Fiscal Cliff

[helene_t]

I agree with everything you write, Ken, but still I have serious issues with the enormous tax rebates given to home owners in countries like USA and the Netherlands.

 

If owning a house is great for the owners, there is no reason for subsidizing it. People are smart enough to chose owning over renting if it is really so much better, without artificial incencitives like mortgage interest deduction.

 

If there is a case for the government to stimulate home owning then it must be for the reason that Cthulhu D mentions - that home ownership gives advantages to society beyond merely giving advantages to the homeowners themselves. Homeowners are likely to stay longer in the same house - as Adam argues this is a bad thing for workforce mobility but it may be a good thing for the neighborhood. And homeowners are probably more likely to feel responsible for the local community and environment, as they have a financial stake in the attractiveness of the neigborhood.

 

I think those are valid reason for making home ownership financially attractive. But it is rarely those reasons that are used in the debate about mortgage interest deduction. Usually it is about making houses affordable to people with moderate incomes. I find that argument strange. We could reduce taxes and thereby making more things affordable, but somehow those tax reliefs have to be financed. As it is, home owners pay less taxes and find it easy to afford there homes and whatever else they want to spend money on. Renters pay more taxes and find it more difficult to afford the rent and whatever else they would like to spend money on.

 

Mortgage interest deduction (or other home ownership subsidies, the Germans have a different construction) is an enormous burden on public finances in many countries.

 

When I raise this point I often hear that it is my own stupid choice to rent, everyone is free to take advantage of the system so I shouldn't complain. Well, I lived most of my life in rented houses in countries with strong ownership incitements, and now that I live in a country with much less ownership incitement I chose to buy a house. Reardless of tax rebates, sometimes you just have no choise but to rent. But in the Netherlands (and I suspect USA), many people are practically forced to own a house because they pay for it anyway through the higher taxes they pay as non-mortgagees. I am not against people owning houses, but it should be ownership by choice.

[mike777]

Yes the USA gives tax breaks for homeownship and marriage because it believes this leads to a better, more stable society.

 

People may disagree but that is the given reason.

[y66]

Reflections on the curious contrast of public policies between Germany and the US: Real estate versus human capital by Joshua Aizenman, Ilan Noy, 25 August 2012

 

In the years leading up to the global crisis, the US focused on subsidising home ownership, whereas Germany placed much more emphasis on education and vocational training. While it is easy to think that this explains the subsequent performance of the two economies, this column provides some much needed economic analysis.

[mike777]

I discussed a paper by Richard Roll who theorized the economic crises was a result of a decline in the expected value of human capital.

 

http://www.cfapubs.org/doi/abs/10.2469/faj.v67.n2.3

[Winstonm]

I am amazed - an Oklahoma Republican senator is advocating taking Obama's tax deal. Losing an election seems to be a sobering proposition.

[PassedOut]

I am amazed - an Oklahoma Republican senator is advocating taking Obama's tax deal. Losing an election seems to be a sobering proposition.

Looks like he might have to do some arm-twisting to get that done. The republicans have submitted their "solution" to the problem:

 

After the kumbaya White House meeting Friday with congressional leaders, it took until the following Monday evening for Republicans to return to the White House with an initial offer.

 

It was, in a word, pathetic.

 

As described to me by several sources with direct knowledge, the “bargain” was that all the Bush tax cuts would be extended. Revenue would be raised through later tax reform — although no amount was specified and, as important, no trigger mechanism put in place to enforce the deal. In return for the vague promise of future revenue, the defense-spending sequester would be canceled, the age for Medicare eligibility would rise and changes would be made to the formula for calculating increases in Social Security benefits. Cuts now, revenue later. Sound familiar?

 

Oh, and by the way, that increase in the debt ceiling? Republicans want to address that separately...

Time to check that our parachutes are in good condition.

B-)

[Winstonm]

Looks like he might have to do some arm-twisting to get that done. The republicans have submitted their "solution" to the problem:

 

 

Time to check that our parachutes are in good condition.

B-)

 

 

 

It's odd to watch a party bury itself one shovelful at a time, is it not?

[mike777]

Dems won...let them lead the way and have most of what they demand.

[Flem72]

Ken just to be clear:

3) you dont have to pay taxes to hold a stock...you do a house.

 

Here's a long range prediction for you: When the lefties have run beyond the effective limits of tax increases on income, there will be talk of taxes on assets. Call me crazy....

 

And I'm becoming one of the psychedelic conservatives: let BHO have anything and everything he wants, and let the voters discover what they have wrought.

[awm]

Here's a long range prediction for you: When the lefties have run beyond the effective limits of tax increases on income, there will be talk of taxes on assets. Call me crazy....

 

And I'm becoming one of the psychedelic conservatives: let BHO have anything and everything he wants, and let the voters discover what they have wrought.

 

Of course, there are already taxes on assets... as anyone who pays property taxes would already know. Whether these taxes should be raised and income taxes lowered (or vice versa) is perhaps an interesting question.

[Flem72]

Of course, there are already taxes on assets... as anyone who pays property taxes would already know. Whether these taxes should be raised and income taxes lowered (or vice versa) is perhaps an interesting question.

 

Yeah budddy, but I'm talking about taxes on your 401K, your equity holdings, your trust assets, a FEDERAL property tax and etc. State property taxes are so old school....

[mike777]

Ya I noticed fox news is talking often about a wealth tax that I guess many countries already have.

