Poll: Which debt-encouraging tax benefit would you most like to eliminate?

Please vote in this poll using the sidebar.

Which debt-encouraging tax benefit would you most like to eliminate?

  • Capital gains tax excemption for home sales. (7%, 16 Votes)
  • Mortgage interest deduction. (5%, 11 Votes)
  • Home equity loan interest deduction. (34%, 83 Votes)
  • Deductability of points paid on mortgage. (2%, 6 Votes)
  • $8,000 tax credit for first-time buyers. (8%, 19 Votes)
  • All of the above. (31%, 76 Votes)
  • None of the above. (13%, 32 Votes)

Total Voters: 242

This poll will be active and displayed on the sidebar through 03.07.2009.

0.00 avg. rating (0% score) - 0 votes

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1
    EconE says:

    I’d like to rephrase the title…

    ‘What do we have to do to get you to sign the next 30 years of your life over to
    the banking system’

    Let’s see.

    1. Capital gains tax exemptions? The only people that are selling and getting “capital gains” now are people that have owned for a long time and they could even lower their prices further to “split the savings” or so to speak in order to get their house sold. Most others are incurring losses. Why not just cut me a check in advance for the capital losses I would take if I purchased at the current over inflated listing prices where even a 20% below asking offer is redonkulous when the person purchased in 2006 and is now bailing yet the agent takes the listing and still bumps the price up 30%.

    2. Mortgage interest deduction. Aren’t they capping it? Haven’t we rehashed this topic over and over? Capping it will help to lower prices further. Keeping at is won’t help many either. Moot point.

    3. HOME EQUITY LOAN INTEREST DEDUCTION!!!? (yes, that was yelling).
    Yikes. Have we not learned our lesson? Isn’t it time to put the Home ATM to rest for a little bit? You’re not “Putting your equity to work for you”…you’re borrowing more money.

    4. Deductability of points. LOL. Who thought of that one? You mean those fees that the banks charge but call them “points”. Just give out no point loans.

    5. 8k tax credit? You can negotiate more than that and have the seller thrown in concessions to boot. You can wait a year, see prices much lower (banks and long time homwowners) and use a discount broker if you want. 8k is chump change compared to the prices of a house just about anywhere in the PSA.

    How about the administration take a day and hop on Redfin so they can see with their own eyes the pie in the sky prices people are still asking. Then, Obama…in a weekly televised broadcast…can warmly remind viewers that they need to lower their prices…substantially.

    Or, the government can just freeze the MLS asking prices right where they are….and send all renters a 50% off coupon good for up to 500k to be used for a primary residence. The freezing of the MLS would be necessary so that agents/sellers can’t manipulate things and raise prices accordingly.

  2. 2
    Herman says:


    Some of these were originally meant to promote home ownership. But that effect only lasts until the benefit has been fully priced in via elevated price levels.

    Others (cap gains) were a gift to retiring baby boomers so they can downsize and cash out without paying tax. One of many policies the boomers enacted for themselves at the expense of their children.

    BTW I think you should add a button for “eliminate all of the above, but only for people with income levels higher than my own”.

  3. 3
    Ben says:

    I actually don’t think that the above matter much in the whole scheme of things.

    The federal reserve system, Freddy and Fanny, and government backing of failed banks are the problems. They cost orders of magnitude more than the incentives for individuals and have the ultimate effect on how things work.

    I don’t think that the individual level incentives matter much when it comes to affordability.

  4. 4
    Kary L. Krismer says:

    I find it a bit interesting that so many would want to get rid of the capital gain exclusion, since it’s so often argued that real estate appreciation closely tracts inflation. If that’s the case, it’s a tax on inflation, which seems rather unfair. Also, the current system is much better than the old one where you’d roll your basis over if you bought a replacement house within a certain time frame. That created a lot of traps for the unwary.

    As to the home equity loan interest deduction, I think there are already some limits on that, one perhaps being that the interest on the loan amount cannot exceed the current value. I’d be more in favor of reducing that to the interest on the loan amount not exceeding the current basis.

  5. 5
    rose-colored-coolaid says:

    By Ben @ 3:

    I actually don’t think that the above matter much in the whole scheme of things.

    Agreed. Though, I voted to get rid of the mortgage interest tax deduction. Why? Not because it actually saves people any money. And not because of the moral hazard of encouraging stupid people to pay JP Morgan $1000 so they can get $200 back from the IRS. I’d like to be rid of that stupid tax benefit so people who don’t understand algebra will stop trying to use it as an argument for why home ownership is such a great investment.

