In this episode, we explore one of ur-symbols of the American Dream: homeownership. In the United States, home ownership is a symbol of the prosperity Americans are promised. It’s been a status symbol separating the middle classes from the poor for much of American history. Why? And how does one tax policy, the home mortgage interest deduction, play upon our collective dreams of Americanism. In this episode, we talk about vacation homes, reparations, Mark Twain, returns on investments, writing letters to curry favor with racists, and guillotines. This is Robot F. Kennedy. SHOW NOTES Six Policies Economists Love (And Politicians Hate), Planet Money Podcast http://www.npr.org/sections/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate Does High Home-Ownership Impair the Labor Market?, Peterson Institute for International Economics https://piie.com/publications/wp/wp13-3.pdf Study: Higher levels of homeownership can kill jobs, Washington Post https://www.washingtonpost.com/news/wonk/wp/2013/05/07/study-high-levels-of-homeownership-can-kill-the-job-market/ The idea that owning a home makes it harder to find a job because of higher moving costs is now known as "Oswald's hypothesis." And it's come in for plenty of scrutiny. Some economists, for instance, have argued that this effect might be counterbalanced by the fact that people who own homes have denser local networks, which makes it easier for them to find jobs in their local area. Why is that? The authors find that higher levels of homeownership in a state appear to be associated with lower levels of labor mobility, higher commute times, and fewer new businesses created. Taken together, those three factors tend to increase the unemployment rate. (Why fewer new businesses? One possibility is that homeowners are more likely to use zoning to restrict the activities of firms, though that's just a hypothesis.) America's interstate highways: America's splurge, The Economist http://www.economist.com/node/10697196 The 7 big questions Republicans have to answer on tax reform, Vox.com https://www.vox.com/policy-and-politics/2017/3/31/15093946/gop-tax-reform-cuts-permanent-border-interest The Ryan-Brady tax reform blueprint would preserve the two biggest and most popular itemized deductions—those for mortgage interest and charitable donations—but eliminate all others, as well as a few credits. The biggest deal here is the deductions for state income, sales, and real estate taxes, which together provided $80.4 billion in tax relief in fiscal year 2014. That's more than the mortgage interest deduction. The mortgage deduction is widely viewed as politically untouchable, because its affluent-but-not-super-wealthy beneficiaries will cry bloody murder if it’s threatened. The Tax Deductions Economists Hate, FiveThirtyEight https://fivethirtyeight.com/features/the-tax-deductions-economists-hate/ At the top of many economists’ hit list is the mortgage-interest deduction. If you have a mortgage on your home, you don’t have to pay taxes on the interest on that loan. According to the Congressional Budget Office, that tax break cost the federal government $70 billion in 2013. Economists have all sorts of problems with the mortgage-interest deduction. For one thing, because wealthier people own bigger homes with bigger mortgages, the benefit disproportionately benefits the rich. In 2013, 73 percent of that $70 billion went to the wealthiest 20 percent of earners; 15 percent went to the richest 1 percent. The poorest 20 percent, who rarely own homes, got essentially nothing. Mortgage Interest Deduction Is Ripe for Reform, Center on Budget and Policy Priorities https://www.cbpp.org/research/mortgage-interest-deduction-is-ripe-for-reform
