy body idiots that have provided the political capital for making our laws and tax code as convoluted as they are.

ja says

Again, same argument missing all the arguments. What about the opportunity cost of the time/money expent on your own house.

Would be less opportunity cost lost than having to write down all the expenses for deduction at tax filing time in addition to doing all the work. If renting to oneself results in taxable imputed income, obviously the expense for being one's own landlord would be used to subtract from that imputed income.

The best way of assuring that you spent time/money on the house is efficient is not subsizing owning it. Unless, of course, that you think individuals do not realize how good is home ownership (vs rental) and government has to give us a "push".

What a moronic and yet hubristic way of thinking how the world works. There's hardly ever a "push" by the government necessary, unless one is thinking of creating over paid job opportunities for the bureaucrats doing the "pushing." There is no subsidy per se. It's renting house vs. renting money, take your pick. Mortgage interest is deducted either by the owner-occupant or the landlord as expense and passed onto the tenant via competition.

But all of the recent studies indicate that there are no externalities owning a home.

There is no real ownership in the US. The "ownership" is fee simple long term renting from the town, which collects property tax as rent. Long term occupancy makes it feasible to invest for the longer term.

ja says

the interest and tax expense if buying now tends to be higher than rental income. In other words, there wouldn't be any income/profit to tax.

Who is talking about mortgage interest? In a ideal-perfect market, rents should be the same than interest for infinite years amortization.

Do you then not realize your tax scheme would collect exactly zero $ in that "ideal-perfect market"? The entire rent would be expensed via amortization. In most desirable parts of the country, the rent-to-sale price ratio is so low that new landlords buying to rent would indeed produce negative cash flow. Apparently the buyers are bidding prices so high that they are effectively counting on rising price in the future.

I'm talking about return on capital. Rental-to-value does not vary that much and even Zillow's approximations are better than nothing.

What return on capital if rent income is no more than amortization and interest payment? The return on capital would be zero in that case, as capital is being consumed while interest expense is being paid out.

Reality says

BTW: I'm not alone, is one of those things that make perfect economic sense but it's difficult to implement politically. Sort of like getting rid of subsidies on farming.

Yes, there are many shills out there looking for new ways to generate tax revenue.

SiO2 says

I hear conservatives say this sometimes. What exactly is meant by this? There's no good level of robbery or theft other than zero, so if tax=theft or robberty, this statement means that there should be no tax whatsoever. Welcome to Somalia.

Somalia under anarchy was a far more prosperous time than Somalia under any of its governments in the previous two centuries.

Reality says

So more legislations, more taxation, more lobbying for special interest groups. You are precisely the type of wannabe busy body idiots that have provided the political capital for making our laws and tax code as convoluted as they are.

one person, one vote. One type of income, one tax.
The overhead for an election system and for a fair income evaluation is small and worth it for the benefits.

Reality says

If renting to oneself results in taxable imputed income, obviously the expense for being one's own landlord would be used to subtract from that imputed income.

Sure, whatever, you can add the landlord income and substract it when deducing the rental income. Just don't do my taxes.

Reality says

There is no subsidy per se. It's renting house vs. renting money, take your pick. Mortgage interest is deducted either by the owner-occupant or the landlord as expense and passed onto the tenant via competition.

Sure, whatever. Competition passes all the savings from manufacturers to consumers. And you can forget about elasticity of offer and demand. Same idea that if goverment pays $1 for potato to farmers, savings are passed to the consumers. Just don't do my 101 economics homework.

Reality says

There is no real ownership in the US. The "ownership" is fee simple long term renting from the town, which collects property tax as rent. Long term occupancy makes it feasible to invest for the longer term.

Sure... Property tax denies property, no matter how small it is or what services you receive on its behalfReality says

What return on capital if rent income is no more than amortization and interest payment? The return on capital would be zero in that case, as capital is being consumed while interest expense is being paid out.

Sure, whatever. If you pay cash then it makes sense and you should pay imputed income? Just don't give ideas to the Wall Street guys or they would start buying securities on (income tax free) leveraged money.

Reality says

Yes, there are many shills out there looking for new ways to generate tax revenue.

Yes, and if you follow their profile, they'll try to generate just the minimum government revenue. But all of it without market distortions.

Reality says

Somalia under anarchy was a far more prosperous time than Somalia under any of its governments in the previous two centuries.

You seem more informed that the World Bank, that doesn't have official GDP statistics about Somalia since the 90s.

But even with CiA's estimations, you are right. Congrats!
Oh wait, if you compare GDP growth of Somalia with the neighbors, it's really shitty.

ja says

one person, one vote. One type of income, one tax.

The overhead for an election system and for a fair income evaluation is small and worth it for the benefits.

What are you talking about? Aren't forgetting the lobbyists? Once you start exempting this group that group from "income" calculation that may amount to as much as 1/3 of what they are currently making, trust me, the lobbyists will be fully engaged.

ja says

If renting to oneself results in taxable imputed income, obviously the expense for being one's own landlord would be used to subtract from that imputed income.

Sure, whatever, you can add the landlord income and substract it when deducing the rental income. Just don't do my taxes.

What the heck are you talking about? Are you old enough to have filed income tax? or are you just some pimply faced high school kid? or college kid not making enough to need to file anything more than an EZ form?

ja says

There is no subsidy per se. It's renting house vs. renting money, take your pick. Mortgage interest is deducted either by the owner-occupant or the landlord as expense and passed onto the tenant via competition.

Sure, whatever. Competition passes all the savings from manufacturers to consumers. And you can forget about elasticity of offer and demand. Same idea that if goverment pays $1 for potato to farmers, savings are passed to the consumers. Just don't do my 101 economics homework.

