Mortgage Payments should be Indexed to the Value of the Home

[SEWIGuy]

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

The biggest tax advantage for homeownership is the exemption of the rent to homeowners implicitly pay themselves.

You assume that rent is mostly profit. It's not.
Rent should cover any taxes on real estate, maintenance (which is often more expensive than renters realize), insurances, interest and depreciation on the value of the property - someone paid a lump sum to have that built. Once all that is taken into account, rent may cover risks associated with ownership. 

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

The biggest tax advantage for homeownership is the exemption of the rent to homeowners implicitly pay themselves.

You assume that rent is mostly profit. It's not.
Rent should cover any taxes on real estate, maintenance (which is often more expensive than renters realize), insurances, interest and depreciation on the value of the property - someone paid a lump sum to have that built. Once all that is taken into account, rent may cover risks associated with ownership. 

We tax the risk premium on all other capital assets (i.e. interest on corporate bonds, dividends from equities)

there is a tax on real estate sale profit, AFAIK. Exactly that.

Not on the first $250,000 in gain ($500,000 if married) primary residence owned for more than one year.

[kernals12]

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

The biggest tax advantage for homeownership is the exemption of the rent to homeowners implicitly pay themselves.

You assume that rent is mostly profit. It's not.
Rent should cover any taxes on real estate, maintenance (which is often more expensive than renters realize), insurances, interest and depreciation on the value of the property - someone paid a lump sum to have that built. Once all that is taken into account, rent may cover risks associated with ownership. 

Well that's because there are plenty of advantages to owning a home besides the SALT and mortgage interest tax deductions. Real estate generally appreciates, and there are inherent advantages to owning property rather than leasing.

The biggest tax advantage for homeownership is the exemption of the rent to homeowners implicitly pay themselves.

You assume that rent is mostly profit. It's not.
Rent should cover any taxes on real estate, maintenance (which is often more expensive than renters realize), insurances, interest and depreciation on the value of the property - someone paid a lump sum to have that built. Once all that is taken into account, rent may cover risks associated with ownership. 

We tax the risk premium on all other capital assets (i.e. interest on corporate bonds, dividends from equities)

there is a tax on real estate sale profit, AFAIK. Exactly that.

Not on the first $250,000 in gain ($500,000 if married) primary residence owned for more than one year.

And even without an exemption, there's still the benefit of deferral. 

[mgk920]

The current system is rather one-sided. If a borrower is underwater and gets foreclosed on, they still owe the difference between the sales price and the value of the loan, but it is extremely unlikely that the borrower will ever be able to pay that debt. On the other hand, if the sales price is higher than the value of the loan, the borrower gets to pocket the surplus. This asymmetry means all borrowers have to pay a higher interest rate.

Yes. The risk is on the buyer. If you don't want to deal with that risk, you can always rent.

Our tax code privileges homeowners over renters.

I would think you would favor that. One aspect of the current income tax system, as it was amended during the previous administration, is a cap on the amount of state and local taxes you can deduct on your federal return. For many of us, that causes us to take the standard deduction, rather than itemizing and deducting mortgage interest and real estate taxes, because the standard deduction exceeds the amount we can get by itemizing. The current system is set to expire next year, though in general we can probably be certain it won't just expire with everything going back to the way it was before because that never seems to happen.

If the current system were to remain in place, though, I've wondered to what extent it might cause a societal shift away from home ownership, at least in larger urban areas. The loss, for many people, of the tax benefit from home ownership could well prompt more people to rent, and I've wondered to what extent that might lead to increasing numbers of people renting apartments or condos—which, in turn, in many urban and suburban areas are often concentrated either near subway lines or along major bus routes. Hence why, given your expressed antipathy towards mass transit, I figure you'd favor tax advantages for home ownership to the extent it could increase reliance on cars.

Deducting the mortgage interest on one's HOUSE from income taxes simply means that you are paying that interest with pre tax rather than post tax money, still a bad deal.  The best ting for you is to make the interest cost as low as possible regardless.  "I've got this massive tax deduction every year!!" ("but you still have an even more massive debt expense that you are servicing").

Mike

[kalvado]

Well, in the grand scheme of things, someone invested into home being built; and that someone wants to collect the interest either as rental income or as a reduced cost of personal residence.
If someone else has no capital to invest... it's called capitalism after all.
there are only different combinations of who owns it - resident, bank, landlord. Government ownership is another option, though, but may be too big can of worms to talk about. 