    How many arguments over the last 6 years went like this (GF = greater fool, BH = bubble head)

    GF : You really need to buy a home.
    BH : Why? They’re overpriced.
    GF : Because it’s a great investment, that’s why. I know a guy who bought a house in (fill in uber-desirable area) in 1964 for $15,000 and now it’s a $7,200,000 home.
    BH : That’s nice and all, but shouldn’t you be careful about extrapolating his success story to your buying a 3800 sq ft lot with a 4200 sq ft home in Issaquah?
    GF : [flustered] Look here, real estate prices always go up.
    BH : What about the Great Depression? Japan 1990’s? LA early 1990’s?
    GF : You’re just throwing your money away on rent, you know.
    BH : Here’s how much I save each month renting compared to your mortgage.
    GF : Oh yeah? You don’t get a tax break you dope! [folds arms and looks smug about how the GF is working the system and the renter is getting worked]

    Anyways, that’s why I hate the mortgage interest deduction. Also, it’s my understanding that due to other changes in the tax code, this deduction is nearly worthless for most homeowners now. I might be wrong on that, since I’ve never used it, and this is just heresy. The point is, a number of these are almost mythical now. You could caress most of them to such a point that only 1 guy in Nebraska gets the deduction, and many people would still quote how important they are for the next decade.

  6. 6
    Scotsman says:

    I voted to kill all of them. Why should the government engage in any kind of social engineering or favor one group (buyers, sellers, builders, etc.) over any other? Once this starts, where do you draw the line? What group or enterprise is worthy, which is excluded? Who contributed the most to my campaign?

    Tax consumption, nothing more.

  7. 7
    TJ_98370 says:

    Off Topic –

    The Dow fell below 7000 this morning.

    Who was it predicting a 6000 range Dow before all this is over?

  8. 8
    tomtom says:

    By Kary L. Krismer @ 4:

    I find it a bit interesting that so many would want to get rid of the capital gain exclusion, since it’s so often argued that real estate appreciation closely tracts inflation. If that’s the case, it’s a tax on inflation, which seems rather unfair.

    Savings and money market accounts also closely track inflation, and they are taxed even more heavily (at marginal income rates).

  9. 9
    Kary L. Krismer says:

    RE: TJ_98370 @ 7 – It’s going to probably continue to fall until someone comes up with a decent solution to the bank problem. I don’t understand why the sole focus is on making sure housing loans are available, and not business loans (other than lack of resources). Business cannot operate without functioning credit markets, and I think the 4th quarter GDP demonstrated that.

  10. 10
    Kary L. Krismer says:

    By tomtom @ 8:

    By Kary L. Krismer @ 4:

    I find it a bit interesting that so many would want to get rid of the capital gain exclusion, since it’s so often argued that real estate appreciation closely tracts inflation. If that’s the case, it’s a tax on inflation, which seems rather unfair.

    Savings and money market accounts also closely track inflation, and they are taxed even more heavily (at marginal income rates).

    Agreed, but it’s usually a relatively insignificant number, and taxed annually, so it doesn’t have as much potential to totally screw up someone’s finances. And part of the reason for the lower tax rate is the recognition that you are dealing with a gain that occurred over multiple years (by definition) and that rates increase as income increases.

    It used to be worse before the $250k exclusion. You’d have people who rolled over 3-6 houses, with the basis calculation being dependent on transactions over a period of 20-40 years (until they reached 65 and could take advantage of a different exclusion). It was an accounting nightmare.

  11. 11
    tomtom says:

    Currently lt capital gains on home sales is 0% at the bottom, 5% for folks in the 10% and 15% brackets (AGI below $65,100), or 15% for those in the higher brackets. Compared to stock appreciation, the $250,000 exclusion is a terribly generous freebee for avoiding taxes. You would be paying taxes on savings interest, and dividends (at a higher rate) and cap gains on other investments which have an ‘inflation’ component.

  12. 12
    Paul says:

    Hello The Tim…

    I appreciate the response your poll illicited in me. Here goes:

    Some comments on your poll’s suggestive language regarding a decrease in taxation of the people as a “debt causing benefit”. It is my opinion that tax benefits do not encourage debt in and of themselves, it may have something to do also with people’s lack of historical context or perspective, and may, therefore be an issue which could be battled via educational campaigns or by people recognizing, understanding and capitalizing on the opportunity to working with credible experts who are honest and ethical, rather than someone who is only looking out for their own narrow, short term interests (i.e. getting paid a quick commission check), instead of the interests of their client or loved one.

