What Crony Capitalism Looks Like
A weekend topic starting with an opinion piece by Peter J. Wallison & Edward J. Pinto at Real Clear Politics. “Two powerful lobbying groups that advertise themselves as helping Americans buy homes have announced that they will oppose the Republican tax plan. Their reason? Because it will lower housing costs. Seldom have any denizens of “the Swamp” shown their true colors quite so flagrantly.”
“For years, the National Association of Realtors and the National Association of Home Builders were strong supporters of Fannie Mae and Freddie Mac, two government-backed mortgage companies, because (they argued) the government subsidies these firms received would create affordable housing for the middle class. That was their stated reason. The real rationale, as they have now made clear, is that Fannie and Freddie’s policies drove up housing prices, thereby increasing their members’ profits.”
“When the Republican tax plan made them choose between helping the middle class to buy homes and reducing their members’ profits, they chose profits. Doubling the standard IRS deduction while reducing or eliminating deductions for state and local taxes would discourage would-be homebuyers from purchasing more expensive homes. Since both the Realtors and the builders earn more from selling bigger homes amid rising prices, they simply oppose any tax plan that does not help inflate housing costs.”
“The same thing is true for the state and local tax deduction, which applies to local property taxes. If this deduction is reduced, homebuyers will not take into account the ’savings’ they would receive from deducting large state and local taxes on a bigger home. This will also reduce their spending on the home, and this too will mean less profit for the Realtors and homebuilders.”
“The Realtors and homebuilders, however, did wonderfully well in the booming market before 2007, profiting from the unprecedented rise in housing prices. They want this market back, and since government housing policies haven’t changed since the financial crisis—the crisis was blamed on the banks rather than housing policies—they are on the way to getting what they want. If you want to know what crony capitalism looks like, this is it.”
“The Realtors and homebuilders are afraid that the GOP tax plan will have the effect of stabilizing housing prices. Although this would be an obvious benefit for young homebuyers trying to purchase their first—or second—homes, it’s wholly undesirable for the builders and real estate agents. All of which raises one central question, which should be in the minds of all Americans—including members of Congress—when they consider the coming tax debate: Whose side are these people on?”
From CNN Money. “President Trump argues the GOP tax overhaul will ‘create tremendous success for companies.’ Yet some of America’s most powerful business alliances are already trying to kill the bill. Toll Brothers, KB Home and other builders tumbled this week because the tax bill would limit key tax breaks that favor homebuyers. Specifically, the legislation calls for capping the mortgage interest deduction at $500,000 instead of $1 million. It would also limit the deduction for state and local property taxes at $10,000.”
“The fear, at least in the housing industry, is that these tax breaks could sap demand for pricey homes, especially in expensive markets. Many of those markets, such as San Francisco and Manhattan, are in high-tax states. That’s a problem because the GOP tax plan would eliminate state income tax deductions altogether.”
“The GOP proposal to cap the mortgage interest deduction is also riling up the vast real estate industry. Echoing the arguments made by the home builders, the National Association of Realtors complained that the plan ‘threatens home values and takes money straight from the pockets of homeowners.’ The concern for realtors is that a slowdown in housing could hurt their income or even employment prospects. The National Association of Home Builders warned the GOP tax plan ’slams the middle class’ by hurting home values.”
The Mercury News in California. “‘It’ll have the worst impact on the Bay Area of any place in the country, because housing prices are so high,’ said Nela Richardson, chief economist for real estate brokerage Redfin. Overall, she said, the tax plan pinches upper-middle class families. ‘There’s no good news for the Bay Area,’ she said.”
“Jeff Bell, realtor and chair of the Silicon Valley Association of Realtors legislative action committee, said the tax plan could make a challenging market even harder for first-time home buyers. The association estimated that the cut in mortgage deductions would cost a Santa Clara County homeowner with an $800,000 mortgage on a $1 million home about $4,800 a year. Existing mortgages are not affected. But Bell said the tax proposal would encourage homeowners to stay put, limiting the number of homes for sale in an already-tight market. That, in turn, could lead to more bidding wars for single-family homes, he said.”
The Union Tribune in California. “While a reduction in tax benefits to homeownership might, on the surface, seem like a reason prices would move lower that might not be the case here, said Steve Thomas of Reports on Housing. He said low housing inventory should continue to create high demand — and high prices — despite any reduction in tax advantage.”
“‘(The tax plan) could strip a little bit of the demand, but we need to see a lot more of it stripped away, and supply to start to rise, before prices to go the other way,’ he said. ‘So, I don’t think it will have an immediate impact. But, it could push things in that direction a little sooner.’”
From Boston Magazine in Massachusetts. “If approved, the rewritten tax code would do big things for big business, moderate amounts for the middle class, and damage to those relying on certain mortgage deductions. That third category, according to the Boston Globe, comprises many of Massachusetts’ wealthy home buyers, who would be negatively affected by the proposed cap to the amount of loan interest and property tax deductions they can leverage.”
“Charlie Nilsen, the national director of residential lending at Boston Private Bank, told the Globe that there’s hardly ‘any good news in this for the housing market in Boston.’”
“Massachusetts’ Democratic lawmakers were swift to condemn the bill, which Republicans aim to rush to President Trump before Christmas. Sen. Elizabeth Warren told PBS News Hour on Thursday that the proposal contains ‘$2 trillion in giveaways to giant corporations.’ She went on to assail the GOP talking point that giving businesses a break brings jobs and higher wages to average Americans, calling it ‘the big lie that the Republicans have been selling now for decades.’”
From Factcheck.org. “For those who do itemize, the proposal allows current homeowners to continue deducting interest paid on mortgages up to $1 million, but caps that amount at $500,000 for any future mortgages. Only around 5 percent of mortgages obtained between 2013 to 2015 were more than $500,000, according to the National Low Income Housing Coalition.”
“However, only those households with total itemized deductions above the proposed standard deduction amounts would benefit from the mortgage interest deduction. And even under the GOP’s old ‘Unified Framework’ plan — which didn’t propose any changes to the mortgage interest deduction — the Tax Policy Center estimated that only about 4 percent of all households would continue to find it more beneficial to itemize and claim the deduction. That’s down from about 21 percent who write off mortgage debt under current law, the TPC says.”
From the Washington Post. “Of the many changes to the U.S. tax code proposed in House Republicans’ plan released this week, few are proving to be as contentious as the cut to the mortgage interest deduction (MID). But the rhetoric about ‘middle-class families’ is largely at odds with the reality of who actually owns half-million dollar homes in the U.S.”
“Nationwide, only about 6 percent of new mortgages are valued at over $500,000, according to a report by the United for Homes campaign, a group that advocates for reforming the MID and making housing more affordable for low-income families. That figure is based on an analysis of mortgages issued in the United States between 2013 and 2015. If your mortgage is over $500,000, in other words, you’re already in the top tier of American homeowners.”
“But the fraction of households affected by the proposed MID change is significantly smaller than the 6 percent figure would seem to suggest. Nationwide, approximately 63.9 percent of families own their own homes according to the latest census data. And data from the Census and independent research firms indicate that about 65 percent of homeowners currently owe at least some money on their mortgages.”
“So in a very back-of-the-envelope fashion, we can say the following: roughly 42 percent of American families (or 65 percent of the 63.9 percent who are homeowners) are currently paying off a mortgage. If 6 percent of them have a mortgage over $500,000, that means that approximately 2.5 percent of Americans are currently paying mortgages on homes valued at $500,000 or more.”
“If half-million dollar homes account for a small portion of the mortgage market, in other words, they affect an even smaller share of the total U.S. population. And that share of the population is likely to be fairly well-off: if you can afford a down payment and monthly payments on an $600,000 house, for instance, you’re not exactly struggling financially.”
“‘There is no policy rationale for the federal government to continue to subsidize mortgages of more than $500,000,’ said the National Low-Income Housing Coalition in a 2015 report. ‘Certainly the few people who can afford to borrow more than $500,000 in home mortgages can afford to pay more in taxes.’”
“Further compounding the issue, the mortgage interest deduction is one of the reasons why home prices across the country are so expensive to begin with. A working paper published earlier this year by economists at MIT, Princeton and the University of Copenhagen concluded that mortgage interest deduction induces homeowners to ‘buy larger and more expensive houses.’”
“That paper also found that the MID has ‘a precisely estimated zero effect’ on the rate of homeownership — people who can afford to buy a house will do so regardless of whether or not a mortgage interest deduction is in place. It’s hard to square those findings and the overall modest impacts of the GOP proposal’s mortgage interest change with the apocalyptic rhetoric coming from its opponents.”
Good morning, I’ll be getting on a plane for Texas in a few hours and will be there for a week on business. Posting and moderation at this blog will be delayed.
What percentage of shacks r over $525,000?
It’s in the post. Broken out even.
Do you know if that $500K is per house, or total for a household?
If it’s total for a household, the price of vacation homes is going to crater like mad. It’s not difficult to reach $500K if you buy a $300K house in the DC area and vacation in a $200K beach house in Bethany (DE).
My understanding is that the $500k is capped per household.
From Bloomberg yesterday:
“The issue for some lawmakers from Southern states, where the cost of living is lower, may be the proposed elimination of the deduction for vacation homes. Mark Meadows, the head of the conservative Freedom Caucus, said that the change would affect his North Carolina district where such second homes are common. He listed that portion of the bill as a concern, but not a “red line” that would cause him to vote against it.”
That would be a great benefit to the California economy, where investors and vacation home owners have crowded the labor force out of the housing market.
How?
I had no idea that so many vacation homes in California are located where the jobs are.
If I understand this correctly, those who already declare housing deductions will be allowed to keep doing so.
Hoe exactly does this make housing more affordable to newcomers and future generations?
Sounds more like exclusivity to me - keep the undesirables out by institutionalizing that which makes everything local unaffordable to the plebs, immigrants and illegals.
The housing deduction should be gotten rid of both entirely and nationwide. Immediately, and for everybody. Old, young, owners and renters.
Making those who cannot afford to buy or rent a domicile pay for yours via MID is highly unethical. It’s vile. Repugnant.
Naturally, those already behaving unethically will be allowed to continue to do so. They are more than okay screwing future generations.
Especially if it allows them to drive a Tesla.
MacBeth, while it would be nice to get rid of MID entirely, no member of Congress would risk making that retroactive. Just stopping it for new purchases is bad enough.
And of course, plenty of second homes are near where the jobs are. Look at all the airboxes used to park money, foreign or American. Or all those investors buying houses and condos to list them on AirBNB. These are in major cities near jobs because that’s where you can park the most money or get the highest AirBNB$/night. In fact it surprises me that these second homes are eligible for MID at all. Second homes are a clearer sign of wealth than a $500K house.
“pay for yours via MID…”
Not too long ago all interest paid was deductible. It is a subsidy of immorality.
I’m glad you post here, Sky.
A couple of years ago, I was looking for a place to stay in Silicon Valley, and looking through the Airbnb listings, a found a few townhomes for rent that were all owned by the same guy. He had a mini short-term rental empire going in San Jose/Santa Clara. Considering the appreciation and the rental income since then, he’s made out like a bandit.
Great op-ed in NYT on CA housing and fires. Loved this comment:
“One way to think about it is that the enormous increase in wealth generated by the tech boom is largely captured by homeowners in the urban core who bought before the boom.”
“MacBeth, while it would be nice to get rid of MID entirely, no member of Congress would risk making that retroactive. Just stopping it for new purchases is bad enough.”
Of course not. They lack the moral fortitude. What a cesspool of corruption, moral failure, unbridled greed. Disgusting lot of individuals.
Better just to screw those who have no say so…namely future generations. Those that don’t already have theirs.
With no cares what-so-ever. Whistling past the graveyard.
How anyone can support that kind of evil must be evil themselves. There is no excuse for it.
Washington DC should dismantled, and the Capitol moved to Kansas. Literally.
“…while it would be nice to get rid of MID entirely, no member of Congress would risk making that retroactive. Just stopping it for new purchases is bad enough.”
Not getting rid of it entirely is a joke. It’s like Proposition 13 in CA, picking winners and losers. Why should one person benefit from the mortgage interest deduction, but not another (or in the case of Prop 13, two same priced houses have vastly different taxes)? I have no idea what goes through these politicians’ minds, but it’s not steeped in reality.
“Of course not. They lack the moral fortitude. What a cesspool of corruption, moral failure, unbridled greed. Disgusting lot of individuals.
Better just to screw those who have no say so…namely future generations. Those that don’t already have theirs.”
Exactly. They’re essentially saying “don’t worry Boomers, you can continue taking your MID, but we’re going to soak those Millennials until there’s no tomorrow.”
I”m all for the elimination of the MID, PERIOD. To take it away only on future purchases but allow all those people who currently use it to continue to get that benefit is rotten to the core. Who in the fawk comes up with this stuff?
The people who really get screwed in the high cost states are renters, whose rent implicitly helps with the landlord’s taxes, though the renters don’t enjoy the MID or state and local property tax deductions on expensive properties.
Where can you get a 300k house in DC?
Nowhere inside the city limits, unless you want to dodge bullets in deep Northeast or Southeast. Check the leafy suburbs, especially in PG county.
Or, you could buy a $400K house with $100K down and have a $300K mortgage. But really, I was just using the round numbers to show how easy a household could have a half-million in housing debt.
Baltimore?
Baltimor
egue?“The median home value in Baltimore is $123,000. Baltimore home values have gone up 4.3% over the past year and Zillow predicts they will rise 3.1% within the next year. The median list price per square foot in Baltimore is $125, which is lower than the Baltimore Metro average of $179.”
Why don’t priced out families in DC move to Baltimore?
Why don’t priced out families in DC move to Baltimore?
Maybe they don’t want to be murdered?
I’ve lived in high crime areas at points in my life. You definitely need to watch your back, and not get unlucky by finding yourself in the wrong place at the wrong time.
That said, the housing cost savings can be huge.
You definitely need to watch your back, and not get unlucky by finding yourself in the wrong place at the wrong time.