Are you bragging about taking Econ 101 now? Is that for high school?

ja says

What return on capital if rent income is no more than amortization and interest payment? The return on capital would be zero in that case, as capital is being consumed while interest expense is being paid out.

Sure, whatever. If you pay cash then it makes sense and you should pay imputed income? Just don't give ideas to the Wall Street guys or they would start buying securities on (income tax free) leveraged money.

Once again, what the heck are you talking about? Do you know anything about accounting or paying taxes on profit?

ja says

Yes, there are many shills out there looking for new ways to generate tax revenue.

Yes, and if you follow their profile, they'll try to generate just the minimum government revenue. But all of it without market distortions.

Dream on. All taxation schemes create distortions. It is human nature to minimize one's own tax bill. You will know that after you have filed tax returns.

ja says

You seem more informed that the World Bank, that doesn't have official GDP statistics about Somalia since the 90s.

But even with CiA's estimations, you are right. Congrats!

Oh wait, if you compare GDP growth of Somalia with the neighbors, it's really shitty.

Rapid economic growth in Somalia during the period of "anarchy" could be verified by the vibrant market place that showed up there, compared to many decades of socialist and fascist rules before then. Even Paul Krugman admits in his latest column that all government economic statistics are essentially boring science fictions. All those dams and other big infrastructure projects that Somalia's neighbors built added greatly to their GDP but benefited the people very little, aside from the crony contractors.

I still don't understand what exactly is rationale for this so called "imputed rent" bullshit. Seems to me that some people are simply pissed that homeowners can deduct interest and property taxes via schedule A over the standard deduction hurdle from their taxable income. To those who are so upset about it, if you actually ran the numbers you would realize that what renters pay in federal + state taxes is very similar to what owners pay in federal + state + property. So the overall tax burden is extremely close. But I guess it's easier to get people emotionally manipulated via the hysteria over "tax breaks."

dublin hillz says

I still don't understand what exactly is rationale for this so called "imputed rent" bullshit. Seems to me that some people are simply pissed that homeowners can deduct interest and property taxes via schedule A over the standard deduction hurdle from their taxable income. To those who are so upset about it, if you actually ran the numbers you would realize that what renters pay in federal + state taxes is very similar to what owners pay in federal + state + property. So the overall tax burden is extremely close. But I guess it's easier to get people emotionally manipulated via the hysteria over "tax breaks."

Think of a world where you paid your home cash. And where there were no property taxes because your town doesn't give you services and you pay them, if you want, by yourself.
Your house is capital and using its shelter year by year its a benefit you receive from that capital. In the same way that you receive dividends if you own stock

Reality says

Rapid economic growth in Somalia during the period of "anarchy" could be verified by the vibrant market place that showed up there, compared to many decades of socialist and fascist rules before then. Even Paul Krugman admits in his latest column that all government economic statistics are essentially boring science fictions. All those dams and other big infrastructure projects that Somalia's neighbors built added greatly to their GDP but benefited the people very little, aside from the crony contractors.

(no clue what Paul Krugman's point about China has to do. As in China's, Somalia's numbers are no good but even if they are half wrong the same conclusions apply)

Sure Somalia has been growing.. but was it because of anarchy? All the neighbors in the area are growing a lot. Caterus paribus?

Reality says

What are you talking about? Aren't forgetting the lobbyists? Once you start exempting this group that group from "income" calculation that may amount to as much as 1/3 of what they are currently making, trust me, the lobbyists will be fully engaged.

Lobbies are a problem now and would be anytime. Myself, I'm lobying about the best more rational and fair solutionReality says

What the heck are you talking about? Are you old enough to have filed income tax? or are you just some pimply faced high school kid? or college kid not making enough to need to file anything more than an EZ form?

I have the same question about yourself. Think about the added value theory and how the tax system tries to capture the incremental value additions. = If you deduct your honoraries as landord, you also have to declare them as income. So you are even.

Reality says

Are you bragging about taking Econ 101 now? Is that for high school?

No, I'm asking you to review it. If you take a pencil, a paper, and some offer and demand curves you'll see that this 'passing costs' thing doesn't have much sense.Reality says

Once again, what the heck are you talking about? Do you know anything about accounting or paying taxes on profit?

For simplification, think in a world where we pay cash for houses.

Reality says

Dream on. All taxation schemes create distortions. It is human nature to minimize one's own tax bill. You will know that after you have filed tax returns.

Again, basic offer and demand curves show that some taxations can minimize the utility loss in the market place. Particularly, if you distribute them evenly across all products.

dublin hillz says

Seems to me that some people are simply pissed that homeowners can deduct interest and property taxes via schedule A over the standard deduction hurdle from their taxable income

the MID is just a subsidy since nearly all buyers (after a certain income level) benefit from it.

And since housing is an *extremely* scarce good (relative to demand), this price subsidy just gets added to the purchase price.

The MID is silly, counter-productive policy.

Part of the problem with this place is treating housing like an actual wealth-creation industry.

That's not really case. Housing is just a major avenue to beat money out of the lower half of the nation.

McDonald's recent budget for its employees had its largest item in rent, $600.

http://www.practicalmoneyskills.com/mcdonalds/documents/McD_Journal2.pdf

There's no reason that housing even has to be that high per month, other than the rent-seeking allowed and even encouraged to go on.

Most of the housing rent we pay is simply the amount it takes to keep the next bidder from taking over our leasehold tenancy, not the actual capitalized cost of production and ongoing maintenance.

There are very few other sectors of the economy that operate like this, which is why housing has embedded economic rents right up there with health care (which is of course another high-profit sector of the economy with supply-demand imbalance).

