subject: Tax Subsidies for Housing Costs Government Hundreds of Billions [print this page] Tax Subsidies for Housing Costs Government Hundreds of Billions
When financial regulatory reform hits the housing sector we are likely to hear some discussion on Fannie Mae and Freddie Mac. To date, Fannie and Freddie have cost the American taxpayers over $145 billion dollars and that sum continues to grow. However, with the two mortgage giants under government conservatorship, we are not likely to see any drastic changes to the way they operate financially. They are most likely going to continue to costing the taxpayers' money. After all, they are no longer in the business to make money unless instructed to by the federal government.
So, if we are not likely to see considerable change in how Fannie and Freddie currently operate, what else is there for the government to do nothing about? How about the issue on tax subsidies for housing?
A primary concern is the tax deductibility of the interest on mortgages. Mortgage interest is predicted to cost the federal government an estimated $600 billion from 2009 to 2013. Those figures are based on estimates from the congressional Joint Committee on Taxation.
Another tax subsidy for housing costing the federal government hundreds of billions is the deductibility of property tax. There is also the dismissal of taxes on monies received for the selling of a home. The combination of these two items will cost the government an estimated $20 billion from 2009 to 2013.
Supporters of these subsidies state that these tax incentives help Increase rates. If that is the case, why is it America's home ownership peaked at around 69% during the boom years1 and the homeownership rate in the European Union is just under 75%2 for the same period of time and they have very few countries who offer such tax incentives.
Critics of the tax incentives believe that such breaks helped to misconstrue housing prices and stripped the government from much needed revenue.
The acceptance of the tax incentives by the majority of the United States citizens, who are homeowners, makes any talks of reform a touchy subject. Any talks of reform to housing subsidies by a politician would likely by viewed as an endorsement to increase taxes.