In 2004 I was working on my car in the driveway & heard a gun battle between a newly-minted double murderer and two cops, just 2 blocks away. Of course I thought it was fire crackers, until all the cop cars in town came down the street. In 2014 I met the father of one of the victims, in an aisle at the Home Depot. We got to talking….
“In 2004 I was working on my car in the driveway & heard a gun battle between a newly-minted double murderer and two cops, just 2 blocks away.”
You are bringing back unfond memories of our former existence in Richmond, CA:
- The sound of gunshots in the street outside while we were putting our kids to bed;
- Reading the news of a murder at the nearby community college, where I later taught maths, located a mile down the hill from our place;
- Reading about a car jacking where the car owner and driver was slain at an intersection a few miles away from home.
Since relocating to a much lower crime area of San Diego than where we used to live in the Bay Area, Chelsea King was murdered a couple of miles away while my daughter was a high school student in the same district. And more recently, a guy who lived a couple of streets over gunned down his wife in front of a marriage counselor’s office; I guess the counseling wasn’t working.
It’s a somewhat unsafe world out there…
Why don’t priced out families in DC move to Baltimore?
During the housing boom, many did. There were advertisements on the Metro subway telling folks to live in Baltimore.
But Baltimore has a LOT of crime, a very long commute, and crappy schools. Areas with a tolerable commute and better schools have already been discovered as being good, and so of course they are priced accordingly.
The commute is 35-40 miles, all through populated areas, and with bumper-bumper traffic on the two major roads.
Good catch ,what will happen to hiv.tv
‘(The tax plan) could strip a little bit of the demand, but we need to see a lot more of it stripped away’
This doesn’t even apply to existing loan owners. But listen to the wailing.
‘Massachusetts’ Democratic lawmakers were swift to condemn the bill…Sen. Elizabeth Warren’
Yeah, gotta keep those poor people in Boston happy, right Running Deer?
So, the cut in deductions doesn’t even apply to current loan owners. Just future loan owners.
So who gets shafted in this? Certainly not those that have made a killing of housing already. All they have to do is stay put.
What’s all the fuss?
gotta keep those poor people in Boston happy, right Running Deer?
In the language of her indigenous ancestors, her name is “Fauxcahontas”
my house went over in value this week.
Now may be the time to draw out some equity while you still have some.
‘Republican tax plan a blow to Democratic states, officials say’
From the comments:
‘There is no reason on Earth that the low-tax (read: responsible) states should pay to cover the federal deductions which the high-tax states have enjoyed for so many years at the expense of the responsible states. If you want high taxes, pay for them yourselves.’
‘Battle of about six states, fix it at the local and state level and stop whining.’
From the intertubes:
‘You can deduct state and local income taxes at tax time or sales taxes that you paid during the year, but you can’t claim both – you have to choose. The sales tax deduction works best for people who live in states with no income tax, or whose sales tax deduction is larger than their state income tax deduction would be.’
So I can save all my grocery receipts and the like all year, add the taxes up and deduct it if I live in a non-income tax state. I wonder how many do that? 1%, less? Do you hear any whining about the injustice of that?
Let Them Eat Cake is the expression, is it not?
Now that wealthy blue state liberals are being confronted with the possibility that they will find it more difficult to have others from other states pay their state and local taxes for them via Federal tax writeoffs, they are all upset.
Typical.
Tough sh*t. You vote for it, you pay for it.
I’m in a deep blue state that has what can only be described as an “inmates running the asylum” fiscal situation. Its time these places no longer sponge off the prudent and get the beating they deserve so that some adults might get elected for once.
And does anyone remember when all the Trump Derangement Victims bleated about how real estate was going to rocket to the moon with all kinds of special treatment because we elected a developer to be president?
Pepperidge farms remembers, kek.
Many wealthy people in/from blue states behave like Children.
Hedonistic, Pious and Entitled.
Just recently, we had a comment here by someone who maligned government employees in the Rust Belt as being leeches - and this very same person is a government employee in Seattle!
Unbelievable.
Actually, I take that back. It is entirely believable, if one believes (as I do) that Big Government is a sinking ship, with those on that ship more than willing to eat their own.
“Pepperidge farms remembers, kek.”
You must post at R/The Donald. I did, too, until they booted me for dissenting on Pence.
Praise kek, though.
MacBeth, FWIW, the government employee in Seattle may be a Federal employee who was ragging on state and local employees. There is a world of difference between Federal and State employees.
FYI, the Feds switched to a new, less generous retirement system in the mid 1980s. The last of those old employees are retiring now. Under the new plan which is almost all current Feds, a fed gets 1%*years*high 3, no spiking. So a 25-year Fed at $100K gets $25K pension, starting age 62, not before. Plus they get TSP which is just a 410K with company match up to 5%. And Social Security. Nice, yes, but it’s nothing like the egregious state employees.
A leech by any other name is still a leech.
If the day comes when government generates profit - wealth - let me know. Until then, it’s all excuses.
Government does not generate wealth. It generates protection, health, prevention, laws, and especially enforcement. I guess most importantly, all that protection
generates an environment where capitalism can go about the business of creating and selling goods and services,for a profit. Yes, the products are all intangibles, so there is no good metric to measure it.
But we do have a metric by knowing what happens when you take government away (entirely). Then you get — at its most extreme — Somalia or Sudan or Venezuela. Then suddenly, refugees are risking death to migrate to that evil western government.
Government is doing a piss-poor job of generating “protection”, “health”, “laws” and “enforcement”.
The quantity and severity of seemingly never-ending lies being spun by the US government these days and fed to the people could likely be unparalleled.
I am very unimpressed with “government”.
It is proactively producing a very punitive, Big Brother environment in which capitalism must fight to exist.
We do not live in anything close to a capitalistic society.
Everyone is bought and paid for. Influence peddlers appear to get whatever they want. Lobbyists deliberately throw sand in gears of all type; politicians look the other way in exchange for cash and votes.
Sorry, oxide. You are not doing your job.
You are not making capitalism easier or more profitable.
You are not creating an loss-reward system that promotes morals and ethics in business or in society.
You are doing the opposite, with each and every new law or regulation. Laws and regulations that the populace is supposed to obey, but not anyone in government.
Wow, you’re on a tear today.
Take a look at Doughnut Economics https://www.kateraworth.com/doughnut/
“………Let Them Eat Cake is the expression, is it not?….”
LOL. The last person to say that was put to death by a guillotine. The peasants were starving with no bread and Marie Antionette, when told of the starving masses said “…then let them eat cake!”
The queen of France had clearly list her head, then literally lost her head. Do not lose yours MacBeth in the missed context of your quote.
It is calculated automatically on your taxes if you use tax software or a competent tax preparer. A formula from the IRS looks at income and # of people and gives a sales tax amount, no receipts required. Of course, one can save receipts and add them up also.
‘Deductions are the Cheez Doodles of tax policy: Everyone likes them; everyone who studies the matter knows they are not good for us; and nonetheless, most people will get very indignant if you attempt to replace them with something more wholesome.’
‘For example, virtually every wonk in Washington, from radical libertarian to fervent socialist, can agree upon at least one thing: the tax deductibility of employer-sponsored health insurance is a terrible idea. And yet, when it comes time to, say, pass a major health-care reform, or reform the tax code, do our nation’s legislators start with the obvious, and get rid of this egregiously stupid deduction?’
‘Of course they don’t touch it. The very egregiousness of its immense costs, the massive distortions it has induced in American consumption patterns, mean that getting rid of it would be far too disruptive.’
‘But those Cheez Doodles sure are tasty, aren’t they? The Clinton administration couldn’t resist sneaking out for a bag or two, and passing them out liberally. The Bush administration had no interest in pulling the bowl away just when the party was getting going again … and here we are, 30 years later, with a tax code once again grown fat with ugly, distortionary tax breaks.’
‘So give Republicans this much credit: they have gone after some deductions that are, if not quite as stupid as the health insurance boondoggle, nonetheless quite silly.’
‘The proposed bill caps the tax deduction for mortgage interest, which does not benefit the economy, does cost the government a lot of money (which again, must be raised some other way, such as through higher marginal tax rates), and pushes up the price of housing, particularly in more affluent areas.’
‘Republicans have also gone after the deduction for state and local taxes. As with the home-mortgage interest provision, they are not getting rid of it entirely. They limit it to property taxes, and cap it at $10,000.’
‘Now, this will be bad for me personally, as a resident of a high-tax locale. I am wincing as I contemplate what this will do to my bank account come April 15. Nonetheless, it’s the right thing to do, and the only problem with the proposal is that it does not go far enough; if I had my druthers, we’d get rid of it entirely. It is effectively a transfer from low-tax states to high-tax ones. And given that the high-tax states tend to be richer than the low-tax ones, it is morally as well as economically indefensible.’
‘So why am I not smiling? Well, there is the aforementioned budget problem of paying for all this reforming. But there is also the political problem of doing so. It is hard not to notice that this bill is designed to spread benefits among Trump supporters, particularly the Republican donor class, while laying most of the costs on a single group of people: six-figure professionals living in blue states, a group known as the HENRYs (High Earning, Not Rich Yet).’
‘One can make a principled justification for levying high taxes on the rich, who can most easily spare the money. One can make a principled justification for taxing everyone equally, share and share alike. But what is the principle by which almost all of the pain of this tax bill should be borne by affluent, but not rich, people who happen to live on the coasts? Other than “we don’t like them.”
I don’t know, maybe your 30 or 50 years at the trough at everyone elses expense is over?
‘Deductions are the Cheez Doodles of tax policy:”
Ahem…… Hey Donk..
Here you go sweetheart:
http://www.taquitos.net/im/sn/CheezDoodles-HotHoney.jpg
LOL….you should not get HA all hot and bothered like that…..
So I’m confused. Are they capping state and local income taxes, or state and local property taxes, or both? $10K in property taxes is a pretty hefty house except for NYC and CA. (Upstate NY house prices are already low because of the high taxes.)
Donk… Upstate NY housing is no less overpriced than anywhere else. Inflated 2x over construction cost to be exact.
Malta, NY Housing Prices Crater 11% YOY
https://www.zillow.com/malta-ny/home-values/
Agreed. $10K is nothing. Cap should be $1.
Irresponsible, selfish people vote for projects/welfare that create massive state taxes.
You vote for it, you pay for it. Pretty simple concept.
Don’t expect others to pay for your recklessness and hedonism.
“Don’t expect others to pay for your recklessness and hedonism.”
Bahahahaha … how else am I supposed to enjoy such an easy life?
Clone ‘em & bone ‘em. Bahahahahahahahaha.
Banker,
I often appreciate your considered observations on the rare occasions that you share them.
More of that and less of this, please.
You seem to have a serious beef with the banking industry. What did they do to you personally? Do tell. I’m always up for learning from others who’ve been there.
“I often appreciate your considered observations on the rare occasions that you share them.”
I suggest you seek immediate medical attention.
“More of that and less of this, please.”
Lol. Be careful of what you wish for.
“You seem to have a serious beef with the banking industry.”
Wrong.
“What did they do to you personally?”
They supplied me with lots of entertainment for one thing; The banks along with their totally dumbed-down customers.
ZZZzzzzz……
The current proposal is to cap state and local property taxes at $10k. This was the compromise that Brady put in after Republican congressmen from blue districts (e.g., NY and NJ) said they wouldn’t support the plan. Other state and local taxes are not deductible, only the $10k cap on property taxes.
Thank you for the added detail.
The state deduction cap for property taxes should be $1. Not $10K.
Why $1? As a reminder to those who screwed their countrymen for decades that they in fact did exactly that.
Making others pay for your largesse and for your wheeling and dealing is highly unethical.
Time for a massive correction.
“Making others pay for your largesse and for your wheeling and dealing is highly unethical.”
😁
“……..Making others pay for your largesse and for your wheeling and dealing is highly unethical………..”
Pretty funny comment since the high income states routinely subsidize the fly over states with federal tax dollars.
Here is a summary:
[W]ho really benefits from government spending? If you listen to Rush Limbaugh, you might think it was those blue states, packed with damn hippie socialist liberals, sipping their lattes and providing free abortions for bored, horny teenagers. …
As it turns out, it is red states that are overwhelmingly the Welfare Queen States. Yes, that’s right. Red States—the ones governed by folks who think government is too big and spending needs to be cut—are a net drain on the economy, taking in more federal spending than they pay out in federal taxes. They talk a good game, but stick Blue States with the bill.
We pay nearly that amount in North Texas for an average single family home. 2000 sq ft, nothing fancier than granite countertops.
People who own their home often doubled up two years of property tax (paying January and December) to itemize every other year. They also usually double up charity giving too.
That’s because Texas doesn’t have any state income tax. You property taxes sort of include state income tax.
Which brings up another topic, what happens to states with high property taxes because there is no state income tax? Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Does this mean that capping the SALT tax is gypping those residents out of deducting “state income” taxes because their MID is limited?
Those states you listed, with the exception of perhaps Texas, don’t have high property taxes. What are you talking about?
“Well, there is the aforementioned budget problem of paying for all this reforming.”
This is a very easily addressed problem. Slash the hell out of ObamaCare and reduce the size of government.
Presto! Problem solved.
Leave people to die in the streets……no problem. Well, maybe a problem, just not MacBeth’s problem!
“.. people dying in the streets”
Not difficult to detect your political leaning with this completely unfounded Democrat talking point.
“while laying most of the costs on a single group of people: six-figure professionals living in blue states, a group known as the HENRYs (High Earning, Not Rich Yet).’
Which is who should be bearing the cost, as they are the very people voting in favor of largesse.
>They vote for it every time the write off their state taxes.
>They vote for it every time they use OPM via The Fed to buy real estate.
>They vote for it every time they support the purchase of vehicles and energy that wouldn’t exist but for the US taxpayer.
>They vote for it every time they decide to become equity locusts, and ruin the economics of other cities and towns. ($300,000 for a house is SOOOO cheap! No it isn’t, not to the local populations, you A-Holes).