The only solution is to increase the supply of quality housing such that there is surplus everywhere people want to live.

If we threw a trillion dollars worth of labor and resources at this we'd have 6 million new units (@ $160,000 per). For a city the size of Portland OR that'd be another 11,000 units on the market.

That'd be a good start in eliminating the rents out in housing, empowering our economy to focus more on actual wealth-creation and not just all the wealth-capture that's going on now to our great long-term detriment.

http://research.stlouisfed.org/fred2/series/GINIALLRH

Another mechanism would be to not deduct property tax from income taxes, but tax property -- the land component -- more. The more land you own, the more taxes you pay. That would encourage higher housing density, which is also necessary for an economy to run more efficiently, with less waste lost to transportation and distribution costs.

ja says

Think of a world where you paid your home cash. And where there were no property taxes because your town doesn't give you services and you pay them, if you want, by yourself.

Your house is capital and using its shelter year by year its a benefit you receive from that capital. In the same way that you receive dividends if you own stock

Why do you have to imagine so many counter-factual assumptions? Home, even if owned outright, already comes with Excise tax: property tax, just like car ownership in many states. What you are proposing is equivalent to levying a tax on the equivalent daily rental fee on car ownership.

ja says

Lobbies are a problem now and would be anytime. Myself, I'm lobying about the best more rational and fair solution

Really? What lobbying firm have you hired? You obviously don't even understand how political lobbying works. What you consider "rational" and "fair" is what most people would consider irrational and unfair. Should you pay a tax on the equivalent monthly computer lease "income" for owning the computer that you have?

ja says

What the heck are you talking about? Are you old enough to have filed income tax? or are you just some pimply faced high school kid? or college kid not making enough to need to file anything more than an EZ form?

I have the same question about yourself. Think about the added value theory and how the tax system tries to capture the incremental value additions. = If you deduct your honoraries as landord, you also have to declare them as income. So you are even.

So you are a pimply faced high school kid who thinks he has the world figured out. FYI, I have been filing income tax returns on personal and business income for over 20 years. What the heck is "honoraries as landlord"? For rental income, I count income from rents and deduct expenses associated with making the housing available to my tenants. For most young families that bought homes recently (as in the past decade), their "imputed income" from owning a home would be very close to zero after deducting interest payment and amortization: a $200k house that would rent for $1500/mo would have close to $800 interest payment + $100 insurance, $200 property tax + $500 amortization = $1600/mo expenses. So the net income after expense would be negative! That's before accounting for any repairs!

The people that your scheme would really catch would be people who already have paid off their houses or have in the house for more than 27.5 amortization years. That means retirees! Who you would then exempt. What exactly is your fuss about? That's why I started suspecting you never had any experience filing tax returns or accounting for business income.

ja says

Are you bragging about taking Econ 101 now? Is that for high school?

No, I'm asking you to review it. If you take a pencil, a paper, and some offer and demand curves you'll see that this 'passing costs' thing doesn't have much sense.Reality says

Do you even know the supply and demand curves for housing in a given area? They are not at all akin to canonical supply and demand curves for hamburgers. Mortgage interest deduction is very much on the mind of people buying properties, as it works into the price and rental price.

ja says

nce again, what the heck are you talking about? Do you know anything about accounting or paying taxes on profit?

For simplification, think in a world where we pay cash for houses

What about cash? You then deposit it into the business account just like receiving a check. Are you suggesting tax evasion now? or money laundrying?

ja says

Again, basic offer and demand curves show that some taxations can minimize the utility loss in the market place. Particularly, if you distribute them evenly across all products.

It's called supply and demand curve, you silly. Qualified Supply and Qualified Demand. You don't know enough economics to talk about Utility or "utility loss." The tax scheme that you propose, with attendant enforcement and compliance cost far outweigh any "fairness" that you are dreaming about. All it would do would be forcing a lot of people going thru the paper pushing and arrive at a near-zero net income from owning their home.

Bellingham Bill says

the MID is just a subsidy since nearly all buyers (after a certain income level) benefit from it.

This statement is very much counter-factual. The overwhelming majority of owner occupants do not take advantage of MID, because they use the standard deduction instead. MID is only available if you itemize. Then for the rich who do itemize, MID gets cut off when Minimum Alternative Tax hits (usually before MID itself runs into caps).

c=983975#comment-983975">Bellingham Bill says

And since housing is an *extremely* scarce good (relative to demand), this price subsidy just gets added to the purchase price.

Are you talking about Demand (as in Qualified Demand) or vernacular "want"?

Bellingham Bill says

There's no reason that housing even has to be that high per month, other than the rent-seeking allowed and even encouraged to go on.

Most of the housing rent we pay is simply the amount it takes to keep the next bidder from taking over our leasehold tenancy, not the actual capitalized cost of production and ongoing maintenance.

You have no clue how much it costs nowadays to build a new house in expensive areas. The overwhelming majority of existing homes for sale nowadays are selling for lower than insurance replacement cost (that's already having land value at zero as insurance co doesn't pay out for land; they only pay structural replacement). If you are envious of return on capital on rental homes, you can take stab at it yourself any time. The barrier to entry is so low, there is no economic rent to speak of.

Bellingham Bill says

The only solution is to increase the supply of quality housing such that there is surplus everywhere people want to live.

If we threw a trillion dollars worth of labor and resources at this we'd have 6 million new units (@ $160,000 per).

LOL. We already know what your proposal would result in: ghost cities like those in China. People don't want to live in the middle nowhere new development. People want to live in places like New York City. Don't tell me you can slap together a plywood box in the middle of time square for $160k and expect being able to keep it there, especially in millions of copies.