    Further, I would point out that most would agree that people manage their money as individuals–some are responsible, and others are wasteful. That is reality. I do not believe everyone should be punished for the mistakes of the few. Even if those few made big, rather silly mistakes like, for instance, BOA (Bank of America) gobbling up the mountain of bad debt that was “Countrywide” (literally and figuratively) and then expecting bailout money from the government, which will inevitably be financed by taxes on the toils of the working American public.

    People who did not experience or read about the great depression, or the lost decades of Real Estate in Japan, for instance, may be served by asking grandma her perspective on the current state of the real estate economy as it relates to her perspective and experience. She may possess a unique and historical perspective on the potential risks associated with leveraging your home for equity to fuel increased spending in general, and in particular, on wasteful consumerism, particularly in a market that may exhibit future price declines. Grandma (or great grandma) may have been able to see first hand, that what goes up must, at least occasionally, come down. Even the fact that real estate is cyclical is something that hasn’t been witnessed (when you account for inflation) by many of our younger to fortyish homeowners who account for much of the current defaults.

    Also, could you clarify a few things for my understanding? I am not clear how or why you would describe any tax exemptions (i.e. reduced taxes) a debt-encouraging benefit? Are you implying that a greater tax on income generated from home sales (yes, they still sell!) is going to help provide a cure-all for debt issues in the general populous? Or is it a solution for someone else? As they say, “Cui Bono?”

    So I guess the plan is to help people (or is government a better term, maybe?) solve their debt problems by taking their (i.e. the people’s) money away through an increase in taxes and giving it to our debt-laden uncle or to bailout BOA which just charged us $35 yesterday for overdrawing by a penny? Hmmm. Interesting. Milton Friedman would have a bit to say about that…

    It’s almost like a massive transfer of capital is occurring as we witness each day and week pass. Specifically capital coming from the people, to the government, to the banks….interesting, yet scary. So I wonder why the goverment is now discussing the possibility of taking partial ownership in the banking system. Again, very interesting, to say the least. I’m interest to see how history will unfold in this arena and how this moment will be remembered.

    Bluntly (although hopefully not antagonistically) inquired, is your poll’s question an indirect way to suggest a way to solve the government’s debt problem? I agree that taxing home profits on individuals and families would help to offset the budget deficit in the short term, but then again, so will proper money management skills employed by our state executives and congress as it relates to policy making. (Did they teach Money management 101 or 202 in your public schools? They didn’t in mine). I guess that is now our problem, too. We (the people) give government vast hordes of money (i.e. a third of the money we make in our life, for instance), which is then manytimes frivolously misallocated and wasted, then they (tax man, i.e. “THE MAN”) look for more ways to get more money from the people to keep the spending frenzy afloat, to avoid the whole house of cards from tumbling over into an economic collapse, banking crisis, and potentially long term depression.

    It may be worth noting that without your (and my) tax revenue, Mr. IRS would not (potentially) have a job, either, and he just may end up working at Taco bell and renting from a slumlord who just was forced to raise his rent $600/month because he now has to compensate for taxes he didn’t use to have to pay, but now does, all because an online poll somehow indirectly swayed peoples opinion to influence many to believe that it was a brilliant idea to tax homeowners who in a large part are already losing tremendous amounts of equity that they’d planned to retire on, in order to compensate for a fiscally irresponsible government. Again, I’m just observing the situation, and my perspective is limited to my own experienc and whatever experience I add to my situation via constant research and maintaining a curiously skeptical frame of mind.

    Those profits that Mr. homowner would otherwise have realized, but will now be captured in increased taxes may have been spent to hire landscaping workers (to keep property values and their corresponding tax revenue base in tact), yoga memberships (to keep long term health costs down, in theory), and Taco bell (all of which employ workers, although not doing much to reduce long term costs of healthcare, LOL), will now be sunk into a government that is unsympathetic to the general populous and decides to use our money to bail out Bank of America because they can’t collect enough $35 fees from the Taco Bell workers who overdrafted their accounts by a penny, to make enough profit to keep their stock price up enough to cover their bad investments which are now coming due. Party’s over, dude (Dude being irresponsible lenders in general).

    Besides, do people really make profits (and therefore tax revenue) in real estate anymore, anyways?!? *WINK,WINK*

    To make a long story even longer, the simple problem with increasing taxes so that government can have more of our income to misallocate is that they are inefficient in their use of OUR money…simply put : “Nobody spends somebody else’s money as carefully as he spends his own…”(it’s that Milton Friedman guy again, and he was a nobel laureate for a reason!).

    Your Brutally Honest Realtor,
    Paul Gebhardt
    Tacoma, WA

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