You vote for it, YOU pay for it.
six-figure professionals living in blue states
I suppose I’m one of these, though…
> I live in a state with no state income taxes, and don’t believe I’ve ever written off sales taxes, even the year I bought a new car
> I don’t own real-estate, and haven’t in 10 years
> I don’t own an electric or hybrid car - I drive a diesel that gets almost the same gas mileage instead (I also don’t drive a ton….20k miles in the past 3.5 years based on my car’s odometer)
> Not an equity locust (I moved from a low-cost city to a much higher-cost one 10 years ago. Don’t own here, so no equity to ‘locust’ with sadly)
> Vote against pretty much every bond issue, tax increase, at all levels of government in which I have a voice.
I do agree — you vote for it, you pay for it. Just be careful with your generalizations — not all of us well-paid professionals in blue cities/states agree with the politics and vote for wealth re-distribution and pushing our financial problems on future generations
I think the worm’s turning around here. Lots of people are getting pissed off with the the excessive tax and spending, car tabs debacle, safe injection sites and general debauchery, child molesting mayor, and the list goes on…
Car tabs debacle? What is that?
(by the way I don’t object to safe injection sites, but I guess that’s another topic)
Car tabs debacle? What is that?
King County car tabs went up some ridiculous amount this past year….3x or so? to fund a light rail project that will benefit a small % of those being taxed…
You don’t seem to be listening, so I’ll say it again for you MacBeth:
[W]ho really benefits from government spending? If you listen to Rush Limbaugh, you might think it was those blue states, packed with damn hippie socialist liberals, sipping their lattes and providing free abortions for bored, horny teenagers. …
As it turns out, it is red states that are overwhelmingly the Welfare Queen States. Yes, that’s right. Red States—the ones governed by folks who think government is too big and spending needs to be cut—are a net drain on the economy, taking in more federal spending than they pay out in federal taxes. They talk a good game, but stick Blue States with the bill.
“……You vote for it, YOU pay for it….”
Again, check your facts. The fly over states are hugely subsidized with federal tax dollars from the higher income blue states you “claim” to subsidize….
You live there……..you pay for it yourself.
This is true. Most red states are the welfare queens.
Are you sure?
“California Poverty Rate Remains Nation’s Highest”
http://www.sacbee.com/news/politics-government/capitol-alert/article172973181.html
Yes, on an individual level, CA has highest poverty rate (by individual). But at a state level, CA contributes more of its resources to the federal purse, and that gets parceled out to other red states.
Here is a pretty good attempt to show how dependent each state is on the federal government:
https://wallethub.com/edu/states-most-least-dependent-on-the-federal-government/2700/#methodology
“But at a state level, CA contributes more of its resources to the federal purse, and that gets parceled out to other red states.”
first, government doesn’t have ‘resources’, it has taxpayers.
second, there’s no mystery why CA has more revenue to ‘contribute’. they simply have a higher number of rich people to squeeze (until they decide to pack up and leave for places like texas).
“Here is a pretty good attempt to show how dependent each state is on the federal government:”
and what is the federal government dependent on?
This is semantics. If you are going to be nit-picky, then simply rephrase it to say that more of CA’s taxpayers go to benefiting other taxpayers in other states.
If CA and other donor states’ taxpayers weren’t net transferring their taxes to the poorer residents of Mississippi and New Mexico via federal contract, benefits, or government jobs, they would have more for themselves, or their taxpayers. Perhaps CA wouldn’t have so much poverty if their taxes weren’t being redistributed to Kentucky, Alabama, and West Virginia.
As an aside, I am not a CA resident. I am from a very red state, Utah, that happens to be in the top ten of least dependent state, depending on which measurement you use. The whole point of my post was to get people to think critically. It’s very simplistic to simply bash CA (and there are lots of things that CA does that is terribly wrong), but it’s just not factual to say they are a welfare queen state.
“This is semantics. If you are going to be nit-picky, then simply rephrase it to say that more of CA’s taxpayers go to benefiting other taxpayers in other states.”
more in numbers but less as a percentage. overall, california is poor.
“Perhaps CA wouldn’t have so much poverty if their taxes weren’t being redistributed to Kentucky, Alabama, and West Virginia.”
wouldn’t make much of a difference since it’s socialist policies that make societies poor.
“It’s very simplistic to simply bash CA (and there are lots of things that CA does that is terribly wrong), but it’s just not factual to say they are a welfare queen state.”
it’s very factual.
and you didn’t answer my question. what is the federal government dependent on?
The federal government is dependent on taxpayers.
I really am not sure you are following the argument. Please read the post I made and make sure you understand it completely.
California, as a state, is by far the wealthiest state in the union. It’s GDP is 14% of the entire country, or about 1/7th the entire nation. The main point is that Californians’ taxes go largely to other states poorer residents in the form of federal benefits. They give more than they get. If it weren’t for California (and other donor states), many of the red states would be much poorer.
“The federal government is dependent on taxpayers.”
bravo! see, that wasn’t so hard was it? then all government is dependent on taxpayers, isn’t it? and rather than see that, you’d like to pit taxpayers from one area on taxpayers from another. you don’t seem to care that ALL taxpayers are getting soaked. you just want more ‘equality’. you’re more interested in making excuses for government or distracting from how unjust it is.
“I really am not sure you are following the argument. Please read the post I made and make sure you understand it completely.”
your argument is basically a shell game.
“California, as a state, is by far the wealthiest state in the union. It’s GDP is 14% of the entire country, or about 1/7th the entire nation.”
who are you trying to kid? that’s like saying a former billionaire who got robbed of all his money is a very rich man. it doesn’t matter how much california HAD before the government got done with them, it only matters how much they have left after.
“The main point is that Californians’ taxes go largely to other states poorer residents in the form of federal benefits.”
oh right, the government is only taking a teeny weeny cut for itself and doling out all the rest. kind of like the ‘united way’. you really believe that that’s what’s really going on?
“They give more than they get.”
it’s the progressive way. they need to pay their ‘fair share’ since they are so rich. incidentally, nobody is ‘giving’ anything here. money is being ‘taken’ not ‘given’. give us the percentages of what’s doled out against the total taxes taken in. i bet you don’t want to do that since it would show that you’re making mountains out of microscopic molehills. again, this is nothing but a distraction. a cover for what government is really doing.
“If it weren’t for California (and other donor states), many of the red states would be much poorer.”
ah yes, those generous blue states. the ones where people are leaving in droves because of suffocating taxation.
why don’t you show us the actual numbers instead of talking in platitudes? wallethub.com uses nothing but ‘weighted numbers’. do you know why they do that? because the actual number disparities would look ridiculously small in the big picture. they want to make the numbers look significant so they have to weight them in order to make them stand out. and of course all the do-gooders lap it right up. and then presto, they have a worthless, insignificant, distracting talking point.
California is actually the poorest state in the US.
“California Is America’s Poorest State”
http://www.laweekly.com/news/california-is-americas-poorest-state-4177082
You’d like to pit taxpayers from one area on taxpayers from another.
That is not what I’m advocating, but that is what is happening right now as a matter of fact. Taxpayers from CA are getting a bad deal because they are paying more in taxes relative to the benefits they are receiving. Think of it like this: say you have three states, state A, state B, and state C. Each contribute different amounts of taxes to the federal government: state A contributes $1000, state B contributes $100, and state C contributes $50. But in terms of benefits, state A might get $700, state B gets $200, and state C gets $150. This is very simplistic, but this is what is happening with CA on a macro level. State A is a donor state, and state B and C are subsidized states.
you don’t seem to care that ALL taxpayers are getting soaked. you just want more ‘equality’.
And yes, I would like more equality, but not like you’re thinking. I would like equality in that each state received federal benefits exactly equal to the amount of taxes they contribute. That way, you wouldn’t have all these donor states and subsidized states to begin with. In other words, if CA contributes 13% of all federal taxes, they should get %13 of of federal benefits, in whatever form they come in. They should not get %15, or 9%, but exactly equal to what they get. No more wildly disparities between what a state receives and what it gives in taxes is what I am advocating.
Give us the percentages of what’s doled out against the total taxes taken in.
The methodology of the WalletHub is listed. The WalletHub uses a weighted methodology because there are 3 different form of federal benefits that they are trying to incorporate into one overall ranking. But you can look at each individual ranking by itself in the chart. The three criteria used are:
1) Each state’s share of federal employees
2) How much of a state’s funding comes from federal tax revenues (e.g. intergovernmental aid)
3) The ratio of federal tax dollars each state gets relative to the amount its taxpayers send to the IRS
All the data sources are cited at the end:
But you could look at simpler analysis, such as % of a state’s residents on food stamps (the 9 of the top 10 are Red states), or any other metric you like.
Here are some more sources:
Data used to create this ranking were collected from the Internal Revenue Service, U.S. Census Bureau, USAspending.gov, Bureau of Labor Statistics and Governing.com.
Which states rely most on Federal aid?
https://taxfoundation.org/states-rely-most-federal-aid/
Which states are givers and takers?
https://www.theatlantic.com/business/archive/2014/05/which-states-are-givers-and-which-are-takers/361668/
The bottom line from Business Insider:
[W]ho really benefits from government spending? If you listen to Rush Limbaugh, you might think it was those blue states, packed with damn hippie socialist liberals, sipping their lattes and providing free abortions for bored, horny teenagers. …
As it turns out, it is red states that are overwhelmingly the Welfare Queen States. Yes, that’s right. Red States—the ones governed by folks who think government is too big and spending needs to be cut—are a net drain on the economy, taking in more federal spending than they pay out in federal taxes. They talk a good game, but stick Blue States with the bill.
This probably doesn’t fit your worldview, but it is nevertheless accurate. One reason why red states often have lower tax rates is because so much of their state tax budget comes from the federal intergovermental transfers. In other words, they are getting subsidized/bailed-out/etc by other taxpayers around the country (e.g. donor states).
Yes, CA has the largest share of the most wealthy and the poorest:
In a new report on wealth in America, wealth intelligence firm Wealth-X revealed that California has more super-wealthy residents than New York.
California now has 13,445 people who are worth more than $30 million, while New York has only 9,530. Texas (6,475) and Florida (4,650) followed in third and fourth place.
http://www.businessinsider.com/us-states-with-the-wealthiest-residents-2015-3
The LA Weekly article cites the poorest state using US Census Bureau’s “supplemental poverty measure”:
The federal government hasn’t adopted the supplemental way of doing things … yet. This week’s report takes into account a little thing we like to call reality.
In other words, this alternative way of crunching the numbers takes into account the cost of living, including our astronomical rents and housing prices, taxes, and benefits.
In other words, CA has a huge swath of poor residents, but because the governments poverty calculations don’t use the supplemental poverty measures, it dramatically underestimates the actual poverty. It also means that CA residents get far less assistance in federal programs.
No more wildly disparities between what a state receives and what it gives in taxes is what I am advocating.
That can only work if you (in the form of the Federal Govt) are willing to stop trying to control and force what other states spend their money on. The red states that receive more than they give are capable of living on much less if allowed to control their own budget.
“Taxpayers from CA are getting a bad deal because they are paying more in taxes relative to the benefits they are receiving.”
show the unweighted, unmassaged numbers that you’re crying about.
“I would like equality in that each state received federal benefits exactly equal to the amount of taxes they contribute.”
wouldn’t make much difference. but even if it did, why have the federal government in the equation at all? after all, if all doles were exactly proportional to collections, why the need for the collections? oh yeah… that’s so the leftists can cry about the unfairness of it all.
“But you can look at each individual ranking by itself in the chart. ”
i saw the chart. what i didn’t see were the real numbers.
===
the below comment is a beaut.
“Yes, that’s right. Red States—the ones governed by folks who think government is too big and spending needs to be cut—are a net drain on the economy, taking in more federal spending than they pay out in federal taxes.”
it proves beyond doubt the writer is an economic illiterate.
Show the unweighted, unmassaged numbers that you’re crying about.
Not crying about it, just pointing out the facts. Here is some more data:
https://taxfoundation.org/press-release/federal-taxing-and-spending-benefit-some-states-leave-others-paying-bill-1/
During fiscal 2005, taxpayers in New Mexico benefited the most from the give-and-take with Uncle Sam, receiving $2.03 in federal outlays for every $1.00 the state’s taxpayers sent to Washington. This first-place finish is nothing new in New Mexico which has perched atop this list for many years. Other big winners in 2005 were Mississippi ($2.02), Alaska ($1.84), Louisiana ($1.78), and West Virginia ($1.76).
2005’s biggest loser was New Jersey, which received 61 cents in outlays per tax dollar. Other low ranking states included Nevada (65 cents), Connecticut (69 cents), New Hampshire (71 cents), and Minnesota (72 cents). California was 43rd to the bottom on this list at 78 cents.
You might look at this too:
http://www.politifact.com/california/article/2017/feb/14/does-california-give-more-it-gets-dc/
[CA] receives $0.99 in federal expenditures per dollar of taxes paid, which is below the national average return for states of $1.22 per dollar paid, according to its review of a 2015 New York Comptroller study.
“You look at other states and they are getting quite a bit more of a return. They are getting $1.10 or $1.20 per dollar,” Boilard added. “We really don’t send out that much more than we bring back. But we get back a lot less than most states.”
Mississippi had the highest ratio, receiving $2.57 in federal spending per dollar of taxes paid. New Jersey had the lowest, receiving just $0.77 per dollar.
If you want further evidence that it is red states on the dole, look at the highest rates of disability:
https://www.ssa.gov/policy/docs/statcomps/di_asr/2011/sect01.html
The states with the highest rates of disabled beneficiaries—7 percent or more—were Alabama, Arkansas, Kentucky, Maine, Mississippi, and West Virginia.
That can only work if you (in the form of the Federal Govt) are willing to stop trying to control and force what other states spend their money on. The red states that receive more than they give are capable of living on much less if allowed to control their own budget.
To an extent. The elephant in the room is medicare and medicaid spending, which is shared by both state and federal government. Those entitlements are huge portions of state spending. The solution to this is to block grant medicare and medicaid. I’d be fine with this. Indeed, this is what most republicans want to have anyway. Incidentally, this is kind of the thorn behind the states who didn’t expand medicare under the ACA. They were philosophically opposed to expanding the entitlement, even though their states’ poor would have benefited.