Low density is also a quality of life issue. Most Americans don't want to be pigeon holed within 2ft of their neighbors.

ja says

Think of a world where you paid your home cash. And where there were no
property taxes because your town doesn't give you services and you pay them, if
you want, by yourself.
Your house is capital and using its shelter year by
year its a benefit you receive from that capital. In the same way that you
receive dividends if you own stock

OK, so lets see here. Imagine a $500K home and can be "rent imputed" for $2600 a month. Currently property tax in california would be $6250 per year. So, I don't have to pay it and I get no services from my city. However, my glorious imputed rent is $31,200 which feds and state want dibs on. Say feds get me for 25% so that's $7800. State wants a 9% cut so that's $2808. Combines, I get fucked for $10,608....and I still get no services...lol, so I have to pay $4358 more and get no services whatsoever and can't write nothing of...sounds like AC transit bus system - increase rates and cut routes what a proposal!

Reality says

Why do you have to imagine so many counter-factual assumptions? Home, even if owned outright, already comes with Excise tax: property tax, just like car ownership in many states. What you are proposing is equivalent to levying a daily rental fee on car ownership.

I imagine them to simplify confused minds. Yes, it would be equivalent to car rental after you take all the overhead of it. And in case it was not clear it's INDEPEEEEENDENT from any other tax or fee you charge on it.

dublin hillz says

OK, so lets see here. Imagine a $500K home and can be "rent imputed" for $2600 a month. Currently property tax in california would be $6250 per year. So, I don't have to pay it and I get no services from my city. However, my glorious imputed rent is $31,200 which feds and state want dibs on. Say feds get me for 25% so that's $7800. State wants a 9% cut so that's $2808. Combines, I get fucked for $10,608....and I still get no services...lol, so I have to pay $4358 more and get no services whatsoever and can't write nothing of...sounds like AC transit bus system - increase rates and cut routes what a proposal!

YEs, it's a increase over what you are paying right now, but this doesn't make it unfair, just politically difficult ;-). Like any other subsidy. It would b much easier politically to forgive any tax on rental, and this wouldn't make it better for the society.

Mortgage deduction is also very stupid from economic point of view, but it's very difficult to get rid of. Proposals out there try to focus on a gradual reduction of it, and/or targeting the richest owners, who get way with most of the deductions. Similar strategies should be used for rental imputed income

Reality says

Really? What lobbying firm have you hired? You obviously don't even understand how political lobbying works

Nor you irony.

Reality says

What you consider "rational" and "fair" is what most people would consider irrational and unfair. Should you pay a tax on the equivalent monthly computer lease "income" for owning the computer that you have?

Can you give me a serious economist making a case why impute income is not good. I'd love to read the paper.

Different to say that it may be impractical to tax all items you otherwise have an option to rent. But that's not a justification not to do it with the biggest items.

Reality says

What the heck is "honoraries as landlord"?

No idea. But you brought it up. I guess honoraries you can claim for all the administrative work or renting a house, that you *could* also claim if you were renting to yourself.

In any case, if you *could* claim the honoraries for renting the house to yourself, they would both deduct from your imputing income and add as wages.

If you meant something else less stupid in the threads above, I apologize for my missunderstanding

Reality says

The people that your scheme would really catch would be people who already have paid off their houses or have in the house for more than 27.5 amortization years. That means retirees!

Or millionares. But why should we care. If you want to subsidize retirees be a man and say so. But don't subsidize retirees (or other) who own vs retirees (or other) who rent. I happen to know some retirees who pay rent from their retirement checks, usually poor people, and I'd think we should subsidize them if we have to do it to anybody.

Reality says

Do you even know the supply and demand curves for housing in a given area?

I never pretenede to know. But as long as they are not perfectly elastic, deduction from landlors would not reflect in lower price for tenants.

Reality says

What about cash? You then deposit it into the business account just like receiving a check. Are you suggesting tax evasion now? or money laundrying?

You can do whatever you want with your cash. But on the interests, you pay income tax.Reality says

It's called supply and demand curve, you silly.

Good catch.. supply curve. AKA offer curve

Reality says

All it would do would be forcing a lot of people going thru the paper pushing and arrive at a near-zero net income from owning their home.

People tend to buy vs renting because it offers them some benefits if they plan to stay there. Even if it's only after 30 years.

Anyway, it's not the same the first year of mortgate, when you have lots of interest to deduct, than the latest, when you are not deducting any.

And I think you are overstimating the overhead of the paperwork of doign that imputed income paperwork. IT can be easily sent to you by government, just like property tax.

Reality says

This statement is very much counter-factual. The overwhelming majority of owner occupants do not take advantage of MID, because they use the standard deduction instead. MID is only available if you itemize. Then for the rich who do itemize, MID gets cut off when Minimum Alternative Tax hits (usually before MID itself runs into caps).

It's a subsudy and a subsidy for the rich. That's what Bellingham says (and what I say and any economist would tell you). A good reason to get rid of it.

Please, don't reply to whatever you think people is saying, read tehm first.Reality says

LOL. We already know what your proposal would result in: ghost cities like those in China.

Problem in China is completely different. Investment without consumption (read what KRugman was actually saying in that article you mentioned).

Bellingham is theoretically right. Why pay $2M for a New York apparment. LEt's build a second New York so prices would go $1M / appartment (simplifying).
Unless, of course, you think you are paying $2M in New York for living close to the smartest guys in the country (kind of a select club). In which case, those guys are screwed because they cannot figure out a way of not paying to the previous (non smartest guys) owners.

In anycase, not a free market in the classical sense.

ja says

I imagine them to simplify confused minds.

Yes, you do have a very confused mind, if any mind at all. What you wrote here is not even a valid sentence.

