The MID truth test
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Do you use the mortgage interest tax deduction (MID) as a marketing tool to encourage prospective buyers to purchase a home? Is a form available for the disclosure? Share your comments below!
- Yes. It is a standard practice. (79%, 68 Votes)
- No. That is not my duty. (21%, 18 Votes)
Total Voters: 86
This article examines the arguments for protecting the mortgage interest tax deduction (MID), reveals who truly benefits from the subsidy and questions both its viability and actual use as a marketing tool by real estate brokers and agents.
They doth protest too much
One of the most contentious debates in the real estate industry is over the mortgage interest tax deduction (MID). Arguments on this issue quickly turn political, with MID proponents coming from the right’s low-/no-tax camp and those rallying for repeal of the deduction firmly entrenched on the high horse of the left.
Proponents of the MID argue it:
- stimulates homeownership;
- provides tax relief for the middle-class; and
- generally limits the government’s reach into the taxpayer’s pocket.
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loading...About The Author
Jeffery Marino
is an assistant editor and lead on our first tuesday news alerts, specializing in critical economic analysis and its impact on California’s real estate market.
Latest CommentsLeave a Reply
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Wow…where are you located…somewhere where the median price is $50K??? Many folks choose to reside in a location where the median price exceeds $500K. The MID is huge and easy to estimate…say you pay $2000 in interest each month…say your tax rate is 30%. Multiply the two and bingo you save $600 each month on income tax. That doesn’t inflate values, but makes just makes homes more affordable. Yes,,,it is a great tool in illustrating why buying is better than renting.
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A great selling tool Dan ???
Now dig into YOUR OWN pocket and YOU pay for it. Ahe author is right – it’s a government give away of my money for no particularly good reason that serves all of us. I don’t want to own. I don’t want to mow the lawn, paint the shed, clean the gutters or put up Christmas lights on weekends. I want to play golf, go to the beach, go skiing, have a barbecue, go to a party or wait…… JUST DO NOTHING AT ALL ! Stop making me pay for the other guys tax benefit !
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While valid, this is how income is defined. Interest is taxed when earned not when paid and it has been since the income tax was created. It makes taxes neutral to debt. If you want to bias the system against debt then it should be removed for all debt, not just mortgages. There is a problem with that though, as it is easy to hide debt calling it something else. We could as well call interest capital gain and disguise it under that. In the end such changes as altering the interest deduction merely promote more tax games. We just went through that converting consumer debt into secured debt. If we do so again, we will just go through more of it. The error is to believe this would alter anything other than hurting some and benefiting others at the transition. Just say no to playing the tax game.
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Income tax on amounts that it takes to support a family should be abolished.
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When did First Tuesday get taken over by liberal haters of real estate agents? This is just another of many articles with that clear prejudice. Jeffery, you need to get your facts straight…oh, but wait…the truth would leave you with nothing to complain about! Let’s just ignore the facts so you can continue your liberal rant.
Here’s the truth:
The mortgage interest deduction amounts to an estimated $100 billion in tax revenue a year. That’s a pittance in view of multi-trillion dollar budgets. We give away more foreign aid than that to billionaire dictators.
The claim that MID primarily benefits wealthy individuals is simply not true – only 9% of homeowners who claim it earn more than $200,000 a year. Try carrying your “Death To MID” sign through any middle class neighborhood and see how much applause you get.
Do the wealthy get a bigger deduction? Sure, and they also pay a disproportionate “fair” share of income tax. The top 10% pay 70% of all income taxes, so maybe it’s OK to give them a small break here. And then there’s the much bigger property taxes on their expensive homes. That’s another punitive “progressive” tax that has absolutely no justification – expensive homes simply do not use more government services. In fact, the opposite is true. The cheaper the neighborhood, the greater the demand on government services. How about applying your Fair Share mantra to that one?
Or maybe you should start a new crusade – like “let’s punish society’s greedy investors and raise the capital gains tax”. Oops. That one won’t work either. The Mutual Fund Investment Company Institute study showed that 49.5% of US Households owned equities. Well, Jeffery there’s always windmills that need to be tilted.
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i’m shocked at what I read, and had to take a second look at where I was reading this from. I really can’t believe that First Tuesday would allow a distorted, inaccurate, artical from a person who’s views appear to be very liberal be included in it’s journal. MID is a tax deduction from money that has been paid by the home owner. It is not money that is being subsidized (Paid) by the goverment. Eliminating this tax deduction would have a negative impact on homeowners and slow down our economy even more. We don’t need to be taxed anymore.
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Subsidy—-How about your Married filing jointly—- Dependent or child tax credit —-or college tuition credits—or why should you deduct that flood or tornado damage cause you—not I, live in that zone –Their I don’t participate in government subsidies has big holes in their buckets.
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The mortgage interest deduction does not benefit the “rich” as much as the middle class. There is a limit on the amount which can be deducted every year. it does benefit people like me(a broker) who have grown up and still live in high housing areas such as the bay area. My current income is about $4,000 a month. The mortgage interest deduction does benefit areas with housing costs above the norm. Income at the present time does not equal the cost of housing here. And what is this thing about the liberals not wanting the mortgage deduction? I’ve been a democrat all of my life and a political activist and don’t know any liberals wanting to get rid of the mortgage deduction…
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It’s simple. Using Dan’s example (#1 above), the interest deduction reduces the cost of the mortgage. The reduction simulates buyers. Thus, it simulates sales. GEEZ!
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