“Here is some more data:”
still no actual numbers.
Here is the raw data for gross tax calculation by state:
https://www.irs.gov/statistics/soi-tax-stats-gross-collections-by-type-of-tax-and-state-irs-data-book-table-5
Here is the raw data for tax refund by state:
https://www.irs.gov/statistics/soi-tax-stats-amount-of-refunds-issued-including-interest-by-state-irs-data-book-table-8
Here is the raw data for total federal spending by state:
http://www.pewtrusts.org/~/media/assets/2016/03/federal_spending_in_the_states_20052014.pdf
Let’s do one example. We’ll look at Mississippi, arguably the biggest “taker” state, and compare it with California, not the biggest donor state, but one of the biggest.
1) Federal Taxes Paid
California: $406 billion in federal taxes paid - $44 billion federal tax refunds = $362 billion net federal taxes paid
Mississippi: $11 billion in federal taxes paid - $3 billion federal tax refunds = $8 billion net federal taxes paid
2) Federal Benefits Received
California: $356 billion in total federal benefits
Mississippi: $34 billion in total federal benefits
3) Federal Benefits Per Tax Dollar Paid
California: $356B/$365B = .98
Mississippi: $34B/$8B = 4.25
This means that for every $1 in federal taxes that Californians pay, they get 98 cents back in benefits. But for Mississippians, they get $4.25 back in benefits for every $1 they pay in taxes. You can run the calculations in a spreadsheet for yourself and see the same thing. It comes to the same conclusion as that of WalletHub: blue states are less dependent on the federal government than red states. Anyone who is intellectually honest and familiar with the data will reach this conclusion.
thanks. i sincerely appreciate the effort you put into that. but it still doesn’t mean that i agree with you.
i asked you before, but you didn’t answer. why do you want the federal government involved when you say you want each state to get back proportionately what gets taken away? if that’s what you want, why have the feds involved at all? why not just have the states keep their own taxpayer’s dollars?
you can probably tell that i’m against the feds interfering with anything. no matter how much they collect, they always spend more, never less. they severely damage the economy with overtaxing and overspending.
anyway, thanks again for the work you put into that answer. it was more than i expected.
anyway, thanks again for the work you put into that answer. it was more than i expected.
Not a problem. It was actually good for me to do the math behind the calculations, keeps me sharp. I used to be in data analytics before I changed careers (now I’m an RN), so I don’t do that stuff as often as I used to!
why do you want the federal government involved when you say you want each state to get back proportionately what gets taken away?
While I do think there are some functions best left to the states, I think the federal government has a useful and necessary role to play, as outlined by the constitution. The debate between states rights vs. federal rights is an ongoing debate and has been throughout our entire history of a nation. In my view, there are certain functions that belong appropriately at the federal level, such as national security and defense, interstate commerce, roads, post office, law and justice, taxation, and other federal programs passed by law at the legislative level.
My view is that all government is fundamentally redistribution. It might be from the rich to the poor, or from the poor to the rich, from the young to the old, from the old to the young, or from the reckless to the prudent, etc. I think that when things get too out of balance between states, we create even more opportunities for discord and friction. I think the country is extremely polarized right now. But I think we would be more unified as a nation if the federal benefits were allocated more fairly between states. I think it is important that American citizens want to pay taxes. I mean, no one wants to pay taxes, but we need to feel collectively that this country is worth it. It’s hard for people to feel that sense of collective unity and patriotism if there is wild disparities between who gets what. It will never be exactly equal (nor should it be), but I think we can do better than we are doing. Maybe that is a first step towards more consensus. I don’t know, maybe it’s just wishful thinking.
“While I do think there are some functions best left to the states, I think the federal government has a useful and necessary role to play, as outlined by the constitution.”
walter block makes a strong case that everything the government does could better be done privately, including defense and roads, etcetera. although he may even be correct about defense, i’m still more comfortable with having a federal military, than having a private one. but that’s about it. the government should defend individual personal and property rights and the nation, but the rest should be left to the states or the people.
“I think that when things get too out of balance between states, we create even more opportunities for discord and friction.”
discord and friction could be worked out just like any other disagreement. for instance, i don’t believe the commerce clause should have ever been written. it was an overreach of power that has been abused ever since. i believe the states themselves would have eventually agreed to not tax each other for goods crossing state lines.
eminent domain was also an overreach of power. it got the railroad built cheaper but at the cost of property rights. it wasn’t a good trade-off.
“But I think we would be more unified as a nation if the federal benefits were allocated more fairly between states.”
and i think we’d be far more unified if the federal government were out of the ‘benefit’ business altogether.to paraphrase george washington, “government is like fire, a dangerous servant and a fearsome master.”
“I mean, no one wants to pay taxes, but we need to feel collectively that this country is worth it.”
i think we need to feel collectively that ‘freedom’ is our top priority, and the moral purpose of any government is to ensure it.
“It’s hard for people to feel that sense of collective unity and patriotism if there is wild disparities between who gets what.”
that’s why we need to get the federal government out of the ‘benefit business’. it needs to be handled by the states so citizens can vote with their feet.
“It will never be exactly equal (nor should it be)”
yet that’s exactly what you advocated when this discussion began.
“I don’t know, maybe it’s just wishful thinking.”
good to know you have your doubts. it shows you’re not dogmatic in your thinking. i think you’re seeing the subtle contradiction in what you want. in other words, your heart is in the right place.
I appreciate the dialogue. You are obviously very bright and have thought about these things in depth and have arrived at what you think is the ideal form of the state. It seems that your stance is to reduce the size and scope of the federal government. I am all for eliminating waste and bloat if I can be convinced that it will be a net benefit.
My preference though is to apply smart regulation and market-like mechanisms to the government functions. I also realize that the government is not the market, so there are certain limitations and edge cases that simply won’t apply.
As a country, we don’t pay near the amount of total taxes as some of the Scandinavian states (my ancestors are from Denmark, and I think that is the best country in the world). My general world view is that a country as wealthy as the united states should be able to ensure that basic needs are being met (e.g. clean water, food, clothing, and shelter) through the market. If this is not happening, then something is wrong and the government needs to step in and make some tweaks.
“I am all for eliminating waste and bloat if I can be convinced that it will be a net benefit.”
you are so convinced of the benefit of big government that you didn’t catch the obvious contradiction in what you wrote above.
“My preference though is to apply smart regulation and market-like mechanisms to the government functions.”
a noble ambition, but it can’t be done. government is monolithic. and even if it wasn’t, it can’t get market signals like the private sector.
contrary to what many people believe, government can’t be run like a business. it isn’t meant to be a business.
“I also realize that the government is not the market, so there are certain limitations and edge cases that simply won’t apply.”
obviously, i think it’s much more than edge cases.
“My general world view is that a country as wealthy as the united states should be able to ensure that basic needs are being met (e.g. clean water, food, clothing, and shelter) through the market.”
the usa is no longer wealthy. it is literally living on borrowed time.
basic needs would have been more easily met if we’d have stayed a more capitalistic country. still, your sentiment that needs should be met through the market is correct. you are like a trapeze artist that gets stuck in mid-air because he’s afraid to let go of the handle behind him. you simply need to trust the free market.
“If this is not happening, then something is wrong and the government needs to step in and make some tweaks.”
that is dangerous thinking. for instance, it is government that distorted the housing market.
politicians and these days, even bankers don’t understand economics. thus, even when they’re well intentioned they screw things up.
your overall assessment of me is correct. i’m for very small government. i know it would have given all of us a much higher standard of living right now, than most people can imagine.
you are so convinced of the benefit of big government that you didn’t catch the obvious contradiction in what you wrote above.
I wouldn’t say that I am for big government per se. I just think that the government we have needs to work well. I can cite plenty of instances where I think government programs are working quite well. My default assumption is not that government needs to shrink or that it is problematic in and of itself. There are some cases where I would advocate for more government intervention, and others where I would advocate for less. I very much hew to Hayek’s view of government, which is that it has a proper role in ensuring the basic welfare. Hayek was actually more of a government interventionist than many Libertarians assume. He realized that there are cases where the government needs to create the market and enforce it’s structure, just not pick individual winners. This is why I like the affordable care act, though it has flaws. It created a market for individuals to buy insurance. Before this, the market literally didn’t exist. You couldn’t buy reasonable insurance if your employer didn’t offer it. That said, I could cite myriad ways in which I would tweak it, but the general concept of creating a market is something I support.
government is monolithic. and even if it wasn’t, it can’t get market signals like the private sector.
This is true to some extent. But the private sector and free market capitalism fails in lots of instances. I work in the medical field and I see egregious examples of market breakdowns where private, unregulated capitalism is very harmful to the system overall. This is a good synopsis of why open markets won’t fix US healthcare:
https://www.nytimes.com/2017/04/04/books/review/an-american-sickness-elisabeth-rosenthal.html
I am worried about the exploitation of individuals by private companies as much, if not more, than I am worried about government. The Facebooks, Googles, Amazons of the world worry me. I like their services, but let’s not pretend that these forces are benevolent companies that have our best interest at heart. Tobacco companies maximize their profit, food companies create addictive food to maximize “bliss point”, and fossil fuel companies sell us too many while our lungs and health deteriorate from the negative externality of pollution. While I appreciate the market and value it, I believe it breaks down in certain instances, whether it be monopoly, monopsony, exploitation, or environmental degregation. The genius of the market is that it decentralizes prices and production.
“My default assumption is not that government needs to shrink or that it is problematic in and of itself.”
yes, that’s obvious.
“There are some cases where I would advocate for more government intervention, and others where I would advocate for less.”
i’m curious. where do you want less?
“He realized that there are cases where the government needs to create the market and enforce it’s structure, just not pick individual winners.”
he was wrong. government should never attempt to create a market because it will always cost more than it’s worth. one of many examples is solyndra.
in a free society markets will develop, grow and die all on their own. in a free society, that process leaves its citizens better off than before. it’s too bad when people fear losing their buggy whip industry and seek government help.
“This is why I like the affordable care act, though it has flaws.”
unbelievable.
“It created a market for individuals to buy insurance. Before this, the market literally didn’t exist.”
yes it did. it was just very weak because of government interference on behalf of lobbyists. one example is the inability to buy insurance across state lines. the corrupt pollyticians sold us out.
“but the general concept of creating a market is something I support.”
that’s a huge error. it costs more than most people understand. entrepreneurs are always trying to find a market niche. if they are too early, they fail. if it’s the right time, they get rich. lots more fail than succeed. it’s natural. nobody ‘creates’ a market. all that can be done is to discover one that already exists.
“But the private sector and free market capitalism fails in lots of instances.”
it’s called ‘creative destruction’ and it’s good and necessary.
“The Facebooks, Googles, Amazons of the world worry me.”
it should be government meddling in them that worries you.
“I like their services, but let’s not pretend that these forces are benevolent companies that have our best interest at heart.”
in the process of serving their own interests they must serve ours or fail.
“Tobacco companies maximize their profit, food companies create addictive food to maximize “bliss point”, and fossil fuel companies sell us too many while our lungs and health deteriorate from the negative externality of pollution.”
government doesn’t know these things before the public does. how hard was it to guess that inhaling smoke would probably have negative consequences? leave it to the individual if they want to smoke or not. yes, some will decide to smoke and some do even now. they know the risks, so leave them alone. same goes for your other examples. people don’t have to buy the ‘blissful’ foods if they don’t want them.
i’m not against air and water standards but the topic of pollution gets very complex and we probably shouldn’t even try to cover it on this blog.
“The genius of the market is that it decentralizes prices and production.”
it lowers prices through efficient production. it makes everyone’s labor more valuable.
i’m curious. where do you want less?
For starters, less military. The US budget is basically 3 prongs: 1) military 2) health care (medicare and medicaid) and 3) every other form of spending. Military is massive. I would dramatically cut the military until our budget is balanced over a period of 10 years so as to allow necessary adjustments. I believe we can have a military capable of national defense at a much lower cost. I would strongly curtail American interventionism abroad. This is arguably where DJT has made the most sense in his scathing critique of the Bush era wars and the cost.
Other areas I would cut: foreign aid, farm subsidies, fossil fuel subsidies, mortgage interest tax deduction, and charitable deductions. Well, the last two aren’t technically aspects of the government, but they reflect implicit subsidies of the wealthy (most of the MID goes to 2nd, 3rd, 4th houses, yatchs, etc.) and the charitable deduction, well, I’m fine if people want to give to their church (I do), but the government shouldn’t subsidize this. Giving should be it’s own reward, leave taxes out of it.
I would also look at SNAP and ban it from purchasing non-nutritious food (chips, soda, cookies, ice cream, candy, etc.). There are lots of common sense reforms that I would make to current social programs. But the biggest opportunity is cutting the military-industrial complex. But that is going to be politically difficult since a good chunk of certain state’s economies are tied to military bases. This is basically a form of state welfare via the military. I would much rather see more section 8 vouchers than extra tanks and F-35s.
Lastly, I would reform entitlements (social security and medicare) to shore up their solvency. This would involve a combination of raising taxes (raising the income cap) and cutting benefits.
entrepreneurs are always trying to find a market niche.
Business start-ups are at an all-time low. Part of this is due to the capital intensive nature of starting a business. Income inequality is a huge problem in the US and increasingly, only the very wealthy can afford to become an entrepreneur because failing at a business is to great a cost. Mark Zuckerberg understands this as do many techies from the right and the left who have begun advocating for a universal basic income. Richard Thaler, this year’s Nobel prize winner for economics, has been a genius in opening up our understanding of behavioral economics. We need to set up the right incentives and tax structure so that lower income and middle income Americans are rewarded for generating savings. Capitalism takes capital; Americans need capital to become entrepreneurs, and right now it’s the very wealthy who have capital.
“but the general concept of creating a market is something I support.”
i’m going to shorten my responses because several times you haven’t answered the points i’m most interested in.
in the above bolded statement you were talking specifically about government creating a market. so i’ve got just 2 questions for you.