Yes, it would be equivalent to car rental after you take all the overhead of it.

Another sentence that defies parsing. What the heck does "take all the overhead of it" mean? Why would anyone own any car at all for personal use under your tax scheme? You are essentially advocating a serf renter society.

And in case it was not clear it's INDEPEEEEENDENT from any other tax or fee you charge on it.

What the heck does "independent" mean in this sentence? Other taxes and fees would be abolished? Who would then pay for the salaries and pensions of the bureaucrats that are currently living off the existing taxes and fees? Do you know anything about the real world economic or political process at all?

ja says

Can you give me a serious economist making a case why impute income is not good. I'd love to read the paper.

There are court precedence on why taxing imputed income doesn't fly in the US. Look up imputed income yourself. Serious economists, or any person with economic knowledge, don't write "offer and demand curve," so you can stop pretending to have have read much of any economics papers.

Different to say that it may be impractical to tax all items you otherwise have an option to rent. But that's not a justification not to do it with the biggest items.

What happened to your earlier concept about "fair" and applying the same rule to all classes of economic activities? Fundamentally you don't understand what private capital ownership means, but prefer a government tax on the use value of all capital ownership. What you don't understand is that capital depreciate and amortize in a progressive society that is not stagnant.

ja says

What the heck is "honoraries as landlord"?

No idea. But you brought it up. I guess honoraries you can claim for all the administrative work or renting a house, that you *could* also claim if you were renting to yourself.

In any case, if you *could* claim the honoraries for renting the house to yourself, they would both deduct from your imputing income and add as wages.

If you meant something else less stupid in the threads above, I apologize for my missunderstanding

No, you brought up the word "honoraries." It was impossible to tell what you meant by that.

Like I illustrated before, the cost of "renting to oneself" for most owners would simply reduce net income from "renting to oneself" to near-zero for people who bought houses on a 30yr mortgage in the past decade.

ja says

Or millionares. But why should we care. If you want to subsidize retirees be a man and say so. But don't subsidize retirees (or other) who own vs retirees (or other) who rent. I happen to know some retirees who pay rent from their retirement checks, usually poor people, and I'd think we should subsidize them if we have to do it to anybody.

It's not about subsidies to retirees, but community stability. People already own their homes, so they think, so they put in the time to enhance their homes and the neighborhood. Do you really want to tell them that, chances are that they will be kicked out of their homes as soon as the mortgage is paid off and the 27.5 amortization schedule is up? Who would then take care of their homes and the neighborhood?

ja says

You can do whatever you want with your cash. But on the interests, you pay income tax

What interest if the money is simply held in cash form or checking account without interest? or in an asset that does not get sold hence no realized return?

Good catch.. supply curve. AKA offer curve

Only to the fools who make up things as they go.

ja says

People tend to buy vs renting because it offers them some benefits if they plan to stay there. Even if it's only after 30 years.

Most people do not stay in the same house for 30 years. The average stay is 4-7 years.

Anyway, it's not the same the first year of mortgate, when you have lots of interest to deduct, than the latest, when you are not deducting any.

The change is miniscule in the first 10 years of a 30yr mortgage. Most people stay in the same house for less than 10 years.

And I think you are overstimating the overhead of the paperwork of doign that imputed income paperwork. IT can be easily sent to you by government, just like property tax.

So tell me, since you obviously are too young and too clueless to own a home, how much book keeping have you done for your car? assuming you own your car. What deduction can you come up with if there is an imputed income tax based on daily car rental price?

Government-god can send you a bill? Have you been to a typical town assessor's office on the days prior to the appeal deadline? or the typical town collector's office on the days prior to property tax is due? The lines are often very long. That's given today's relatively simplistic assess process compared to the convoluted nonsense that you have proposing with far more substantial tax due.

ja says

Reality says

This statement is very much counter-factual. The overwhelming majority of owner occupants do not take advantage of MID, because they use the standard deduction instead. MID is only available if you itemize. Then for the rich who do itemize, MID gets cut off when Minimum Alternative Tax hits (usually before MID itself runs into caps).

It's a subsudy and a subsidy for the rich. That's what Bellingham says (and what I say and any economist would tell you). A good reason to get rid of it.

Please, don't reply to whatever you think people is saying, read tehm first.

You may want to re-read what BB said, instead of trying to project what you have in mind. Most home owner-occupant simply do not take advantage of MID; that's a matter of fact.

MID came into being as a result of 1986 tax reform; prior to that all consumer interest payment was deductible since the 1913 introduction of income tax. The original operating assumption was that since businesses are allowed to deduct interest expense as the cost of doing business, a nation of individual proprietors should be allowed to deduct interest expense as much of it may well be related to business.

What's funny is that, despite your criticism of MID, your proposal to tax imputed income from renting to oneself would actually force the home owners to itemize mortgage interest payment as business expense in renting to oneself.

ja says

Problem in China is completely different. Investment without consumption (read what KRugman was actually saying in that article you mentioned).

Stop changing topic. The ghost cities in China result from precisely what BB proposes: massive construction of housing supply by the government bureaucrats. As for consumption vs. investment, building those ghost cities is no different from gambling; bad investment is consumption. The line between investment vs. consumption is simply whether there is economic return. The ghost cities have no economic return, only capital destruction, so they are the worst kind of wasteful consumption. It's worse than "investing" in hookers and cracks.

Bellingham is theoretically right. Why pay $2M for a New York apparment. LEt's build a second New York so prices would go $1M / appartment (simplifying).

That's precisely what the Chinese bureaucrats thought! You have the ghost cities to show you why it's a bad idea to have bureaucratic planning displace organic growth..

