What Can I Say?
Posted by Chris Martin at 7/28/2009 7:03 PM 
Categories: Health policy
Tags: But second homes are the foundation of the American dream
Categories: Health policy
Tags: But second homes are the foundation of the American dream
So every day we hear some millionaire or other tell us that the reason health costs are rising is because we allow businesses to deduct health insurance as an expense and then do not count it as wages when it comes to taxing people.
Which tax treatment, we are told, causes horrible market distortions and drives up health care prices. Now Wonks Anonymous does not believe that the theoretical arguments made for this position are sound as he has argued elsewhere. But that is not the point of this rant.
May Wonks Anonymous point something out. We also allow people to deduct the interest on their mortgages. Not for just one house but for two houses. At the same time we are recovering from a major economic disaster that was compounded of careless borrowing and rampant housing speculation.
No economist in his right mind would say that our tax system, which subsidizes borrowing against real estate, had nothing to do with the mess that we find ourselves in.
But, unlike good health insurance which is something that many union workers benefit from, second homes and large mortgages are generally the province of the better off members of our society. And of course our congress critters sympathize since they need to have two homes - one back in the district and another in DC where they really live.
What is more unfair? Letting a supermarket cashier have a low out of pocket health plan with a little help from the government or giving some clown a major tax deduction to help pay for his condo in Aspen?
Which tax treatment, we are told, causes horrible market distortions and drives up health care prices. Now Wonks Anonymous does not believe that the theoretical arguments made for this position are sound as he has argued elsewhere. But that is not the point of this rant.
May Wonks Anonymous point something out. We also allow people to deduct the interest on their mortgages. Not for just one house but for two houses. At the same time we are recovering from a major economic disaster that was compounded of careless borrowing and rampant housing speculation.
No economist in his right mind would say that our tax system, which subsidizes borrowing against real estate, had nothing to do with the mess that we find ourselves in.
But, unlike good health insurance which is something that many union workers benefit from, second homes and large mortgages are generally the province of the better off members of our society. And of course our congress critters sympathize since they need to have two homes - one back in the district and another in DC where they really live.
What is more unfair? Letting a supermarket cashier have a low out of pocket health plan with a little help from the government or giving some clown a major tax deduction to help pay for his condo in Aspen?
Um, the mortgage interest deduction has been part of the US tax code since 1913, but there had never been a national housing bubble until 2000-2006. And in the UK, favorable tax treatment for morgage interest was phased out in 2000-2001, but there was a housing bubble there too.
Most accounts of the mess were in involve a chain of reckless and corrupt behavior on the part of realators, appraisers, mortgage brokers/originators, Wall Street broker dealers who securitized the loans, bond rating agencies, and banks and insurance companies that underwrote credit defalut swaps. And regulators who failed to stop them.
I agree that the mortgage interest deduction is give-away to the affluent and to real estate interests that serves no useful purpose. But it played little or no roll in the housing bubble and financial crisis.
The same argument can be made about the Health care exemption which has been around since the 1940's but only created the Health Care cost crisis in the past 20 years.
WA
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