[PassedOut]

And I'm becoming one of the psychedelic conservatives: let BHO have anything and everything he wants, and let the voters discover what they have wrought.

Me too. Obama has brought down spending and I hope congress agrees to even deeper cuts. But it will take revenue increases as well to get back to the road that Clinton paved. It will be interesting to see how that gets done.

[mike777]

btw speaking of trust assets...often you dont own the trust......in fact very often you dont.

 

people dont know this.

 

 

a wealth tax could just complicate such tax avoidance stuff but create jobs for tax lawyers and others.

 

 

in any case the Dems won...let them lead on these issues..they were voted in.

 

senate republicans have and should have little power....in the house a bit more but only a bit more.

[Bbradley62]

in any case the Dems won...let them lead on these issues..they were voted in.

 

senate republicans have and should have little power....in the house a bit more but only a bit more.

It's not entirely true that "the Dems won"... Obama won... 25 Dem senators (including two independents) won as opposed to 8 GOP senators... but the GOP won 234 out of 435 seats in the House. Those 234 GOP congressmen can certainly make a case that they were elected as a majority in their House and they should not be expected to simply roll over for the Dems.

[mike777]

It's not entirely true that "the Dems won"... Obama won... 25 Dem senators (including two independents) won as opposed to 8 GOP senators... but the GOP won 234 out of 435 seats in the House. Those 234 GOP congressmen can certainly make a case that they were elected as a majority in their House and they should not be expected to simply roll over for the Dems.

 

 

 

I hope i said gop in house has some effect..but not much they did lose the overall raw vote for the house

 

 

....in the house a bit more but only a bit more

[blackshoe]

Let me tell you how it will be

There's one for you, nineteen for me

'Cause I'm the taxman, yeah, I'm the taxman

 

Should five per cent appear too small

Be thankful I don't take it all

'Cause I'm the taxman, yeah I'm the taxman

 

If you drive a car, I'll tax the street,

If you try to sit, I'll tax your seat.

If you get too cold I'll tax the heat,

If you take a walk, I'll tax your feet.

 

Don't ask me what I want it for

If you don't want to pay some more

'Cause I'm the taxman, yeah, I'm the taxman

 

Now my advice for those who die

Declare the pennies on your eyes

'Cause I'm the taxman, yeah, I'm the taxman

And you're working for no one but me.

 

-- George Harrison, "The Taxman"

[mike777]

and yet he lived and paid taxes where?

 

any way see UK vs Hong Kong...milton friedman

 

see the voters ....voted for Dems and policy

[Cthulhu D]

It's not entirely true that "the Dems won"... Obama won... 25 Dem senators (including two independents) won as opposed to 8 GOP senators... but the GOP won 234 out of 435 seats in the House. Those 234 GOP congressmen can certainly make a case that they were elected as a majority in their House and they should not be expected to simply roll over for the Dems.

 

It's clear that the US has a major problem with Gerrymandering in the lower house though. I do not understand why the land of the free continues to tolerate this sort of bizarre disenfranchisement of the voters. Only one of 53 seats in California has changed hands in the last decade?

[mike777]

gerrymandering in most cases a strawman

 

in this case...dems won...replost

 

pls let them govern and stop being silly

 

rpe lost....dem won

[Cthulhu D]

gerrymandering in most cases a strawman

 

 

It's an established fact that the US is heavily gerrymandered - http://www.theatlantic.com/magazine/archive/2012/10/the-league-of/309084/

 

Really it's one of the most damaging forces in the US today, because it means you're not running against the other side, you're running against the other wing of your own party!

[mike777]

I repeat:

 

 

gerry mandering in this case..today

 

 

often

 

but it dont matter I repeat it dont matter

 

 

gop lost

 

 

dems won

 

 

give it up and they make policy

 

 

I said strawman

[Cthulhu D]

I repeat:

 

 

gerry mandering in this case..today

 

 

often

 

but it dont matter I repeat it dont matter

 

 

gop lost

 

 

dems won

 

 

give it up and they make policy

 

 

I said strawman

 

It matters hugely because it is what keeps the congress like it is, and also prevents congressmen from either side moving towards the centre. Without that you cannot compromise. Without comprise you cannot pass legislation. If your legislative body cannot pass legislation, you don't have a government any more.

[kenberg]

It's clear that the US has a major problem with Gerrymandering in the lower house though. I do not understand why the land of the free continues to tolerate this sort of bizarre disenfranchisement of the voters. Only one of 53 seats in California has changed hands in the last decade?

 

I believe I confessed my guilt on this right after the election. Maryland redrew the lines for congressional districts. this was challenged, and put to a referendum. My wife, more principled than I am, voted to reject the gerrymandering. I voted to accept it. It's true that the redrawn lines put me in the same district as my older daughter, and it takes an hour to get to her house, going through two other counties,, but the redrawing also means that I am now in Chris Van Hollen's district instead of Roscoe Bartlett's. Actually it also means Roscoe Bartlett has been replaced by john Delaney. I know I should have followed principle and voted against the gerrymandering, but I just couldn't. I confess my sin. I imagine myself going in to Van Hollen's office to tell him I am a constituent and I live in Carroll County. I expect a reply of something akin to "Where the hell is Carroll County?". I''m joking, Chris, joking. I am sure you will represent me just fine. Call if you need directions.

[kenberg]

 

 

Ken just to be clear:

1) yes you cannot live in a stock like you live in a house.

 

Are you telling me that 401K is not the address of an old folks home In Washington D.C.? Good grief, I have been swindled again.