Unless, of course, you think you are paying $2M in New York for living close to the smartest guys in the country (kind of a select club). In which case, those guys are screwed because they cannot figure out a way of not paying to the previous (non smartest guys) owners.

You don't understand why and how cities came into being: as centers of economic opportunity in an ever changing world.

In anycase, not a free market in the classical sense.

You don't understand either free market or "classical sense." You have no clue regarding economics or accounting or taxable income.

ja says

YEs, it's a increase over what you are paying right now, but this doesn't make
it unfair

How can you propose and defend the concept of paying way more taxes and getting absolutely "no services" for the local community? And I am absolutely not clear about how communities will fund roads, lights, mosquite abatement, local garbage collections, schools, etc that are currently being funded by property taxes. You say that people will have to pay for these services by themselves. First of all this is not feasible to pay for roads, schools, etc "by yourself" and additionally, where the fuck would the new money that is to be paid in taxes to the feds and state go?

dublin hillz says

How can you propose and defend the concept of paying way more taxes and getting absolutely "no services" for the local community? And I am absolutely not clear about how communities will fund roads, lights, mosquite abatement, local garbage collections, schools, etc that are currently being funded by property taxes. You say that people will have to pay for these services by themselves. First of all this is not feasible to pay for roads, schools, etc "by yourself" and additionally, where the fuck would the new money that is to be paid in taxes to the feds and state go?

I agree. It was just an hypothesis to illustrate my point.

Reality says

What interest if the money is simply held in cash form or checking account without interest? or in an asset that does not get sold hence no realized return?

Or in stock market, or in bonds.. Wait.. if they don't give me any benefit, then the whole theory goes down

Reality says

Only to the fools who make up things as they go.

Or to those that google it. Particularly on academic jargon related sites.

Reality says

Most people do not stay in the same house for 30 years. The average stay is 4-7 years.

I don't really care how long they stay. Price and quantity exchanged should be decided freely after goverment introduces the fewer distortions possible.

Same way that you shouldn't subsidize the price of potatoes just because you think they are already expensive.Reality says

So tell me, since you obviously are too young and too clueless to own a home, how much book keeping have you done for your car? assuming you own your car. What deduction can you come up with if there is an imputed income tax based on daily car rental price?

Perhaps just the average deduction a rental bossiness would use. I'm Ok with approximations. But you seem to think "exact" or "nothing"
Reality says

Government-god can send you a bill? Have you been to a typical town assessor's office on the days prior to the appeal deadline?

For the nth time, similar than home taxes or car taxes. Just an apporximation.

Reality says

You may want to re-read what BB said, instead of trying to project what you have in mind. Most home owner-occupant simply do not take advantage of MID; that's a matter of fact.

An extra reason not to use a subsidy that applies only to richest owners. I think BB was with me. But I'll allow you to correct me if I misread.

Reality says

MID came into being as a result of 1986 tax reform; prior to that all consumer interest payment was deductible since the 1913 introduction of income tax

Yes.. and the tax reform didn't go far enough IMHO, since it left home mortgate. Not sure if you have a point or just nostalgic.

Reality says

What's funny is that, despite your criticism of MID, your proposal to tax imputed income from renting to oneself would actually force the home owners to itemize mortgage interest payment as business expense in renting to oneself.

Funny how? As most people in this forum, I'm against MID because it distorts free market. I just want to bring it a step further and deduct MID but taxing imputed income, what would add even fewer distortions.

Reality says

The ghost cities in China result from precisely what BB proposes: massive construction of housing supply by the government bureaucrats. A

Yes.. and because goverment manipulation of interest rates makes housing the only sound investment for middle classes. We are not as far as China in goverment manipulation of the market, but I wish it would be even less.
Reality says

You don't understand why and how cities came into being: as centers of economic opportunity in an ever changing world.

~ smartest people concentration
Yes.. and it comes with extra cost of over-saturation. Its a vicious circle, because incremental benefit of another person going to the city is higher with the size of the city, but so are the costs. After certain critical size, costs surpass benefits. Solution is to create new cities, but this has tremendous upfront costs. Anyway, that's a offtopic theory of mine based on Urban Metabolism.

Reality says

You don't understand either free market or "classical sense." You have no clue regarding economics or accounting or taxable income.

Thanks. Coming from you it feels like a compliment.

ja says

Or in stock market, or in bonds.. Wait.. if they don't give me any benefit, then the whole theory goes down

What theory do you have besides some jumbled random ideas? Do you want to tax the personal pleasure that one derives from looking at the stock certificates?

Only to the fools who make up things as they go.

Or to those that google it. Particularly on academic jargon related sites.

Another google genius who doesn't know what he is citing. Here's a hint: we are not talking about international trade here.

Most people do not stay in the same house for 30 years. The average stay is 4-7 years.

I don't really care how long they stay. Price and quantity exchanged should be decided freely after goverment introduces the fewer distortions possible.

Same way that you shouldn't subsidize the price of potatoes just because you think they are already expensive.

Obviously you are too young to even understand why people move. Here's a hint: people move due to changes in their lives and career. The relevant point here is that on an average 4-7 years into a 30yr mortgage, the interest payment portion has not been reduced much at all. So the tax you are proposing on imputed income from renting to oneself would be offset by a massive dose of interest expense, on top of amortization (4~7 x 1/27.5 would then be wrapped under the tax free $250/500k cap at the time of sale), so your scheme wouldn't net much tax revenue at all, but only serve to complicate people's tax filings, as now they all have to itemize and/or file schedule E.