1. if goverment can create a market, why did solyndra fail?
2. if government can create a market, why does the government EVER fail in creating a marketable product?
1. if goverment can create a market, why did solyndra fail?
I don’t have all the answers as to why Solyndra failed. Here’s a good synopsis of why that seems pretty to the point:
https://techcrunch.com/2011/10/04/why-did-solyndra-fail-so-spectacularly/
I think it is really important to realize that many businesses fail spectacularly, especially private ones. Look at this massive list of retailers that have failed this year:
http://clark.com/shopping-retail/major-retailers-closing-2017/
My point is that holding up Solyndra as a particularly egregious example of bad government intervention is a caricature. I might as easily hold up how DARPA and the US government basically created the internet to prove how good the government is. I’m not here to defend Solyndra, but I don’t think you should throw the baby out with the bath water.
When I talk about government creating a market, I think there are good ways and bad ways to do it. I think that the solar tax credit and the electric vehicle credits are very well designed because they go to the consumer of the good directly and don’t pick a winner or loser. This effectively creates a market and gives all market providers the ability to enter. And, Chevy has created a truly awesome car (Chevy Bolt) and Nissan has too in the Leaf. So has BMW with the i3. And Tesla is beating them all, but it’s a luxury car. Anyway, this is creating the market that could wean us off of fossil fuel in a way that I support. If we really want to get serious about terrorism and not funding countries who despise us, we should get off of oil.
As for number 2, I’m not sure I understand the question. The government’s role isn’t to create products, although plenty of state run universities have incubators of entrepreneurial labs that run very successful start-ups. Some of these accelerators use a mix of public and private funds, including grants, and have a very good track record. I’ve worked with private equity and VC and you throw a lot of stuff at the wal and most of it doesn’t stick. That is the nature of things. The government shouldn’t be in the business of creating a product unless there is a compelling reason why the private sector can’t/won’t create it and the product is essential to the welfare of it’s citizens.
you’re missing the whole point. i was just using solyndra as an example.
you said: “but the general concept of creating a market is something I support.”
i’m trying to tell you that your whole concept is an error. nobody creates a market, including the government. government can subsidize, but it can’t create a market.
markets develop unseen. then they get ‘discovered’. that’s what ‘price discovery’ is all about. if government could magically create a market, then solyndra would never have failed. it would have been a shining success.
the government makes things there’s no market for all at all. things like aircraft carriers and nuclear subs. it has to make these things (that have no market) for our defense. but just because government makes something doesn’t mean there is/was a market for it. again, government can’t create a market. a market is like gold. it gets discovered.
and since government can’t create a market, it has no business trying to do so. the idiots in government think if they can just flap their arms fast enough, they’ll be able to fly. but it just can’t be done no matter how much they believe in it. of course that doesn’t stop them from wasting lots of energy (money) trying to get their arms to flap faster (create a market).
you can build a lemonade stand in the middle of a hot empty desert, but it doesn’t mean there’ll be a market for it. it doesn’t mean that it will be profitable.
but since you believe that gold… er, i mean ‘markets’ can be created, please give us the step by step process for doing so.
I believe we are using terms differently. When I use the word market, it more along the lines of “rules of the game” rather than a tangible, physical good (e.g. gold). I think a good example of how the US government has created a market for electric vehicles is the EV tax credit. Prior to its passage, EVs were these terrible golf-cart things that almost no one purchased. There was no real market for them: they weren’t being produced, and people weren’t buying them. But the EV tax credit has created a viable market for EVs. If you look at the adoption curve for EVs, it is staggering. Countries like Norway and China are leading the way actually, but this is because the government strongly supports the adoption. But the US is doing pretty well too. OPEC increased its forecast of EV cars by 500% in the middle from 46M in 2040 to 266M. In the US, the subsidies will expire very soon for some car manufacturers and the technology will need to stand on it’s own. But the initial subsidy and price support has gotten us beyond the chicken-vs-egg thing.
I look at it like a bit this:
“Consider this analogy: free-market capitalism is constituted by government laws in the same way that sports are constituted by their rules. When we watch football, for instance, we usually see it as a freewheeling game with exciting runs and daring passes. But in reality, football is a highly circumscribed and regulated activity. It is only made possible by a large numbers of rules and regulations that cover everything ranging from the size of the field and the ball, to the number of downs, how scoring occurs, how tackling and blocking must take place, what constitutes a legal play, and so on. And without referees to interpret and enforce these rules, football as we know it would descend into chaos. The defining nature of these rules is shown by the fact that there are different kinds of football, depending on the rules. In Canada, for instance, the field is much larger, teams have one more player, and there are only three downs. In Arena League football, the clock rarely stops, the fields and goal posts are much smaller, and substitutions are very limited. The rules make the game.
Just as rules can create different kinds of football, government laws can create different kinds of capitalism and market relations. This clearly shows how market economies are actually political constructions – with their basic institutional arrangements being developed and managed by government rules.”
From: http://governmentisgood.com/articles.php?aid=13&print=1
“I think a good example of how the US government has created a market for electric vehicles is the EV tax credit.”
that’s not a market! it’s a subsidy! it’s an attempt at price fixing. don’t you see the difference between a subsidy and a market?
the tax credit proves that EVs weren’t yet ready for a free market. they were introduced too early. they are nearly competitive now and will be soon, but it was too early.
do you know how markets develop? they devolop in increasing wealth and with technology that makes products cheaper. so if you want more successful markets, you need a prospering society along with increasing technology. THEN you need entrepreneurs to discover them.
You are correct. But the subsidy is what created the market in the first place. Now we are reaching parity where EVs will be cheaper to own than gas equivalents. But this may have never happened if the subsidy wasn’t given in the first place. This is my reference to chicken and egg (e.g. consumers want to buy an EV but none make them; auto manufacturers are unwilling to make an EV because they don’t see any consumers buying them). The subsidy in essence greased the skids and kick-started the market.
Another example where governments have created a market would be in Europe and Asia with regards to internet service providers. NPR’s Planet Money team did a good episode on how Europe has way more choices and competition as to who provides the last leg of internet service. In the US, it’s a virtual monopoly for internet service in almost every state.
https://www.npr.org/sections/money/2014/04/04/299060527/episode-529-the-last-mile
A question or two for you:
1) Do you believe that there is a social cost to carbon that is unaccounted for in the price of gas?
2) Do you believe that the fossil fuel industry is being subsidized by the US government?
“But the subsidy is what created the market in the first place.”
no, it didn’t. in fact, the subsidy delayed the viable market.
the space program delayed private entry into space (and other things) by wasting huge amounts of money.
subsidies waste wealth. the less wealth there is, the fewer markets develop. subsidies are a drain on the economy.
should buggy whips have been subsidized before they were economically viable? should they be subsidized now? maybe we can revive the industry.
“1) Do you believe that there is a social cost to carbon that is unaccounted for in the price of gas?”
no, and i’m not going to argue ‘climate change’ again on this blog. if you’re interested enough, you can go back and find my comments on it.
“2) Do you believe that the fossil fuel industry is being subsidized by the US government?
no. reducing taxes is not ’subsidizing’.
If you don’t believe in climate change, pollution, or that the fossil fuel industry is being heavily subsidized, then these core assumptions will make it impossible for us to find agreement. We will have to disagree on these fundamental points that inform our worldview.
From your comments I can infer that you think that all subsidies are harmful. I would counter that some subsidies can be useful, some harmful, and some neutral. Some subsidies have their place for a time, and others are ill-fated to begin with.
The fossil fuel industry is far more heavily subsidized than the alternative energy industry:
https://www.vox.com/energy-and-environment/2017/10/6/16428458/us-energy-subsidies
I should point out that differential tax treatment is a form of a subsidy in and of itself. For instance, the fact that homeowners can claim the MID is an explicit subsidy to homeowners over renters in the form “reducing taxes.” However, this subsidy is ineffective because it has been demonstrated time and time again that it has no impact on homeownership rates and only serves to inflate prices (and line the pockets of the real estate industry via commissions). In other words, there is no compelling public interest for this subsidy, so it should be scrapped.
should buggy whips have been subsidized before they were economically viable? should they be subsidized now? maybe we can revive the industry.
I don’t know why we would want to go back in time to an inferior technology. Nothing in my comments so far have indicated that I would want to subsidize an inferior technology. Indeed, I view the continued implicit support, not the least of which is our military, for fossil fuel and internal combustion engines amounts to a massive subsidy of an inferior technology (internal combustion engine, or modern-day horse and buggy) over a superior, nascent technology (fully electric vehicles).
“The fossil fuel industry is far more heavily subsidized than the alternative energy industry:”
how is the fossil fuel industry subsidized?
“Indeed, I view the continued implicit support, not the least of which is our military, for fossil fuel and internal combustion engines amounts to a massive subsidy of an inferior technology (internal combustion engine, or modern-day horse and buggy) over a superior, nascent technology (fully electric vehicles).”
should we subsidize teleportation too? it’s a very superior, very nascent techology.
“how is the fossil fuel industry subsidized?”
The Vox article I linked to provides a conservative estimate of the annual US subsidies for the US fossil fuel industry.
The IMF estimated a global subsidy of fossil fuel of $5.3 trillion:
https://www.vox.com/2015/5/20/8630913/IMf-fossil-fuel-subsidies
Generally speaking, we tend to think of markets as if they exist in some naturally free state — and any government spending that favors certain sectors is an artificial “subsidy” of sorts.
So, for instance, we think of the United States as “subsidizing” solar power through tax credits and renewable portfolio standards. But we don’t typically think of society as “subsidizing” coal power by being willing to breathe in particulate matter and pay the resulting hospital bills.
The IMF report is effectively arguing that we should think of the latter as a subsidy. There’s no such thing as a pure market that’s not already shaped by the various policies and choices we make. We’ve set up a variety of political and social arrangements over the years that have made it artificially cheap to burn fossil fuels for energy. Calling these arrangements a “subsidy” may seem awkward, but it’s not totally arbitrary.
“The IMF estimated a global subsidy of fossil fuel of $5.3 trillion:”
just as i thought. total BS. they’re pulling that number out of their arse. and they honestly expect sane people to lap it up?
“The IMF report is effectively arguing that we should think of the latter as a subsidy.”
more like ineffectively arguing. it’s obvious that the fossil fuel industry isn’t being subsidized at all. the imf is blowing smoke and you’re trying to cover.
but hey, it’s really cool that they’re telling us what we should think, isn’t it?
“But we don’t typically think of society as “subsidizing” coal power by being willing to breathe in particulate matter and pay the resulting hospital bills.”
no kidding! that’s because it isn’t a subsidy.
“Calling these arrangements a “subsidy” may seem awkward, but it’s not totally arbitrary.”
oh yes it is. all their double-speak shouldn’t fool anyone.
i’ll translate the bolded above.. “please believe our magical thinking, because we’ve got nothing else.”
the truth is that fossil fuels aren’t being subsidized. and i think you fully understand that.
further, according to your logic of superior, nascent technology, we should have no problem with subsidizing teleportation.
the truth is that fossil fuels aren’t being subsidized. and i think you fully understand that.
The CBO’s own report states that the fossil fuel industry has been getting subsidies since 1916:
From the introduction of tax preferences for oil producers
in the Revenue Act of 1916 until 2005, the largest share
of energy-related tax preferences went to domestic producers of oil and natural gas. Beginning in 2005, the
composition of those preferences changed: An increasing
share of them was aimed at encouraging the use of
energy-efficient technologies and of energy generated
from wind, the sun, and other renewable sources
The fossil fuel industry is certainly being subsidized. Check out the report from the Congressional Budget Office:
https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/52521-energytestimony.pdf
The subsidies amount to $5.6 billion dollars. Subsidies given to renewable energy got about double that amount (so we are subsidizing renewable energy more), and subsidies to energy efficiency programs got slightly more than 1/2 of that amount.
You can read a full G20 report on how pretty much every country subsidizes the fossil fuel industry (oil, natural gas, and coal) in it’s own way:
http://priceofoil.org/content/uploads/2015/11/Empty-promises_main-report.2015.pdf
Executive summary for US (2015):
The US provided more than $20 billion in national
fossil fuel production subsidies each year, despite calls
from President Barack Obama to eliminate industry tax
breaks.
The US country summary starts on P.80. It’s about 1 page long. The POI estimates subsidies of $20 billion in 2015.
Their methodology explains how they calculate their subsidy (p. 32):
A subsidy is “any financial contribution by a government, or agent of a government,that is recipient-specific and confers a benefit on its recipients in comparison to other market participants’ (WTO, 1994).
This definition (WTO, 1994) includes:
• direct transfer of funds (e.g. grants, loans and equity
infusion), potential direct transfers of funds or liabilities
(e.g. loan guarantees)
• government revenue that is otherwise due is foregone or
not collected (e.g. fiscal incentives such as tax credits)
• government provision of goods or services other than general infrastructure, or purchase of goods, below market-value
• income or price support.
it doesn’t matter how you to try to torture the definition to fit your agenda. it won’t work.
show me any time the coal industry was given any money without being taxed in some fashion.
a tax reduction isn’t a subsidy.
if you start taking only fifty bucks from a victim, instead of a hundred, are you subsidizing him?
try looking at traditional definitions instead of a leftist, globalist organization’s that has an agenda to make it seem ok to unjustly take money from certain industries. they (wto) are slime.
in the meantime they are driving prices higher and lowering the standard of living for everyone.
the wto can take it’s perverted definition and shove it.
btw, here’s the bp the wto really likes.
• government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits)
they really love that one, don’t they?
subsidies aren’t adjusted tax rates. sorry, but you can’t claim that ‘forgone’ government revenue is a subsidy, no matter what the numbers are. a subsidy is MONEY GIVEN (not ‘foregone’) to some entity like the coal industry, without that industry being taxed in any other way. and you and i both know that that has NEVER HAPPENED with fossil fuels. it only happens with pet government companies like solyndra.
you’re trying to carry the globalists water. how does it feel?
it doesn’t matter how you to try to torture the definition to fit your agenda.
