It's not a mandate, it's a tax incentive. I'm not forced to buy a house, but if I choose not to have a mortgage, then I forgo the federal tax benefits. If you accept that the mortgage deduction is within the scope of the government's powers, then I am not really sure I see the difference. Am I missing something?
As an aside, I agree that Medicare expansion would have been a better policy. Good luck getting that through congress, though.
Yes, tax rates are arbitrary so not qualifying for an exemption is mathematically equivalent to being fined. It's just presented in the reverse.
You are being fined for not paying mortgage interest. You are being fined for each kid you don't have. Buy your house and have your kids or you will continue paying more in taxes!
Suppose Person A lives in a house with a mortgage, and Person B lives in an apartment with a lease. Suppose -- it's unlikely, but for sake of the hypothetical -- Person A's monthly mortgage and Person B's monthly rent payment are the same dollar amount and their gross annual income is the same.
Person B -- the renter -- will pay more income tax, because Person B does not get to deduct mortgage interest while Person A does.
In much the same way, if Person A carries insurance all year and Person B doesn't, Person B will pay more income tax.
So yes, you do get "fined" for not buying a house. We just spin it as "encouraging the dream of home ownership" instead of as a "fine", a "penalty", as "the government holding a gun to your head and forcing you to buy a house", etc.
How would a renter feel if their rent increased because their landlord was unable to take a mortgage deduction? In other words, is the deduction implicitly distributed pro-rata to the supporting renters via market force?
In the US, the home mortgage interest deduction does not apply to rental properties. To qualify for the deduction, you either have to use the home as your residence for a minimum period each year, or rent only part of it (and meet requirements for renting part of the home: you can't have more than two tenants, and the part of the home they live in can't have its own separate kitchen or toilet facilities).
But that's the home deduction. Apartment buildings, for example, are investment property for which mortgage interest is a deductible expense. https://www.irs.gov/publications/p527/ch01.html
Then you concede that taking away the home mortgage interest deduction (making the homeowner-who-resides-in-the-owned-home and the renter equal for tax purposes) would not drive up rents, and your original comment was at worst wrong and at best a non sequitur.
I'm positing false equivalence. Taking away the home mortgage interest deduction would make the homeowner and renter unequal. Doing so would not drive up rents, just as eliminating the mortgage deduction on investment property wouldn't impact house prices.
How would a renter feel if their rent increased because their landlord was unable to take a mortgage deduction?
I countered that the home mortgage interest deduction doesn't apply to rental properties. Renters and homeowners are thus currently unequal from a tax standpoint, since renters effectively pay a higher tax rate than homeowners. Removing the deduction would thus not create a new inequality; it would remedy an existing one.
If I choose to live rent-free in my parents' basement, I will not get fined for doing so. I keep ALL of my cash. But I'll STILL get fined for having not buying myself insurance.
I'm not sure what logical fallacy you're throwing here, some form of "Denying the antecedent" or something along those lines, but it's not the same situation.
I don't think the issue is purely semantic. The government provides a financial incentive to buy houses. I can decide whether I want to be $x richer and have a mortgage to pay. I can similarly decide if I want to be $y richer and have a health insurance plan.
I don't mean this as a rhetorical question, so I apologize if it comes across as snide, but from the point of view of economics, what is the difference? I'm trying to understand why one kind of tax incentive is objectionable and not the other.
There is a huge difference between a fine and not receiving an incentive.
If I have $1000 in my pocket right now, I will still have $1000 in my pocket if I choose not to go after an incentive.
But if I have $1000 in my pocket right now, I will not have $1000 in my pocket even if I choose not to buy any health insurance.
In my eyes, being punished for peacefully doing absolutely nothing is as anti-American as it comes. That's another argument, but my point is that the analogy is off the mark.
Just because you don't understand the difference between a penalty and an incentive doesn't make your analogy suddenly correct.
There's an incentive for having a home mortgage under certain conditions only, and you do not owe anyone additional money if you have no outstanding mortgages on properties.
The same is not true for the ACA. You are fined for not owning something - e.g. if your net worth was $0, you could go into the negative for not having insurance.
If you don't own a mortgage, you cannot be fined into the negative.
> Just because you don't understand the difference between a penalty and an incentive doesn't make your analogy suddenly correct.
There is no difference between a tax penalty and a tax incentive (more precisely, a tax incentive is exactly identical to a general tax cut plus a tax penalty for everyone who doesn't qualify for the incentive, and a tax penalty is equivalent to a general tax increase plus a tax incentive for everyone not subject to the penalty; so, except as concerns the general level of taxation, penalties are exactly the same as incentives.)
> If you don't own a mortgage, you cannot be fined into the negative
Since having a mortgage or not can make the difference between owing net income taxes or not, if you have $0 net worth before a particular year's taxes are considered, you absolutely can be "fined into the negative" for not paying interest on a mortgage (lenders, not borrowers, own mortgages.)
Not to go off on a tangent, but I actually don't agree with the mortgage deduction either. I don't think the government should be using the tax code to try and incentivize or disincentivize behavior. The congress has shown itself to be monumentally incompetent in choosing what behavior should and should not be rewarded. The mortgage tax deduction being one. We found out the hard way during the mortgage crisis that not everyone should be incentivized to own a home, and even now it continues to survive.
The mortgage interest deduction is in fact federal spending, as it is a subsidy.
The healthcare mandate is a tax. What many people object to here is that most taxes tax an activity (making money, buying things, owning things, etc.), such that one does not HAVE to do any of those things, but if one CHOOSES to, they become subject to the tax. Here on the other-hand they are being TAXED for NOT doing something.
Using your analogy, the healthcare mandate is the same as taxing people for not owning a home.
Yes and I do think more needs to be done to incentivize people to live healthier. It's one thing for all of us to cover the costs of others for congenital defects and accidents outside their control. It's another thing entirely if they cannot be bothered to exercise at all, eat even remotely healthy, or smoke cigarettes (I think you do in fact get charged a higher premium in a separate pool in some/all? states if you're a smoker; but smoking mitigation is not subject to any co-pay fees or deductible it's 100% covered including some reasonable number of psych eval) or engage in very risky activities. This can't be a life guarantee for the old either. After a certain age, you kinda need to stop looking for problems or you gonna find something and it's pointless to do anything but manage quality of life rather than remaining quantity.
As an aside, I agree that Medicare expansion would have been a better policy. Good luck getting that through congress, though.