Perhaps just the average deduction a rental bossiness would use. I'm Ok with approximations. But you seem to think "exact" or "nothing"

What "average deduction of a rental bossiness" are you talking about? You are making sh*t up as you go. There is no "standard deduction" number for rental income. Every house is different. Take a look at Schedule E, and see how much book keeping you'd have to do to fill it out.

Government-god can send you a bill? Have you been to a typical town assessor's office on the days prior to the appeal deadline?

For the nth time, similar than home taxes or car taxes. Just an apporximation.

How old are you? to be typing up broken sentence after broken sentence like that? I don't usually pick on people's writings and spellings, but are you drunk or high or just 10yrs old? Real estate property tax and car excise tax are taxes on ownership, the rates are usually somewhere between 0.25% to 2%. You are talking about a 25% or so tax on something that is hard to verify: just because someone owns a house doesn't mean he is living there therefore renting to himself at all! Even if the owner does live there, the drastically high tax would invite massive disputes regarding what the real market value of the "imputed income."

ja says

An extra reason not to use a subsidy that applies only to richest owners. I think BB was with me. But I'll allow you to correct me if I misread.

If BB were with you, then both of you were wrong. The richest owners do not get to deduct MID, as MID caps out at $1M. Alternative Minimum Tax would also intervene for the richest homeowners.

MID came into being as a result of 1986 tax reform; prior to that all consumer interest payment was deductible since the 1913 introduction of income tax

Yes.. and the tax reform didn't go far enough IMHO, since it left home mortgate. Not sure if you have a point or just nostalgic.

Are you from some communistic revolutionary country? In this country, precedence and continuity are the basis of law. You obviously have no respect for either.

Funny how? As most people in this forum, I'm against MID because it distorts free market. I just want to bring it a step further and deduct MID but taxing imputed income, what would add even fewer distortions.

Funny because your proposed tax would cause many people who choose standard deduction now to use MID instead in order to offset the imaginary income that you are ascribing to them.

The ghost cities in China result from precisely what BB proposes: massive construction of housing supply by the government bureaucrats. A

Yes.. and because goverment manipulation of interest rates makes housing the only sound investment for middle classes. We are not as far as China in goverment manipulation of the market, but I wish it would be even less.

You are once again talking nonsense. The ghost cities in China are not due to government manipulation of interest rate per se. Their lending rate for real estate in China is in the 6-12% range depending on whether one has to borrow from the shadow banking system. Their ghost cities are the result of bureaucratic planning malinvestment exactly as proposed by BB and you: why can't we build a new city a few miles away from the existing one at lower cost, and people will move there! Well, people don't.

Chinese bureaucratic planners are just like you and Bill, suffer from typical Marxist end-state fantasy, instead of seeing city as a living process. People don't want to be the first 1000 living in a city with 100,000 units already built; it would be no different from living in an abandoned section of Detroit, with empty houses all around you inviting criminals, while the chicken-and-egg problem preventing convenience stores showing up due to lack of customer density. So hardly anyone moves into the new city, as the brand new city rots in the rain.

ja says

~ smartest people concentration

Yes.. and it comes with extra cost of over-saturation. Its a vicious circle, because incremental benefit of another person going to the city is higher with the size of the city, but so are the costs. After certain critical size, costs surpass benefits. Solution is to create new cities, but this has tremendous upfront costs. Anyway, that's a offtopic theory of mine based on Urban Metabolism.

The forming of city as commerce centers has nothing to do with "smartest people concentration" or any such elitist nonsense. It takes all sorts of people to make a city work, including dumb burger flippers who after 8hrs of work at the food cart would just go home, watch TV and make love with their spouse. Self-important know-nothing like yourself can only leach off other productive people in the city. It would be even dumber if you think yourself or any government bureaucrats can spot "critical size," as it is a moving target with numerous factors.

Reality says

What theory do you have besides some jumbled random ideas? Do you want to tax the personal pleasure that one derives from looking at the stock certificates?

The day this kind if pleasure is traded in the open market, yes. Till then, I'll wait.

Reality says

Another google genius who doesn't know what he is citing. Here's a hint: we are not talking about international trade here.

Clap, clap. You win. offer curve is used mainly on international trade context. Fewer use it as synonymous of supply curve. Let's not google down the last entries, but let's open another thread about the sex of angels.

Reality says

so your scheme wouldn't net much tax revenue at all, but only serve to complicate people's tax filings, as now they all have to itemize and/or file schedule E.

Good, I guess you are advocating for a simplified version of 1040. No need of schedules if you are *only* declaring imputed income rent.

Reality says

What "average deduction of a rental bossiness" are you talking about? You are making sh*t up as you go. There is no "standard deduction" number for rental income. Every house is different. Take a look at Schedule E, and see how much book keeping you'd have to do to fill it out.

Reality says

You are talking about a 25% or so tax on something that is hard to verify: just because someone owns a house doesn't mean he is living there therefore renting to himself at all! Even if the owner does live there, the drastically high tax would invite massive disputes regarding what the real market value of the "imputed income.

No hard to verify. I never said anybody has to verify if you are living on it or not. In the same way that you can rent two houses for the whole year and only live on each half of the year. The imputed income applies for everything that you own. Same that if you earn dividends on you capital and you decide to burn the check you receive for them.

ja says

The day this kind if pleasure is traded in the open market, yes. Till then, I'll wait.

There already are stocks of defunct companies sold as collectibles. Obviously the value is there is not the value of the company itself.

Clap, clap. You win. offer curve is used mainly on international trade context. Fewer use it as synonymous of supply curve.

Mostly morons like you.

so your scheme wouldn't net much tax revenue at all, but only serve to complicate people's tax filings, as now they all have to itemize and/or file schedule E.

Good, I guess you are advocating for a simplified version of 1040. No need of schedules if you are *only* declaring imputed income rent.