I don’t have an agenda other than wanting my son to grow up healthy, happy, and well-adjusted. I want him to eat healthy food, drink good water, and breath clean air. This is just basic stuff. My family has lived in China and have suffered from the air quality. I don’t want unfettered pollution like they have. I work in a hospital with terminally-ill elderly who has respiratory difficulties and children with asthma. I take care of them and watch them suffer and administer breathing treatments. There are real, serious health consequences to polluted air and water. I wish I could take you on rounds with me so you could see this in person. Just so you know, I’ve been elected a republican state and local delegate for Utah (Salt Lake County and Utah County). I helped elect a federal congressman. Concern about the environment is a bipartisan issue, not some leftist plot. True “conservatives” understand that the planet is something we have stewardship over and need to take care of.
I feel like what you are saying is that if the fossil fuel industry gets their taxes reduced, then it is not a subsidy. But when a purchaser of an EV gets their taxes reduced because of a EV tax credit, then you say that is a subsidy? Do you see how this is a double standard?
The VOX article’s author had a good point about peoples’ perception of subsidies:
The Congressional Budget Office is widely considered, by the right and the left, a neutral, non-partisan arbiter of facts. The post I pointed to above shows that they have highlighted the fact that fossil fuel does get subsidies and has for a very, very long time. It is only recently that alternative energy has started getting subsidies. There may be disputes about how to calculate how much of a subsidy fossil fuel is getting, but it’s simply not accurate to say they are getting none. The CBO projections show that.
Out of curiosity, would you consider the mortgage interest deduction a subsidy?
“I want him to eat healthy food, drink good water, and breath clean air.”
then you should want him to grow up in the most capitalistic country he can. that will be one that can afford to keep the air and water clean.
“I don’t want unfettered pollution like they have.”
then pray we get more capitalism here.
“Just so you know, I’ve been elected a republican state and local delegate for Utah (Salt Lake County and Utah County).”
most republicans are liberals these days.
“Concern about the environment is a bipartisan issue, not some leftist plot.”
i’m far right, and contrary to what you believe, i have always been concerned about the environment. but the ‘environmentalist’ label doesn’t fit me because i’m not a marxist.
“True “conservatives” understand that the planet is something we have stewardship over and need to take care of.”
true conservatives understand that a prospering nation makes problems easier to solve. why don’t you check how well the USSR, communist china and NK took care of their environment?
“I feel like what you are saying is that if the fossil fuel industry gets their taxes reduced, then it is not a subsidy.”
you don’t need to feel it. i said it.
“But when a purchaser of an EV gets their taxes reduced because of a EV tax credit, then you say that is a subsidy?”
i’m not talking about tax reductions. they aren’t subsidies. i’m talking about federal grants and matching private grants.
“Do you see how this is a double standard?”
i don’t have a double standard. you have a lack of understanding.
“The VOX article’s author had a good point about peoples’ perception of subsidies:”
the vox article’s author is an economic illiterate.
“The post I pointed to above shows that they have highlighted the fact that fossil fuel does get subsidies and has for a very, very long time.”
i can’t help it if their ignorance makes them delusional.
“There may be disputes about how to calculate how much of a subsidy fossil fuel is getting, but it’s simply not accurate to say they are getting none.”
it’s quite accurate to say it. if the industry ever got federal grants, THOSE would be subsidies. i guess it’s possible they may have received a grant or two, but considering how much they are hated by nearly everyone, it’s highly improbable. i’d bet they never got a federal grant.
“Out of curiosity, would you consider the mortgage interest deduction a subsidy?”
no. tax breaks aren’t subsidies.
Whoops, 2.5% of homeowners get schlonged
Future loan owners. Existing don’t get touched. Oh maybe they won’t be able to sell that shack for as much, but we’re all for affordable housing, right? We all want “bring down” the cost of shacks, that’s what we hear over and over.
Degenerate gambling debtors don’t want the price of their shack to go down. Build some cheap shoebox condos without running water somewhere else for the common folk.
I surmise the DegenerateGamblers, DebtDonkeys and HousingHens weren’t advised of the wise proverb, If you have to borrow for 15 or 30 years, you can’t afford it nor is it affordable.
It’s not my funeral.
California is ground zero for degenerate gambling debtors.
It’s in their blood.
California was settled by gold-hungry, get-rich quick schemers. Hedonists also predominated, as exemplified by Hollywood, Disneyland and if-it-feels-good-do-it local and state laws.
To top it off, let future generations pay for it all, a la Proposition 13.
Now that they’ve raped their own state and picked the bones clean, they are leaving, only to infest other cities and states.
“California is ground zero for degenerate gambling debtors.”
Check.
“It’s in their blood.”
No, it’s in their school system.
“California was settled by gold-hungry, get-rich quick schemers. Hedonists also predominated, as exemplified by Hollywood, Disneyland and if-it-feels-good-do-it local and state laws.”
Check.
“To top it off, let future generations pay for it all, a la Proposition 13.”
Check.
“Now that they’ve raped their own state and picked the bones clean, they are leaving, only to infest other cities and states.”
I like it, I love it, I want some more of it.
😁
Actually, you don’t want more of it, Mr Banker.
For if there gets to be too much of it, you might find yourself beheaded.
Not a chance; All I need to do is find a fall guy, one who has been totally dumbed-down.
They are so easy to find; they walk into my bank every day asking to sign some dotted lines.
“I like it, I love it, I want some more of it.
😁”
Now now. No borrowing and modifying the DebtDonkey/HousingHen mantra.
I like it, I love it, I want more of it make it hurt Mr. Banker make it hurt!
‘For years, the National Association of Realtors and the National Association of Home Builders were strong supporters of Fannie Mae and Freddie Mac, two government-backed mortgage companies, because (they argued) the government subsidies these firms received would create affordable housing for the middle class. That was their stated reason. The real rationale, as they have now made clear, is that Fannie and Freddie’s policies drove up housing prices, thereby increasing their members’ profits.’
Let’s get down into some details. Why should we have different federally guaranteed loan caps for these “affluent” areas? Why should we have a government run lending industry at all? Why should the central bank spend $4 trillion buying treasuries and MBS? It sure seems tilted in one giant direction, and taking one or two baby steps away from that is not such a big deal. Well maybe Toll Brothers stock is down a bit. You do know they have Picasso’s in their dining hall, don’t you?
Why should we have a government run lending industry at all?
The real answer is that private sector likes to sell only to their richest and juiciest customers. Notice how health insurance companies didn’t insure anyone over 65. Or how quick private schools will expel “bad” kids. Or how banks wouldn’t offer mortgages to people who are on the borderline of affordability, even to the extreme of redlining, forcing families to waste rent for generations. Or how people were standing in soup lines because agriculture is simply not profitable.
In each of these cases, the gov stepped in and offered a program for these dregs of society. I know I know, it’s all socialist. But that’s at least one reason.
It is government that has put much out of reach for huge numbers of people. It is not the private sector.
If I am wrong, explain how Washington DC became the wealthiest metropolitan area across the entire United States.
It didn’t start off that way, MacBeth. For example, insurance was out of reach — entirely — for senior citizens, because private sector did not offer it at all. Food for poor people was mostly out of reach. Schooling — especially college — was out of reach for poor people. I say “was.” In the beginning, these programs worked great. Poor and old people got help. But then the private sector, seeing a bottomless well of government money, started to exploit it. Raise college costs and then beg the gov to Even more, they wanted the same goodies for themselves; for example, FHA loans should be income capped but it is not.
I’ve been beating this on HBB for a while now: gov program fills a need. Private sector invests in that need, raise prices to where the poor can’t afford it with wages, beg the gov to dip into the bottomless well to pay for even more of it. Everything from Cash4Clunkers to college loans to Section 8.
How did DC become so wealthy? Easy answer — the same bottomless well of government money. The price that contractors charge is not limited to what the gov has on hand. Ask Taxpayers, who lives in Defense Contractor Central. Eisenhower’s MIC, and later, 9/11, made Northern Virginia wealthy. They know that whatever they charge, gov will pay. These are high skill jobs with high pay, to both citizens and to smart legal immigrants, so everyone can afford high house prices and high taxes, which in turn produce even better educated smart kids who come back to share in the jobs. Maryland is a little poorer but still wealthy. Lots of lawyers, scientists, engineers, with requisite pay.
t is important to understand the cases where markets breakdown, either via monopoly or monopsony. Also, sometimes the market does not provide a needed good altogether or side steps large segments of the population. Libertarians who understand Hayek realize that wasn’t opposed to certain elements of a safety net.
Maybe it’s the Government monopoly that needs to be broken apart.
The Government monopoly has become so large and so all-intrusive and all-punishing that all other markets are unable to operate efficiently or to clear.
Perhaps you needs to consider that concept for a while.
Government today is a highly insidious apparatus. It’s reach and corruption needs to be significantly curtailed.
The real answer is that private sector likes to sell only to their richest and juiciest customers.
Actually, there is far more money to be made in selling mass-produced goods to the masses at prices they can afford.
In sectors with less cronyism and government distortion, that is what happens.
That works well only if you have very cheap manufacturing costs and highly efficient distribution system, i.e. Wal-Mart, a recent invention. And even Wal-Mart profits gets hit badly when gov cheese EBT and food stamps are cut.
It’s been going on for hundreds of years. It’s called The Industrial Revolution.
Karen,
Do you think the market always works, absent cronyism and government regs? I’ve read all of Ayn Rand’s stuff and all of the Hayek, Mises, Schumpeter, and Libertarian thought and I’ve come to the personal conclusion that markets don’t always work. The government can play a useful role in establishing markets where none exists or, for instance, for capturing negative externalities (like pollution) where the cost isn’t born by the producer. Also, history tells us that industrial revolution had some downsides to it (ever read The Jungleor anything by Upton Sinclair?).
I wonder why you would say that the market isn’t supplying affordable housing right now? The demand for section 8 vouchers vastly exceeds its supply. Would you pin the blame on existence of minimum wage? Licensing regs for construction? Is it because of NIMBYism, federal housing financing schemes?
Markets don’t always work.
And they’re not always supposed to.
And that is the point.
Government is not in the position to dictate which markets should and should not exist. Government simply does not have the wisdom to do so. It never will have that wisdom, because it can’t.
Government is not an active player in the marketplace. It doesn’t live and breathe the marketplace. Its existence is not reliant upon how it performs in the marketplace.
Further government does not exist to tell people what to do. Not in a society that espouses liberty and freedom for individuals (the smallest of all minority groups, BTW).
An obvious result of this freedom are markets that are occasionally roiled, markets that come and go. Fortunes that come and go.
A free society is much better equipped to adjust, to be nimble, to minor and major changes in markets - if it is allowed to react, to change, to find or invent better efficiencies.
Government impedes all of that. Government is NOT allowing market to adjust. It is NOT providing ease of discovery, discoveries that result in better solutions.
And that is the problem.
What I would love to see Trump do is name five major Federal departments (say HUD, EPA, HSA, DOE and the IRS) and tell them that one of them will be eliminated by the end of 2019.
But not name which one.
The department that is eliminated entirely (and all employees fired) is the one that performs the most poorly, the most recklessly, during calendar year 2018,
I think it would be a great thing to see several tens of thousands (or more) of federal workers sh**ting their pants for a year, knowing that they might get canned.
And have all of their benefits disappear.
Maybe then they might begin to understand a little bit of what the marketplace consistently faces.
How do you plan to measure performance of these agencies, since we can’t measure profit? Are you going to compare IRS tax revenue collected vs houses sold to the poor v.s. number of coal mine violations?
Well, you’re the one in DC.
What would you suggest?
What laundry list of accountabilities would make sense?
I have some ideas:
(1) Occurrences of fraud.
(2) Occurrences of malfeasance.
(3) Actual hours worked versus time spent screwing off.
(4) Number of favors granted based on political affiliation.
(5) Payola
(6) The amount of money received from lobbyists, corporations and “other entities”.
(7) Hours actually worked versus vacation time granted.
(8) The occurrences and quantities of fecal matter found in hallways.
(9) Occurrences of lawsuits faced by each dept.
(10) Time spent blown in unnecessary meetings.
(11) The number of 2+ hour lunch breaks.
(12) The number of employees surfing the web, playing games, looking at pornography.
So, there’s a dozen. Need me to come up with a dozen more?
BTW, Ayn Rand depended on the welfare of her government in her later years. The irony of her life was quite sad. It sounds like MacBeth would have tossed her out in the street.
If you want to make something expensive, make it free.
^ Excellent! Comment of the week!
Might I add expensive in more ways than just monetary and fiscal.
“If you want to make something expensive, make it free.”
Bahahahaha … the most expensive drinks you may ever be offered are the free drinks offered up by casinos.
Have you read The High Cost of Free Parking by chance?
I certainly have experienced it!
Honolulu, Hawaii 96813 Housing Prices Crater 16% YOY
https://www.zillow.com/honolulu-hi-96813/home-values/
Democrats protecting the 1%ers.
Republicans helping the working man and families.
Democrats won’t understand their landslide defeat in 2020 either.
Incorrect.
It is the NeoCon-Progessives that are protecting the 1%. (Call ‘em globalists if you want. Same difference.)
Don’t ever forget that. Numerous progressives in both parties led us to where we are today.
We must remain vigilant if we want a future centered on individual liberty. It will take 20-30 years to first drain the swamp and then institutionalize a better, freer future.
Who Wins and Loses From The Republican Tax Plan
https://www.nytimes.com/2017/11/02/us/politics/republican-tax-plan-winners-losers.html
Winners
1. Businesses - Corporate tax rate goes from 35% to 20%.
2. Multinational corporations - Foreign profits to be taxed at 10% instead of current 35% rate & one-time tax of 12% on US company’s assets held abroad in tax havens (these profits have never been taxed)
3. Some middle class families - Standard deduction doubles.
4. The rich and their families - proposal eliminates the AMT and the estate tax.
5. Hedge funds - no change to carried interest loophole.
Losers
1. Real estate industry - mortgage interest deduction capped at $500k and property tax deduction capped at $10k.
2. The sick - deduction for high medical expenses eliminated.
3. Charities - Tax benefit of donating to charities reduced due to higher standard deduction.
4. University endowments - 1.4% excise tax on private colleges and universities with 500+ students and assets > $100k per student.
