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Kuros
Joined: 27 Apr 2004
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 Posted: Tue Oct 06, 2009 12:46 am Post subject: Homeowners on Welfare |
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Time: Get Homes Off Welfare
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How do we subsidize homeownership? Let me count the ways. First, more than 80% of the mortgage loans made in the U.S. so far this year have been bought by the government-sponsored entities (GSEs) Fannie Mae, Freddie Mac and Ginnie Mae. That keeps the interest rates on those GSE-backed mortgages substantially lower than on mortgages that can be sold only on private markets, because taxpayers are on the hook for defaults on the former. That risk, long hypothetical, became reality as we got stuck with a $291 billion rescue bill for Fannie and Freddie in the fiscal year that ended in September. Meanwhile, the Federal Reserve is doing its part to artificially lower interest rates by buying $1.25 trillion of Fannie, Freddie and Ginnie mortgage securities this year and next.
Then come the tax breaks. The stimulus bill approved in February included an $8,000 tax credit for first-time home buyers � at a cost of about $14 billion for the year. That's set to expire, but there's talk in Congress of extending or even expanding it. A much bigger deal is the income tax deduction for mortgage interest paid � which has been with us as long as there's been an income tax � at a cost estimated by the Congressional Joint Committee on Taxation at $80 billion this year. The deduction for property taxes costs an additional $16 billion, as does the tax break on capital gains on the sale of owner-occupied houses.
There are many other, smaller subsidies aimed at low-income home buyers. But the bulk of the tax benefits flow to the upper end of the income spectrum. And to the coasts as well: a study by two Wharton School economists found that homeowners in high-priced regions in California and on the Eastern seaboard suck up most of the gains. |
Uncle Sam foregoes $80 billion in income to encourage borrowing for housing. $80 billion is about the total GDP of the state of Nebraska. |
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Ya-ta Boy
Joined: 16 Jan 2003
Location: Established in 1994
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| Posted: Tue Oct 06, 2009 3:54 am Post subject: |
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Some good points in the OP. However, it isn't the whole story. Homeownership is also subsidized by sending out cops to patrol Snob Hill but not so much The Projects. Let's be fair. Isn't the whole system set up to protect the property of the Haves from the Have Nots?
I've always maintained that the country is better off when gov't policy is aimed at broadening the size and wealth of the middle class. Homeownership is key to that. Nearly 30 years of pushing the concentration of wealth to the top couple of % has been destructive of that end. I don't know about you, but I prefer a country where the path to a decent life does not go through a period of indentured servitude to the Haves. Call me silly and naive, but when the rich screw things up I don't have a problem with spending gov't money to try to rectify the mess they've made of things. |
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