We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
Readers know that I am opposed to mortgage interest deductions. As I view it, these are mainly an indirect subsidization for the construction industry, with incidental apparent benefit to the homeowner - paid for by renters.
I say "apparent" because it is no real benefit to mortgage-holders. After all, without that tax deduction home prices would necessarily be lower to be affordable by your price range.
Same thing applies to all products: subsidies, subsidized loans, grants, favoring policies, etc. distort markets and make things more inefficient and, in the end, more costly more everybody. It's the Law of Unintended - Intended - Consequences.
Here's an example in the news: Real-World Evidence Showing that Unemployment Insurance Benefits Increase Unemployment. Big surprise there, right? I am not opposed to unemployment insurance, but my point is that markets, including labor markets, still work like markets no matter how much they are distorted by policies. Just boulders in the river until they become dams. If people want to take a lengthy sabbatical on unemployment, they will take it until it runs out. That's quite rational and legal, if undignified and exploitative.
Higher ed is a great example. Student loans, grants, and favoring policies simply make it feasible for schools to charge more and to spend more. But where is that money going?
You know where it is going. It's payola to schools. It is going to burgeoning highly-paid admin staff, slick new dorms, mindless PC programs, marketing, and other baloney which has nothing to do with the education which is supposedly being bought by feckless and sacrificing parents, and state-taxpayers.
Hot tubs and basketball teams? Give me a break. College is not supposed to be either High School or babysitting.
Uh... I'm confused... Those geniuses, Nancy Pelozi (I like the way Krauthammer says it) and Harry Reid said that paying unemployment benefits was the best way to create jobs!!! Something to do with a multiplier effect...
Nancy and Harry wouldn't steer us wrong, would they?
One of the ways to track the dramatic increase in costs for higher education is to track the ratio of the cost of attending vs. the median family income in the United States. For instance, in 1986 according to this document was $29,460 (see p. 9) . That same year, the cost of attending Harvard (including tuition, fees, and room and board) was $16,145 (before financial aid) according to this article. That means that in 1986 the cost of attending Harvard represented 54.8% of the median income for families.
I'm using Harvard just because it is well-documented and the numbers are easy to come by, but it can easily stand in as a proxy for private higher education generally. Many schools have also increased their costs to be more in line with those of Harvard and the Ivies as a way of trying to market a certain sort of elite cache. But public education costs as a fraction of median income have gone up just as dramatically, as well.
"As I view it, these are mainly an indirect subsidization for the construction industry, with incidental apparent benefit to the homeowner - paid for by renters."
I disagree on both points. First, I think it is more a subsidy to the banking or mortgage lending industry, who can raise their lending rates if the homeowner can claim an itemized deduction on his tax return for the interest he's paying on his mortgage.
Second, renters have ALWAYS had a tax advantage from the mortgage interest deduction, albeit indirectly, and that's because mortgage interest is a deductible business expense for the renter's landlord when he goes to pay his taxes. When a landlord's expenses are smaller, he can charge a lower rent for someone to live in his rental property.
Allowing all home owners the same tax deduction for mortgage interest in effect levels the playing field for those who are neither landlords who rent out their property nor renters who pay a landlord a monthly rent. To be clear, the business expense taken as a tax deduction by the landlord provides an indirect tax benefit, not a cost, to renters because it lowers the landlord's cost of his mortgage on his rental property. The landlord can pass these reduced costs along to his renter by lowering what he charges for rent. If he chooses to do so, the interest deduction then benefits the renter.
Since the justification for a mortgage tax deduction is to increase home ownership, it seems obvious that it should only apply to primary residences, and should be capped at some reasonable level. The idea that home prices in its absence will fall (for comparable homes) is intuitively questionable.