5. The deficit - plan adds $1.5 trillion to federal debt over 10 years.
6. Rare disease sufferers - tax credit eliminated for clinical trials to treat rare diseases.
7. Tesla - elimination of $7500 tax credit for EV purchase.
Winners
1. Businesses - Corporate tax rate goes from 35% to 20%.
2. Multinational corporations - Foreign profits to be taxed at 10% instead of current 35% rate & one-time tax of 12% on US company’s assets held abroad in tax havens (these profits have never been taxed)
3. Some middle class families - Standard deduction doubles.
4. The rich and their families - proposal eliminates the AMT and the estate tax.
5. Hedge funds - no change to carried interest loophole.
And there you have it…Just Like 2-fruit said;
Democrats protecting the 1%ers.
Republicans helping the working man and families.
Some middle class Americans and maybe lower class Americans will benefit from this. But I think the vast direct benefit of this plan skews toward the wealthy 1% while increasing the deficit. I would guess its probably about 80% of the tax benefit goes to the top 1%. There is all this talk about a potential $4000 wage increase that will happen as corporations get tax breaks. I can’t take people seriously who think this will happen.
LOL, helping the poor middle class hedge fund manager……
Thanks for the list. Other winners include:
6. Renters with no deductions other than standard deduction. Probably somewhere in the neighborhood of 30-40 million people.
It’s interesting, the paucity of discussion about renters.
The NAR and the rest of the real estate syndicate hates this of course, but tough sh*t. With luck, it will soon be time for them to pay the piper. A shame we can’t rape them like they’ve raped everyone else.
Especially if interest rates rise (not likely in the short term should the tax plan pass, but increasingly likely and sudden a year or two later).
Yes, some crumbs for the renters. If GOP just 1) doubled the standard deduction and 2) capped MID at $500k and property taxes capped at $10k, it would be a better plan. Less of a give-away to the 1% and less of a deficit buster.
Yes to both of your ideas.
Ideally, a tax plan would include are:
(1) Elimination of ALL deductions, for everyone. Period.
(2) A tax cut for all brackets.
(3) Copious reductions in spending.
The glaring lack of #3 means that nearly everything else is little more than window dressing. The exception are the tax cuts for businesses, which has some teeth. Bringing back jobs and wealth from overseas should provide better jobs that pay more.
With time, this should lead to increased consumer spending, interest rate hikes, increased revenue for government to steal, and then maybe actual tax reform.
That last bit only will be possible if BOTH parties (or whatever incarnation of “party” exists today) drain the swamp. It’s not just Republicans that need to toss hundreds of “leaders” out on their behinds. Democrats need to do the same. And without hesitation.
Our government is atrocious, has been for 30 years, and it’s our fault for not ousting these bums years ago.
Many should be in a federal penitentiary.
And we need to insist they serve time.
I’m not in favor of vigilantism, but We The People may be forced to resort to that if all this government b.s. and corruption doesn’t soon stop.
OK GUYZ
A National sales tax…….say 5-7% think of how many hundreds of billions go untaxed in the underground economy.
Drug dealers prostitutes cash businesses, gambling …..they all have to spend that loot everntaully so a 5+% tax on everything would be a winner to help the budget.
A National sales tax…….say 5-7% think of how many hundreds of billions go untaxed in the underground economy.
Drug dealers prostitutes cash businesses, gambling …..they all have to spend that loot eventually so a 5+% tax on everything would be a winner to help the budget.
eggszactly!! and NO other taxation. not on gains, income or property. just the sales tax.
the pollyticians don’t know that it would bring in much more revenue than the government gets now. but they wouldn’t vote for it even if they knew. because they know they’d lose lots of power and influence with a national sales tax.
Yeah I’m sure the NY Time is a very unbiased source when it comes to evaluating Republican tax plans. Let me guess, women and minorities hurt the most?
Is there an item on the list you disagree with? Seems like pretty straightforward analysis to me.
Losers
8. Some middle class families in California (me). I ran the numbers based on my 2016 return, where we had $28,000 in itemized deductions and $8,100 for 2 personal exemptions ($36,100 total). That would get replaced with a $24,000 standard deduction, meaning we would have a “taxable income” that is $12,100 higher than last year. At the 25% rate (our bracket would not change), we would pay $3,025 more in federal income tax if the proposal becomes law.
All of a sudden it wouldn’t feel so good to pay $15,000 in State Income tax, $5,000 in property tax, or give $8,000 to charitable causes. Because doing so wouldn’t save me a dime on my federal taxes. The value of my house will probably drop as well.
But at least I can take some comfort knowing I am helping those at the top. I hear they are going to finally take some of the money they save and share it with us wage earners. I guess having years of higher than average net profit margins just wasn’t enough. This tax bill will finally create the certainty they need! (pardon sarcasm)
Your remedy is to get California to lower taxes. I’m tired of subsidizing you and the people of NY and NJ. You guys want a 13% income tax, have at it. But don’t make me subsidize 1/4 of it.
California, as well as NY and NJ, are so-called “donor” states. We send more in federal tax to Washington, DC than we get back. So I just might be subsidizing you! I don’t know where you live, but many of the low tax states are poorer and live pretty high on the federal dole.
It is a complicated topic that doesn’t lend itself to sound bites. My post was to illustrate the point that the bill’s authors can’t just run around saying its a tax cut for working, middle class families.
That’s incorrect. These are welfare states. And keep you in mind California is in fact the poorest state in the nation and has been for years.
Great HA, send more federal tax dollars to CA…..HA!
Retail REITs starting to get crushed.
+++++++
Malls and their Hapless Investors Keep Getting Crushed
by Wolf Richter • Nov 3, 2017
Investors in retail malls didn’t need another wake-up call. They’ve been wide awake all year, hearing from Wall Street that there’s no brick-and-mortar meltdown even as the shares of their real estate investment trusts (REITs) have gotten crushed by the travails of brick-and-mortar retail and the over-malling of America. But late Thursday, mall investors got another unneeded wake-up call.
CBL Properties, a mall REIT with 119 mostly retail-oriented properties, reported earnings, and shares plunged 26% on Friday, to $5.92. They’d already been dropping for years because the brick-and-mortar retail meltdown is structural, and not new, and will not turn around before it’s finished melting down. Shares of CBL are down 50% year-to-date and 75% from May 2013.
“This quarter’s results fell below our expectations as our revenues were impacted by additional bankruptcies, store closures and rent concessions,” CEO Stephen Lebovitz summarized it in the third-quarter earnings report.
So other mall REITs dove in formation:
Kimco Realty (KIM) down 2.1% today and 42% since end of July 2016.
Macerich (MAC) down 2.2% today and 39% since end of July 2016.
Simon Property Group (SPG) down 2.7% today and 32% since the end of July 2016.
GGP (formerly General Growth Properties) down 2.9% today and 41% since the end of July 2016.
Federal Realty Investment Trust (FRT) down 1.3% today and 25% since the end of July 2016.
Regency Centers Corp (REG), down 1.8% today and 22% since the end of July 2016.
the rich are getting free money from stawks so they can hire some minions to do their dirty work. TRickLe Down? LMAO
Those who invest in stocks expose themselves to considerably more personal risk than those suckling at the government teat.
The latter would include real estate “investors” who use OPM to screw both naive and witless others out of their money, and then are allowed to walk away scot free when the going gets tough.
Stock investors, for the most part, get to do neither.
has the risk in the stawk market been removed by central banks or is it lurking?
There’s always risk in the stock market.
Always.
seems like a sh@tload of pent up risk to me.
Definitely.
Still not as bad yet, anyway, as 2000 or 2008.
Come on in, folks, the water is fine. You can even buy stocks with your phone now!
Market optimism hits Black Monday-level peak, a ‘potential significant danger’
The spread between bulls and bears hasn’t been this high since early 1987, shortly before the Black Monday market crash, according to the latest Investors Intelligence reading.
Bulls in this week’s survey totaled 63.5 percent against just 14.4 percent for bears. A spread above 30 points signals “elevated risk” while 40 points calls for “defensive measures.”
Jeff Cox | @JeffCoxCNBCcom
Published 10:28 AM ET Wed, 1 Nov 2017 Updated 10:50 AM ET Wed, 1 Nov 2017 CNBC.com
A trader uses his phone outside the New York Stock Exchange (NYSE) in New York.
Brendan McDermid | Reuters
The roaring stock market has professional investors riding high, so much so that it’s rekindling memories of the 1987 crash.
In terms of sentiment, the difference between bulls and bears hasn’t been this high in 30 years, according to the latest Investors Intelligence reading. Back then, stocks were bubbling their way toward the worst single-day sell-off in history when the Dow collapsed 22 percent on Oct. 19, 1987.
Bulls in this week’s II survey totaled 63.5 percent against just 14.4 percent for bears. That’s a spread of 49.1 points, well above the level the editors believe represents potential danger in the market.
A spread above 30 points signals “elevated risk” while 40 points calls for “defensive measures,” according to II’s formula.
“Sentiment readings have roughly followed their 1987 pattern,” II Editor John Gray wrote. “Then the bulls peaked (near 65%) with initial market highs early that year and they returned to above 60% levels months later after more index records. In 1987 stocks crashed a few months after that. A repeat of that scenario suggests potential significant danger for over the remainder of 2017!”
…
7 Charts That Make Stocks Look Like A Terrible Investment
Oct. 17, 2017 3:09 PM
Summar
- Stocks are soaring, unemployment is low and many people are confident in a strong economic future.
- Unfortunately, there are many metrics indicating that the 8-year economic expansion is coming to an end.
- Reduce equity exposure, hold more cash and prepare for a major market correction.
The president and the financial media are celebrating as stocks keep hitting new all-time highs. The unemployment rate just hit the lowest level in 16 years while consumer confidence has also hit its highest levels in 16 years. It seems as if things could not be going much better. But as is often the case with economics and investments, it is often calmest right before the storm. Below are 7 charts that tell a different story than the one you will hear from the mainstream narrative. Hopefully these charts will make you think twice before getting too optimistic about this high-flying stock market.
…
Beware of the 800 year cyclical low in the global risk free rate.
Current market risk is a coiled snake, ready to strike at the moment of peak investor complacency. The central bankers who created the risk buildup don’t seem to have the willpower to unwind it before the onset of the next financial crisis, at which point it will be too late.
20 October 2017
Staff Working Paper No. 686: Eight centuries of the risk-free rate: bond market reversals from the Venetians to the ‘VaR shock’
Paul Schmelzing
This paper presents a new dataset for the annual risk-free rate in both nominal and real terms going back to the 13th century. On this basis, we establish for the first time a long-term comparative investigation of ‘bond bull markets’. It is shown that the global risk-free rate in July 2016 reached its lowest nominal level ever recorded. The current bond bull market in US Treasuries which originated in 1981 is currently the third longest on record, and the second most intense.
The second part of this paper presents three case studies for the 20th century, to typify modern forms of bond market reversals. It is found that fundamental, inflation-led bond market reversals have inflicted the longest and most intense losses upon investors, as exemplified by the 1960s market in US Treasuries.
…
Seriously? Going back to the 13th century?
“Two powerful lobbying groups that advertise themselves as helping Americans buy homes have announced that they will oppose the Republican tax plan. Their reason? Because it will lower housing costs.”
I thought making homes more affordable was a primary policy objective in DC? Me confused.
I know you are being facetious….but since when does the government care about the well being of the citizenry?
Washington DC remains the wealthiest metropolitan area across all of the United States. And that’s all that one needs to know about Washington. It tells all.
To all new readers of this board: Always consider the geographic distribution of money. Who has the wealth isn’t very important. WHERE the wealth is located is vital.
Once you know where the wealth is, immediately examine the voting history of that geographic area.
Washington DC is the wealthiest metro. And it routinely votes 85-90% Democrat. What does that tell you? How should you respond/behave/live as a result.
Examine other wealthy geographic areas as well. What is the voting history in each area? What does that tell you?
“The financial crisis in 2008 was the result of government housing policies—strongly backed by both the Realtors and homebuilders—that encouraged and sometimes even demanded reductions in underwriting standards so that more Americans with modest incomes could buy homes. The result was a massive housing boom, which drove up prices for first-time homebuyers. By 2007, housing was unaffordable for people of modest means, no matter how concessionary the mortgage terms. The crash in housing values that followed caused many Americans—who bought houses at inflated prices they couldn’t afford—to lose their homes.”
Glad they got this out there. Hopefully those currently in government will read this article and correct course.
P-bear, your mistake is thinking that “more affordable” must be “lower price.” Nope. More affordable means: same price and same taxes, but you “afford” it by cobbling together some combination of low down payment, maybe some down payment help, low interest loans, and putting your roommate’s income on the application.
“‘(The tax plan) could strip a little bit of the demand, but we need to see a lot more of it stripped away, and supply to start to rise, before prices to go the other way,’ he said. ‘So, I don’t think it will have an immediate impact. But, it could push things in that direction a little sooner.’”
This may have to wait for the Fed to normalize interest rates, which could take decades at the snail’s pace they have charted.
Andover, MA Housing Prices Crater 14% YOY
https://www.movoto.com/andover-ma/market-trends/
A few of the words on this blog that make me smile when I see them.
Please feel free to add to the list.
schlonged
DebtDonkeys
shacks
Housing hens
Cluck cluck cluck. They don’t need pockets. I wonder if they’re grass fed?
Mmmm…grass-fed housing hens. Tasty.
Falling Prices
President Trump
Crater
Housing Hens
Mortgage Monkeys
Good Friend
This HBB lexicon is unique and endless
oil city and joshua trees. And lazy rivers and puddlecams and pirate shops.
and cheez doodls
And best of all…… Donk CRATERton.
Falling knives 🔪
Used Home Seller
National Assocation of Realwhores
Looser
The LARP Revolution begins today, stay out of densely populated urban areas.
Didn’t help Rand Paul. LARP came to him.
