For some time now, United States tax codes have provided incentives for homeownership. These tax breaks were meant to encourage first home purchases with the thought that homeowners would upgrade to more expensive homes as the aged. The intended message to the American people is that to truly qualify as a middle-class family there must first be a qualification for a mortgage.
The new GOP tax bill will effectively roll back many of the benefits associated with homeownership. Monthly housing costs for many homeowners will be increased by lowering the number of deductions allowed for a reduction of mortgage interest and taxes on the property. And because the standard deduction will be approximately doubled under the new tax bill there will be a significantly smaller number of homeowners eligible for tax benefits.
The Republican plan is indicative of government ‘unwillingness to subsidize’ American home ownership is the message that Edward Glaeser, Harvard economist, gleans from GOP actions. Glaeser explains that the approach is also reflective of how expensive the cost of housing is and the problem the GOP feels is caused by using the U.S. tax code to aid in the purchasing of price inflated homes.
For decades, both political parties have promoted homeownership as a vehicle to build wealth and stabilize neighborhoods despite the criticalness of many economists, Glaeser included, in regards to the government subsidizing of home purchases.
In effect, the government has artificially lowered the cost of home financing through the use of tax subsidies and mortgage brokers such as Fannie Mae. The result has often been American families taking on more debt than they can afford to purchases larger homes or even secondary residences.
Some economists feel that these practices have a number of negative effects on the economy. For one the benefits are not applied equally. Deductions grow with the value of the more costly the home is so the majority of financial benefits from these subsidies go to the wealthiest Americans. This works to alter the American landscape by encouraging the production of single-family homes in suburban areas, resulting in increased infrastructure spending. This practice causes the housing market to become a larger portion of the United States economy than it would be otherwise.
It has also been observed that the funneled resources to an unproductive industry like construction, investment depletion results in more productive industries like education and manufacturing.
Detractors of the GOP proposals are both many and vocal. The California Association Of Realtors has stated that the tax bill set forth by the Republicans ‘punishes homeowners’ and undermines the dreams of homeownership shared by many Americans.