[Falik]

The issue actually gets a bit more fuzzy when you start talking about child tax credits/deductions (there is a new person involved at the relevant frontier, and you need to make decisions about the effect on welfare of creating a new human being)

Certain other tax expenditures at least improve equality significantly (earned income tax credit), whereas the health insurance and home interest deductions benefit the relatively rich disproportionately.

[kucheravka]

1) Because the mortgage tax deduction distorts between home ownership and renting, while the insurance deduction distorts between insurance and out-of-pocket health care consumption

2) In addition to these distortions, they both encourage overconsumption of their products

3) Hollowing out the tax base through this type of deduction reduces revenue in a way which can only be made up by increasing marginal rates. Marginal rates are the most important determinant of the deadweight loss of taxation at the work/leisure frontier

[HotDolly]

Insurance deductions increase costs for health care due to employers being the purchasers but not the consumers. Health Care in the US is bought based on how much is paid, rather than on the health care received.

JM

[rowneigerie]

Actually, though, what the co-chairmen are proposing is a mixture of tax cuts and tax increases — tax cuts for the wealthy, tax increases for the middle class. They suggest eliminating tax breaks that, whatever you think of them, matter a lot to middle-class Americans — the deductibility of health benefits and mortgage interest — and using much of the revenue gained thereby, not to reduce the deficit, but to allow sharp reductions in both the top marginal tax rate and in the corporate tax rate.

It will take time to crunch the numbers here, but this proposal clearly represents a major transfer of income upward, from the middle class to a small minority of wealthy Americans.

http://www.nytimes.com/2010/11/12/op...12krugman.html

[DrKirkNoliss]

Have you won a pseudo-Nobel prize in Economics?

[JimmyHas]

Getting rid of the mortgage and health insurance deductions would be so beautiful.

QFT

[wgX44EEn]

What are you two laughing about? I was simply pointing out that the Nobel Prize in Economics is not a true Nobel Prize.

[minowz]

Comments:

1) **** the "middle class", e.g. the 60th to 90th percentile in income. They are by far the most spoiled group in the US (and in most other developed nations). I hope the "middle class" gets raped and dies of AIDS. The top 10% work their asses off and pay all the taxes, the bottom 60% are brought up in shitty conditions and struggle day to day. The "middle class" is composed of people who were born into well-adjusted families, were too lazy/stupid to actually succeed in life and feel entitled to **** like publicly-funded tertiary education, the mortgage interest deduction and other giveaways to the relatively privileged.

Come now KH, be fair. We need the cows to feed the economy.

[agiopwer]

I don't understand why home ownership is such a positive in the first place. It reduces geographic mobility of the labor force, reducing the diversification benefit the US enjoys due to having the biggest market in the world (Euroland doesn't count as a truly integrated labor market IMO)

Also, it's not just us; very few countries allow mortgage tax deductions.

The deduction serves to encourage leverage, along with the existence of FNM and FMCC

[Everwondopedo]

Dangerous Game: The latest budget numbers look bad. But the truth is even worse.

Clinton

[arcaniagainee]

Ok, so I'm in, KH is in, Dan is in... hell, even Drix seems to be in.

Ergo, it's DOA, right?

-Arrian

[rsdefwgxvcfdts]

Which ear, left or right? We need to know whether you're a wingnut Tea Party extremist or a moonbat progressive commie.