Harvey Weinstein’s favorite song back in 1972
https://www.youtube.com/watch?v=cXoaupox2IA
Best of luck to Corey Feldman!
Yep. And bad cess to Kevin Spacey. Whose behavior was an “inside joke” in Hollywood, so much so that Family Guy referenced it in a clip:
https://www.youtube.com/watch?v=wleDc2BVkPU
I wonder which of the two would be more likely to receive an ovation at next year’ Oscars…
Corey Feldman or Kevin Spacey?
Which would better support Hollywood’s narrative? Which better promotes diversity and is less racist?
A bit of Hollywood script which applies very well to that place: “You’ll never find a more wretched hive of scum and villainy.”
If homes over $500k drop in value, all lower priced homes will also. You can see this as “making housing cheaper” or as “lowering the net worth of current homeowners”. I guess it depends on your circumstances.
I like to see it as the GOP plan to make America’s housing market great again by making homes affordable.
Trump hammers the Bush idiots.
God Bless DJT.
+++++++
White House slams Bushes for Iraq War after ‘blowhard’ dig
NY Post | November 4, 2017 | Mary Kay Linge
The White House punched back at both Presidents Bush on Saturday over their criticism of fellow Republican President Donald Trump as a destructive force in the party.
“If one presidential candidate can disassemble a political party, it speaks volumes about how strong a legacy its past two presidents really had,” a White House official told CNN. “And that begins with the Iraq war, one of the greatest foreign policy mistakes in American history.”
Damn those pesky facts!
CLAIM
Donald Trump expressed strong opposition to the war in Iraq before it began in 2003.
RATING
FALSE
1. Snopes is a far left “fact checking” organixation that has no credibility
2. FACT: Hillary Clinton, Joe Biden and John Kerry SUPPORTED AND VOTED FOR THE WAR IN IRAQ.
3. Donald Trump was not even a politician and had NO POLITICAL POWER in 2003.
4. Democrats still have no idea why they lost in 2016.
Roteatlaters
Democrats: We need to tax the rich!!!
Republicans: OK, no more SALT and MID deductions for the rich.
Democrats: How dare you do exactly what we want?!??
I think the entire MID thing is much ado about nothing. First off, what % of all mortgages are over $500K? Given the median home price is $300K nationally, I’d have to guess less than 10% of mortgages nationwide are above that level. Remember, this is the value of the mortgage, not the value of the house. So even on a $600K home, someone putting down 20% is still under the $500K threshold for a mortgage.
Second it’s not an all or nothing proposition. Someone with a $750K mortgage, will still get to deduct interest on $500K. Yet the way the MSM/Dems (but there I go repeating myself) are spinning it, it’s as if someone with a mortgage of $500,001 will lose all their MID deduction.
Let’s take an example of a $750K mortgage at 4% for someone in the 25% tax bracket. In the new plan 25% will be all the way up to $260K AGI mind you, so that is about $300K gross income.
In year 1 of the mortgage, the total interest paid is $30K. But only $20K of it will be deductible, ie 2/3 of the mortgage which is $500K out of $750K. So instead of saving 25% of $30K in taxes, the savings will be only 25% of $20K. In other words, an extra $2500 a year in taxes. Or $200 a month.
Now do you really think that $200 a month is make it or break it for someone earning $300K a year? No way.
And this is in year 1 of a mortgage. Every year less interest is paid, which means every year the impact of the $500K cap is less and less.
In other words, this will barely have an impact on housing and the NAR, as usual is full of shyte.
I’d think AMT would wipe out the deduction for the 300k/yr guys.
“In year 1 of the mortgage, the total interest paid is $30K. But only $20K of it will be deductible, ie 2/3 of the mortgage which is $500K out of $750K. So instead of saving 25% of $30K in taxes, the savings will be only 25% of $20K. In other words, an extra $2500 a year in taxes. Or $200 a month.
Now do you really think that $200 a month is make it or break it for someone earning $300K a year? No way.”
******
Keep in mind you can qualify for a $750K mortgage on less than $300K a year. And it isn’t just the mortgage deduction that’s reduced, it’s also no write off on state taxes and the capped deduction on property taxes as well. So it’s a triple whammy.
And don’t forget about healthcare premiums going up dramatically for many households as well.
Here in CA, state taxes / local assessments will be headed upwards for years to come, considering the state’s unfunded pension fiasco. And none of that will be a write off.
“Let’s take an example of a $750K mortgage at 4% for someone in the 25% tax bracket…”
That person is royally screwed. He owes 10 x his gross salary and is paying interest on the loan, taxes on the salary, taxes on the house plus all the you know what. On top of that he lives in California. There is no hope for him, regardless of tweaks to the tax law. Or her, of course, as the case may be.
Contrarians will say that this attitude will leave me living in a cardboard box!
Current homeowners not being affected stops a whole lot of howling against the tax bill, I would think. The way it moderates or perhaps lower housing costs would be due to future homeowners lacking motivation to borrow beyond the half a million cutoff, which should create downward pressure on prices. The current homeowner isn’t affected until it’s time to sell. People who own muliple rentals might throw some back into the pool to be purchased and owned by individuals? Sounds like something that needs to happen. The prices of housing are going to have come down in some manner because access to housing is a huge problem under the current set up. Housing isn’t very optional for humans- it’s prominent under basic needs. Change is going to come either in a planned manner or chaotic collapse.
I don’t think the MID factors into the rent vs buy decision as much as people here and elsewhere think it does. Like I posted above we’re talking a $200/mo difference for someone taking out a $750K loan. It’s really not that big of a deal for someone whose income affords a $750K mortgage.
The MID may not impact the overall rent vs. buy decision, but I’m betting it will factor in to how much house someone can ultimately “afford.”
Cap the MID at $500K, cap property taxes at $500K, forget about writing off the interest on a big HELOC, no state/local tax deduction, rising interest rates and rising healthcare premiums.
It mainly serves to line the pockets of those with expensive mortgages, and to drive up the prices of the homes they buy. It’s not likely that someone who was going to buy a home for over $500K is going to rent or go homeless due to the MID cap.
Glad the high fallutin eggheads agree with me:
“That paper also found that the MID has ‘a precisely estimated zero effect’ on the rate of homeownership — people who can afford to buy a house will do so regardless of whether or not a mortgage interest deduction is in place. It’s hard to square those findings and the overall modest impacts of the GOP proposal’s mortgage interest change with the apocalyptic rhetoric coming from its opponents.”
I visited the San Diego waterfront this morning. I can’t recall seeing so many homeless people people in the area. I literally just about tripped on a woman who was sleeping on the sidewalk at 10am.
Reining in California’s insane home prices might help reduce the number of people who decide it is easier to live permanently outdoors.
Rand Paul has been assaulted inside his own home in Bowling Green, Kentucky. By a retired doctor and registered Democrap:
“According to the Kentucky Board of Medical Licensure, Boucher is a retired physician, as of February, 2015. He was licensed in 1998.
According to records obtained by WAVE 3 News, he graduated from the University of Des Moines Osteopathic Med & Surgery.
WAVE 3 News was also able to confirm Boucher is a registered Democrat. On his Facebook page, Boucher’s previous posts have been politically charged, showing frustration with President Donald Trump. We did not find any posts mentioning Senator Paul”
http://www.zerohedge.com/news/2017-11-04/rand-paul-assaulted-intruder-kentucky-home
This is beyond ugly. I guess these guys mean business and the Scalise shooting wasn’t exactly a one-off.
I’m surprised that Senators and Members of Congress don’t have bodyguards 24/7
Deep State is frantic right now. They’re throwing so much crap against the wall hoping something, anything will stick. If all else fails, just start murdering outright. This guy was a patsy and probably had a little visit from some Deep State goon that he doesn’t exactly remember.
Facebook is fertile ground to find malcontents. The Scalise shooter had some really raw stuff up on his FB page.
Apparently this Boucher character is a real arse-wipe.
http://www.vitals.com/doctors/Dr_Rene_Boucher/reviews
Apparently this Boucher character…
KY med license board says suspect’s DO license expired 2/28/2015. The reviews on your link dated before that time, some are horrible. Interesting that the same link has some glorious reviews for him — after he retired & his license expired. Fishy.
I’m surprised that Senators and Members of Congress don’t have bodyguards 24/7 Same here. Times have changed, and not for the better.
Maybe he was psychotic and was drawn to the hate like a moth to a flame.
With all the hate draped politics it isn’t likely to stop. In tough economic times it could be a real worry all around. Nutters feel justified doing harm when they are encouraged by voices of authority.
BTW, Did Screech in her book about why she lost mention that little thing about her cheating on the debate questions?
Hillary is done, caput, finito. Donna Brazille pretty much finished her off. The Dems are dumping her like a load of garbage. Next up is the Clinton Foundation and its offshoots. The word has gone out. Maybe if Hillary had just bowed out gracefully, things would have been different, but apparently the donors are pissed, and not just at Hillary, but the Hollywood crowd as well.
Big doings going on right now, all over the place. In politics, the media, entertainment, even sports. Seismic shifts. Saudi Arabia is having a purge. Only big finance seems to be untouched at the moment. But that could change, too.
I should go to church and light a candle for the Great Disruptor.
“Hillary is done, caput, finito.”
by Hillary Rodham Clinton
What Happened
You lost and nobody likes you.
“Donna Brazille pretty much finished her off.”
Elizabeth Warren too.
Asked if DNC system was rigged in Clinton’s favor, Warren says ‘yes’
By Sophie Tatum, CNN
Updated 9:36 AM ET, Fri November 3, 2017
https://www.youtube.com/watch?v=tRUi0d-vPLQ
This is beyond ugly. I guess these guys mean business and the Scalise shooting wasn’t exactly a one-off.
Yes,it is beyond ugly. Yes, the shootings definitely weren’t one-off, but “these guys” don’t “mean” anything in a sane world. But this current world has already gone off the tracks, sanity-wise. There are legions of volatile, just barely sane, potential miscreants around. There will be more incidents like this, with greater severity, as time passes. You read it here first.
“There are legions of volatile, just barely sane, potential miscreants around.”
It’s always been that way, tresh. I think the difference is that the crazy has, in the past, been held in check by social conventions, etc. In the US, anyway. These days, seems like anything goes. And when anything goes, anything will.
“There will be more incidents like this, with greater severity, as time passes. You read it here first”
Possibly. I do take note, however, that yesterday’s much publicized Antifa Day of Rage really didn’t materialize.
‘Seldom have any denizens of “the Swamp” shown their true colors quite so flagrantly.’
Isn’t there some kind of swamp draining plan in play?
Here’s the link to the proposed tax bill. It’s a 429 page pdf document.
https://waysandmeansforms.house.gov/uploadedfiles/bill_text.pdf
Shorter than the Obamacare bill, but much longer than Too Big to Fail, Too Big to Exist.
Silverdale, WA Housing Prices Crater 6% YOY
https://www.movoto.com/silverdale-wa/market-trends/
Here’s a video (run time = 1:21) that may interest some of you pukes (and, who knows?, some of you pukes might even learn sumtin’).
Yuri Bezmenov: Deception Was My Job.
https://www.youtube.com/watch?v=y3qkf3bajd4
When will trumps tax plan take effect? 2018?
I can almost hear the screeching and moaning of the homeowners on my block from inside our rental home.
Business & Economy
GOP tax plan has outsized impact on SoCal homeowners, homebuyers
Future homeowners in high-cost areas such as Southern California would be disproportionately hit under the GOP tax proposal released Thursday.
Josie Huang with David Wagner | November 2, 2017
Congressional Republicans introduced a tax overhaul plan that would disproportionately affect future homebuyers in high-priced real estate markets such as Southern California.
Right now, homeowners can take deductions on home mortgages worth up to $1 million. But the GOP plan would cap these deductions at $500,000 for future homeowners.
That won’t change things much for states with low housing costs. But it’s a different story in Los Angeles, where the median home price tops $630,000. Geoff McIntosh, president of the California Association of Realtors, predicts that fewer homebuyers will be able to enter the market.
“They’re going to be forced to be renters or be forced to consider moving out of state or at least moving further from their place of employment,” McIntosh said.
Tens of thousands of new homeowners could potentially be affected. Research by ATTOM Data Solutions shows that 15 percent of all homes sold or refinanced in Los Angeles County this year so far involved mortgages above $500,000.
The percentage is 18 percent in Orange County and 14 percent in San Diego County. In lower-cost San Bernardino County, the share of $500,000-plus mortgages is 3 percent.
McIntosh said the mortgage deduction change will only squeeze homeowners who will lose out through other aspects of the GOP plan, such as its call to eliminate the deduction for state and local income taxes.
That deduction can be significant for many Californians, said UCLA law professor Jason Oh.
“Because of how high state and local taxes are in California, more Californians itemize than in many other states,” he said.
About one in three taxpayers itemizes in California.
Republicans say many would still benefit under their plan, thanks to a bigger standard deduction. The bill calls for raising the standard deduction from $6,350 to $12,000 for individuals, and from $12,700 to $24,000 for married couples.
Rep. Brad Sherman (D-Sherman Oaks), who once chaired California’s tax agency, believes the GOP is also pursuing another goal with this part of its tax plan.
“It also is designed to put political pressure on California to become more like [low-tax and low-spending] Texas and Mississippi,” Sherman said.
The idea is that ending the deduction for state and local income taxes could spark a popular push for tax cuts in California, he argued.
Oh said he’s interested to see how state and local governments react to this new federal tax system, if it becomes law.
He thinks many states could choose to lower their income taxes, and offset those cuts with higher property taxes. That could give their home-owning residents more to deduct from their federal tax bill.
“But unfortunately in California, because of Prop. 13, that kind of move away from non-deductible income taxes and toward deductible property taxes is hard to do,” Oh said.
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Dumb question of the day: Given that it is all printing press money anyway, what real effects would taxing less have on the less taxed?
print more so we can get more free stuff from overseas!
I just put in a buy order on my walmart phone for 1000 shares.
Englewood, CO Housing Prices Crater 7% YOY
https://www.movoto.com/englewood-co/market-trends/