[Rothman]

I like cake.

I like eating, too.

What else would one do with cake?

So...you can have your cake and eat it, too...

[ZLoth]

For most people, a mortgage is, by far, the longest duration loan they will ever take out. In 30 years a lot changes; the general price level rises thanks to inflation, your earnings increase the longer you're in the workforce, and an expanding economy increases land values, but the payment amounts remain the same.

That assumes that everyone takes out a 30 year mortgage. Nope, I have a 15 year mortgage that will be paid off in ten. And yes, there are ten and twenty year fixed mortgages, not to mention adjustable rate mortgages.

Also, the "payments remain the same" only works if you have a fixed interest rate and no escrow account for property taxes and homeowners insurance. So, yup, at the cost of interest, I have escrow account to ensure that property insurance and taxes are paid, thus I get a yearly statement around March with the adjusted escrow payment.

It also means that borrowers bear all of the risk of decreases in property values. 15 years ago, when very large numbers of people were foreclosed on, they remained in debt even after the house had been sold, as the value of the home was less than the face value of the loan.

Fifteen years ago makes it 2009. In that surreal estate period before that, there were too many NINA (No Income No Asset) mortgages as well as interest-only mortgages where the borrow only paid the interest for several years in the hopes of refinancing when the home increased in value and the interest rate dropped. Instead, they were underwater. Oh, and the interest rate ranged from 5.5-7% before that housing crash.

It also means that housing shortages, such as the one occurring now, means that borrowers see their net worth go up, making them likely to vote for politicians who pass laws that restrict the supply of housing, creating great welfare losses.

Part of the reason behind the housing shortage is that many people took advantage of the low interest rate a few years and refinanced. Those interest rates have more than doubled, so if they sell and get a new mortgage, their costs would be more. This also means that the "empty nesters" of older folks whose kids have moved out are hanging onto their bigger homes, turning the spare bedrooms into hobby rooms or storage rooms.

All of this can be solved by tying principal and interest amounts to the value of the property. To eliminate the incentive for borrowers to neglect maintenance to lower their mortgage payments and for administrative simplicity, it would be best to use an index of regional home prices to be adjusted annually.

Again, define "value". Ultimately, the price of a home is determined by the purchaser and the seller. Because of the sharp increase in the appraised value of homes in the past five years, the increased in the assessed value of homes had it against limits. For Texas, that rise in appraised value is hitting against the 10% limit if you have a homestead exemption on that primary residence. If you are a renter, then homestead exemption doesn't apply and the full value of the property tax is passed along as a rent increase.

Unfortunately, some homeowners are resisting those property tax increases by letting their homes fall apart by not even performing home maintenance, then complain about gentrification when other homes in their neighborhood get sold as fixer-uppers and those new homeowners perform the necessary yet long-delayed maintenance.

[Max Rockatansky]

I like cake.

I like eating, too.

What else would one do with cake?

So...you can have your cake and eat it, too...

You can stare at it.  I often find myself doing that at weddings when I'm served cake and I'd not sure if it contains tree nuts. 

[Scott5114]

The phrase "have your cake and eat it too" is referring to the fact that once you eat the cake, you no longer have it.

[Big John]

You can have archaic too, but it's obsolete.

[1995hoo]

The phrase "have your cake and eat it too" is referring to the fact that once you eat the cake, you no longer have it.

Paul Brians has a good explanation along the lines of what you've noted:

The most popular form of this saying—"You can't have your cake and eat it too"— confuses many people because they mistakenly suppose the word "have" means "eat," as in "Have a piece of cake for dessert." A more logical version of this saying is "You can't eat your cake and have it too," meaning that if you eat your cake you won't have it any more. The point is that if you eat your cake right now you won't have it to eat later. "Have" means "possess" in this context, not "eat."

[Rothman]

If I eat the cake, I still have it.

[kalvado]

If I eat the cake, I still have it.

Not for long, though.

[SectorZ]

can you explain that in Super Mario 64 terms

His posts should be set to this music...
 

[Max Rockatansky]

Too upbeat, K12 is more Lethal Lava Land paced.

[LilianaUwU]

can you explain that in Super Mario 64 terms

His posts should be set to this music...

I prefer this version. It's much more grand.