The home mortgage interest deduction should be eliminated in the United States

Housing Prices: Pro states that my argument on housing prices was misleading. I disagree but this is a matter of perception. I will go more into detail in this round to refute these assertions. Pro gives us a generalization of what a high elasticity is to a low elasticity, then compares it to the housing market. This is a false method. To explain why I will quote the following sentence from the same paragraph as her quote cited from earlier in the round to make this argument: “The deduction will raise prices more in densely populated areas with low housing supply elasticity’s and high tax rates” Clearly the elasticity’s being discussed here are low when being compared to other housing areas, not to general economic theory. Her source would have obviously taken the actual elasticity rates into consideration when concluding that certain areas may loose as much as 10% of their housing values. I would also like to point out the very first sentence of the paragraph this whole argument comes from: “The MID also has the potential to affect homeownership through its impact on home prices.” Clearly it is recognized that housing values will be impacted. The National Association of Realtors research concluded that impact to be 15% nationwide average(1), although I admit that they are not exactly unbiased. Despite all the statistics we can sit here and quote, one thing that is obvious and can not be refuted is that eliminating the MID will have a psychological impact on the buyers. An action like this will be perceived as a hit on the housing market and since housing values are the result of perception, it will naturally be impacted. As far as how much of a change in housing values this would have, it is clearly a highly debated topic but the main point I make with this argument is that it will have an impact. Pro clearly agrees with this general statement by her first sentence in “Americas Net Worth”. Americas Net Worth: Pro seems to confuse two different concepts into this argument. She discusses the value of housing prices being impacted more for higher income earners, and shows an income tax bracket as her apparent source for her point. Her argument appears to be that a decline in housing values would be felt more by wealthy Americans, and therefore serve to increase equality in overall Net Worth. If I am interpreting this point correctly I will just say that weather it increases equality or not, declining in housing values for wealthy Americans will in no way benefit lower class Americans. As for the tax increase chart, Pros chart shows that the percentages will clearly be felt more for wealthier Americans. I don’t think this point is a great way to illustrate why eliminating the MID is beneficial, but I will point out that if we are talking about an action that increases the tax burden only on homeowners then it would be helpful to consider the impact only on homeowners. Naturally, Americans in that bottom bracket are less likely to own homes. The issue with this chart is that makes it look like homeowners in the bottom income bracket will not see any difference at all in their tax burden, by factoring Americans that do not own homes into the average. I don’t refute the general concept of equality this chart shows, but I simply point out that it does have some flaws which skew the results. Economic Equality: In the last round I posted a chart showing that the MID currently shifts the deductions down toward the lower classes. I did this by comparing very basic statistics given by the IRS. In addition to the income tax change chart posted by Pro, she also responds with a quote showing the opinion of 2 economists. I remind Pro and the readers that this is a debate and that simply showing that experts agree with a particular point is not a valid argument, especially in the face of a rebuttal. However in the spirit of having an intellectually honest debate I will take a moment to point out the flaw in the chart I posted. This chart showed that Americans under $200,000 yr pay 51% of all income taxes but receive 79% of all the deductions. These numbers came from an IRS table listed under “interest deductions>home mortgage interest>paid to individuals.” I assumed that “paid to individuals” meant that they had received this money. But these statistics are in direct conflict with Pros chart so after much research, I concluded that “paid to individuals” is not money “paid”, but rather the amount they were able to deduct from their income tax returns. So since the top income earners pay 49% of all taxes but only receive 21% of the deductions, that 21% means much more to them because of the high percentage of taxes they will be excluded from paying as the result of eliminating the MID. So it is understandable that higher income earners will be impacted more then lower income earners. Financial Responsibility: Pro states that the MID encourages Americans to purchase larger homes then they otherwise would have. I find this to be an unreasonable argument for eliminating the MID. I also find it unreasonable to read Pros 61 page source to understand the basis of this claim so I will simply refute it with common sense. The only reason Americans would buy larger homes then they would otherwise, is because of the money they will save with the MID. If they are buying homes they can not afford, or not taking the time to properly factor the MID into their financial obligations then this is a sign of personal irresponsibility of the buyer. Eliminating the MID will not change the responsibility level of the buyers in the market. Conclusion: In terms of substance Pro and I have made very similar cases. The difference is mostly in how we view the facts. Pros round 3 conclusion sums up her general position that the MID is unnecessary and costs us too much so it should be eliminated. I will sum up my position with the following three points (my statements in this conclusion do not necessarily conflict with any statements made by Pro): The MID has been in place since 1913. It is not a giveaway by any means because everybody in this nation has had equal opportunity to take advantage of it, and its impact has helped shape our current economy. I would say that Pros points make a good argument for why we should have never enacted the MID in the first place, but taking something away that is already in place is a completely different argument. I don’t feel Pro has made an effective argument for this and my next 2 points will explain why. The MID does not cost us anything. To say that the MID will cost us 131 billion dollars is no different then saying that the US should raise everybody’s taxes by 10%, and by not doing so it will cost the US X-billion dollars. When it comes to increasing tax revenue, the whole argument is simply a matter of where to take the taxes from. Homeowners are people of all income levels who have taken steps and worked hard to improve their own financial future by building their net worth. In addition to that, I will also like to simply point out that studies have shown homeowners to be more likely to involve themselves in programs that benefit the community, vote, maintain their community by better maintaining their residence, and are less likely to be involved in crime. So once again, I understand the need to increase our tax revenue but we should not be doing it in a way that increases the burden only on homeowners. Eliminating the MID would do just that.