Spotted by Kj at bt.dk (this is a Google translation so may be a bit ropey):
A pruning of the interest deduction may be part of the government's tax reform presented Tuesday. Mortgage Association is open to cutting the mortgage interest deduction.
Homeowners are likely to have reduced their interest deductions when the government on Tuesday presented its long-awaited tax reform. A lowering of the interest deduction in play in SRSF the Government's proposal, learn Berlingske.
However, only with effect from after 2015. At first impair the value of the interest deduction to the time avoids the government to break its promise from the government program to 'the government will keep residential taxes and mortgage interest deduction at rest in the current parliamentary term'. And when the term expires by 2015, hoping SRSF so that it is less vulnerable to criticism about broken promises.
Already it is a fact that the tax value of the interest deduction is lowered gradually from 33 per cent. to 25 per cent. in the period up to 2019 for amounts exceeding DKK 100,000 in interest expense for married couples and 50,000 for singles. It was one of the elements from the previous Liberal government's tax reform in 2009, which annually brings more than four billion.
And from the blue corner: "We oppose any measures which will cost homeowners money," said Liberal Party (the main opposition party) tax spokesman Torsten Schack Pedersen.
????
Whatever the maths are, if you scrap the interest deduction that increases the tax base, so to collect the same revenues, the headline rates can be reduced by a few percent, it can't take more than five minutes to work out the impact if you have the data to hand.
The people who would benefit from this are proper home owners (i.e. those with small or no mortgages) and people who intend to buy a home in the near future (as well as tenants, of course) as they'd all pay less tax. All things being equal, house prices would come down if the interest deduction were scrapped, but would also go up slightly if income tax rates were reduced, the net impact is hard to judge.
So on the face of it, the short term losers are those with large mortgages, and in the medium and long term, the biggest losers would be the banks (who siphon off half the subsidy via higher lending volumes). Overall, its quite possible that owner-occupation rates increase, so this measure is about as far from being an 'attack on homeownership' as you can get.
Bankrupt
3 hours ago
12 comments:
So on the face of it, the short term losers are those with large mortgages, and in the medium and long term, the biggest losers would be the banks (who siphon off half the subsidy via higher lending volumes). Overall, its quite possible that owner-occupation rates increase, so this measure is about as far from being an 'attack on homeownership' as you can get.
There is no doubt who really benefits from the ID currently here, well-off BTL landlords. As the top-rate is 48%, any doctor or lawyer with common sense will own a couple of rentals on interest-only mortgages, have govt subsidise half their interest payments, and have the rental income/capital gains taxed at a much more comfortable rate of 28%.
"We oppose any measures which will cost homeowners money," said Liberal Party (the main opposition party) tax spokesman Torsten Schack Pedersen."
Are you sure Google translate got that right? I think what he's really trying to say is "We oppose any measures which will cost banks money,"
Kj, there's far worse.
In Germany (when I worked there as an accountant in the 1990s, I don't know how bad it is now) had a top rate of tax of over 50% and landlords who bought new buildings could write off the cost of the building against tax over ten years, as well as getting the interest deduction, zero capital gains tax and were able to set off income losses against other income.
The tax breaks for owner-occupation were much much less than this (no deduction for build costs and restricted interest deduction).
So if two connected people were thinking of buying a house each to live in, we would advise them to buy a house as a landlord and rent it to the other one. Fact.
B, the word he used was "boligejerne" which literally translated means "housing owner".
MW: Ah the joys of tax planning. At least Germany seems relatively free of Homeownerism, but may still be infected by a slight case of Landlordism.
For the record, I've got nothing against the well off and understand very well why they tax-plan. The problem is what the consequences are; a common occurence when looking for a flat, I remember this when I was looking for my first, is that a middle-aged man wearing Polo or Gant-clothing will appear, not very likely to need a starter-flat, and you already know you don't have to bother making a bid, he's there to avoid higher rate income taxes or wealth taxes, and will make you pay it in rent instead.
Kj, Germany is delightfully free of Home-Owner-Ism and NIMBYism.
But they do have land-owner-ism - the main reason why Germany did not have a house price bubble in last ten years is because prices were so stupid high to start with - and people think it is normal to pay hundreds of thousands of Euros for a small plot of land to build a house on.
I wouldn't call it "landlordism", the higher rate taxpayers are tricked by the lovely shiny tax breaks into buying new flats, but they pay too much for the new flats and actually get a very poor return on their investments - because all the subsidy goes into land values.
But whatever it is, it is much better than in the UK.
Mark, I wasn't being serious.
BTW, what is the percentage of owner-occupiers in Germany? Don't most people rent?
B, very low % of owner-occupier in E Germany, in W Germany it's lower than here (about half) and on average less than half of people are owner-occupiers.
But the Germans have all sorts of implicit and explicit rent controls (whereby "Allow more stuff to be built where it's needed" counts as an implicit rent control) so it's no big deal.
I think I have been debating with krj about interest rate exemptions elsewhere. It started with MIRAs which has personal exemptions,not per property,and the UK property market went crazy.Double exemptions has to be stopped by a Tory Chancellor.
But the larger point remains: the spirit of MIRAS has risen from the grave in Britain. Everybody gets exempted from paying a viable mortgage interest rate by the blanket measure of setting a laughably low general interest rate. (Not laughable to savers.)
So the Homeownerists exempt everybody they want to vote for them from paying land tax AND from paying proper interest rates.The old double whammy.
DBC, it didn't start with MIRAS. From the word go, with income tax there was an deduction for all interest paid, but this got watered down and down until only MIRAS (and a couple of minor deductions like relief for loans taken out to invest in a business) were left.
Suffice to say, the low interest rates save mortgage borrowers about £40 billion a year (and savers pay it), so the effect of this is like a super-tax on interest income which is used to give a massive tax-break to mortgage borrowers (if they re-introduced full on MIRAS at today's interest rates, then this would be worth approx. £15 billion a year).
Sorry but I was writing the above in extreme haste. I meant the debate with Krj or kj (whom I assumed were the same person) started on the subject of MIRAS, not that interest rate exemptions started with MIRAS. Where kj comes from they still have a universalised interest rate exemption (from what I gather ).
DBC, Kj is in Norway and is the still small voice of sanity in an otherwise apparently Home-Owner-Ist country (they are as bad as we are).
DBC: abolishing the interest rate exemption is a good thing, and would take down house-prices a notch, but it is not enough, as witnessed by the case of the UK. If LVT was introduced, the interest rate exemption wouldn't be that big of a problem for house-prices, but still an unfortunate incentive to use debt.
Post a Comment