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Originally Posted by Willravel
People need incentives to own homes when renting is another option. If the middle class is all renting, ownership moves to the top, with banks and the rich. What do you suppose happens to renters' rights when the majority of home owners are rich or super rich?
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What?!?
You are suggesting that if not for the mortgage tax deduction people would not desire to own their homes???
First, did people desire to own their homes before the tax deduction? Before there was even a income tax in this country?
Second, the incentive of home-ownership is intrinsic in being in control of living expenses. You buy a home to own it. Get to a point where you either have fixed and known costs with no mortgage or no rent.
Third, home-ownership is a hedge against inflation. Rents will always go up over time.
Fourth, home-ownership is an investment. People can make money through owning a home. It serves some as a built in nest egg. A home serves as a legacy for your children.
Fifth, home-ownership represents stability and status in a community.
People rarely do things simply because of the tax implications, it is very possible that home-ownership rates would not be measurably different without the special deduction - but I bet homes would be less expensive and thus more affordable to poor and average people. I argue that the mortgage deduction causes people to buy bigger homes and it inflates prices, perhaps to the point of actually off-setting the tax benefit.
Here is something to think about regarding government and unintended consequences that is related to the home ownership issue related to government and unintended consequences.
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One result of the federal government’s student financial aid programs is higher tuition costs at our nation’s colleges and universities. Basic economic theory suggests that the increased demand for higher education generated by HEA will have the effect of increasing tuitions. The empirical evidence is consistent with that—federal loans, Pell grants, and other assistance programs result in higher tuition for students at our nation’s colleges and universities.
The diversity of objectives, resources, and types of governance among the thousands of colleges and universities makes it difficult to adequately measure the exact amount by which tuitions rise in response to federal student assistance. Therefore, estimates of the amount vary in the literature. Congress can at best know that its policies increase tuitions and that some portion of the federal assistance ends up being captured by state governments and by the colleges and universities.
Also, when large numbers of students begin to rely on the federal government to fund their higher education, and the federal government uses this financing to affect the behavior of state and private institutions, we should be concerned about how the resulting loss of independence of our colleges and universities affects the ability of voters to form opinions about public policy that are independent of the government’s position.
Rather than expand the current system, Congress should consider a phase-out of federal assistance to higher education over a 12-year time frame. As the federal government removes itself from student assistance, we should expect several things to happen. First, sticker tuition prices should decline. Second, the private market should respond to the phase-out of federal assistance. That response would likely take three forms: additional private-sector loans, additional private scholarship funds, and perhaps most importantly, the expansion of human capital contracts. Human capital contracts, first suggested 40 years ago by Nobel Laureate Milton Friedman, would allow students to pledge a portion of future earnings in return for assistance in paying their tuition."
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Making College More Expensive: The Unintended Consequences of Federal Tuition Aid | Intellectual Takeout (ITO)
The game is clear, if you qualify for special treatment from government or you are rich, college is not an issue. If a person is middle class and don't quality for special treatment their options are severely and unfairly limited. It is crazy to the point of, in some cases a family would be better off not saving, not preparing for the expenses and not earning a high income when it is time to apply for aid.
Is this the kind of system you favor? I certainly do not.
My son is 14 and entering HS next fall I am facing this issue now, how do you suggest I "play the game" to minimize out of pocket costs? And be honest, it is a game. I have talked to some other parents and my wife and I are relatively ignorant. I thought we just needed to save money and he needed to get good grades. That is certainly naive.