Once again you are showing your cluelessness and utter lack of experience filing tax returns. We already know you never filed a return for a business. Assuming you have filed for stock trading gains, since you talk about stocks so much, do you pay tax according to the 1099 number from your broker on total proceeds from securities sold, without using Schedule D to deduct your purchase cost? If you are going to impute income from renting to oneself, obviously the person would have to expense cost associated with being one's own landlord. That means Schedule E requirement.

No hard to verify. I never said anybody has to verify if you are living on it or not. In the same way that you can rent two houses for the whole year and only live on each half of the year. The imputed income applies for everything that you own. Same that if you earn dividends on you capital and you decide to burn the check you receive for them.

What a joke! Do you impute dividend income according to SP500 average even if the company doesn't pay dividend or is losing money on top of that? What if the house is not in livable condition? As in being renovated? Renovation can take months, sometimes years, during which there is no rental income even for property intended for renting to others. Or simply in an abandoned or broken condition like pipes broken, roof leaking etc.. You can not collect rent from other people even if you try. Your scheme to raise taxes would probably lead to many abandoned homes. Also, what about just vacant rental homes intended for renting to others? You can't just bureaucratically decide hence forth vacancy is not legal therefore must be non-existent, or is that part of your alternative universe scheme?!

Reality says

If BB were with you, then both of you were wrong. The richest owners do not get to deduct MID, as MID caps out at $1M. Alternative Minimum Tax would also intervene for the richest homeowners.

Clap, Clap. Let's correct "richest up to some limits".

Reality says

Are you from some communistic revolutionary country? In this country, precedence and continuity are the basis of law. You obviously have no respect for either.

?? Just for wanting to change a law?
No, I would put communist and McArthians both in the same fire

But, anyway, let's not go off topic. MID was not even intended for the purpose it is today used. IF we are not getting rid of it, it's just for political reasons, not because it's good economy

http://www.nytimes.com/2006/03/05/magazine/305deduction.1.html?pagewanted=2&_r=3&

Reality says

Funny because your proposed tax would cause many people who choose standard deduction now to use MID instead in order to offset the imaginary income that you are ascribing to them.

Obviously, if you can tax rental imputed income, you would be able to have both deductions.

If you are so worried of the details to dismiss the big picture, ask about them (to me, or check the blogs of anybody proposing it). But don't imagine things..
Reality says

Their lending rate for real estate in China is in the 6-12% range depending on whether one has to borrow from the shadow banking system. Their ghost cities are the result of bureaucratic planning malinvestment exactly as proposed by BB and you: why can't we build a new city a few miles away from the existing one at lower cost, and people will move there! Well, people don't.

Chinese bureaucratic planners are just like you and Bill, suffer from typical Marxist end-state fantasy, instead of seeing city as a living process

I would argue that the government is just getting a lift from the bubble, not riding it:

http://brontecapital.blogspot.com/2012/06/macroeconomics-of-chinese-kleptocracy.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+BronteCapital+%28Bronte+Capital%29

Reality says

Self-important know-nothing like yourself can only leach off other productive people in the city. It would be even dumber if you think yourself or any government bureaucrats can spot "critical size," as it is a moving target with numerous factors.

Again, if you have proof that cities don't attract talent, please share.
But I think it's unquestionable that it empowers people. And those who get there accelerate their lives. For professors and for burger flippers. Google Geoffrey West if you are interested in more details of what I meant.

In any case, I didn't talked about government spotting a cap size. Don't know if this will be possible one day.

The main issue with so called "imputed rent" is in the consequences - it will increase barriers to entry into homeownership and as a result will increase the number of people renting, in essence causing rental rates to skyrocket and perpetuate a permanent underclass of sorts. I don't see why united states should support this defacto aristocracy in the making.

dublin hillz says

The main issue with so called "imputed rent" is in the consequences - it will increase barriers to entry into homeownership and as a result will increase the number of people renting

My point is that it will *not* reduce those barriers.
Renting could be as good as owning, depending on the market price and on your personal needs.

There is huge opportunity cost. For instance, all the money we can get via that tax, could go to reduce the tax rate. This would benefit everybody, not just the house owners.

ja says

My point is that it will *not* reduce those barriers.

Then why is owners to renters ration roughly 2:1 in the united states while it's exactly reversed in switzerland?

ja says

Funny because your proposed tax would cause many people who choose standard deduction now to use MID instead in order to offset the imaginary income that you are ascribing to them.

Obviously, if you can tax rental imputed income, you would be able to have both deductions.

If you are so worried of the details to dismiss the big picture, ask about them (to me, or check the blogs of anybody proposing it). But don't imagine things..

As I have demonstrated again and again, you are just too inexperienced with business accounting and tax filing to realize the problem. The blogs that you refer to are probably similarly lacking in business and tax experience.

I would argue that the government is just getting a lift from the bubble, not riding it:

Their government has been causing the bubble. After all, their central bank (which in the case of China is actually controlled by the government) is the engine creating all that cheap credit.

Again, if you have proof that cities don't attract talent, please share.

It has nothing to do with "smartest people concentration."

But I think it's unquestionable that it empowers people.

Commerce empowers people. Cities tend to be where commerce takes place. OTOH, there are plenty slums where people people are not empowered at all; they are also in cities.

And those who get there accelerate their lives. For professors and for burger flippers. Google Geoffrey West if you are interested in more details of what I meant.

Perhaps for you, but for me, no need for Geoffrey West to tell me that.

Some would say that without very existence of Fannie Mae and Freddie Mac, no thirty-year fixed mortgages would exist. The nature of mortgage lending in other countries would seem to support this.

Would you go that far?