This article is incredibly misguided for several reasons...
1.) If you truly are "rich," then you pay for your home in cash. You do not take out a mortgage on your house. Look at a distribution of loan amounts, the vast majority are around $600k. Very few are are >$1M [0]. Home loans are a product for middle-class Americans.
2.) A lot of rich people don't really pay income taxes like middle class people do. This is something a lot of people fail to understand. For example, you can be multi-billionaire and make $0 in given year and still be a multi-billionaire.
3.) If you're rich, do you really care about the $20k deduction you get every year? Probably not.
4.) Interest rates are so low that the deduction is becoming less relevant. For example, if you take out a 3.75% loan on $600k, your deduction really isn't that much, you get to deduct a whopping ~$20k, which even if the highest tax bracket, you'll get back ~$10k The deduction argument holds a lot more weight when interests rates are high.
But glad to see more attacks on the "bourgeoise middle-class" from the trusty NYTimes.
>1.) If you truly are "rich," then you pay for your home in cash. You do not take out a mortgage on your house. Look at a distribution of loan amounts, the vast majority are around $600k. Very few are are >$1M [0]. Home loans are a product for middle-class Americans.
Looking at the distribution of loan amounts would only be meaningful in the context of the distribution of home sale prices.
Obviously fewer loans are made for houses that fewer people are buying.
Someone who has $8.5M of assets and wants $750k of liquidity. Interest rates are so low that it makes sense to take out a mortgage to invest the cash elsewhere.
Your points ignore real estate developers.....
Even the most successful ones that I know leverage debt in order to minimize risk. There is an entire strategy around this which developers use to scale quickly. It relies on them taking out loans and allows them to continue to use their capital on other things.
> 1.) If you truly are "rich," then you pay for your home in cash.
You might buy a house in cash if you're rich to get a better purchase price and have a quicker closing process. However, you would likely mortgage the house AFTER purchase and then invest that cash in a high dividend stock or some other security.
Only a rich fool would keep a house mortgage when interest rates are as low as 2.5% in some cases. (source: friend who has this interest rate)
For instance - there are some REITs that return dividends higher than 8%. What rich person would want to keep non-liquid capital tied up in home equity when there are plenty of high performing dividend stocks out there?
The point of the article is that the upper middle class is profiting disproportionally from the MID, while the poor don't. From the article:
> What this means in aggregate is that households with at least six-figure incomes receive more than four-fifths of the total value of mortgage interest and property-tax deductions.
Your arguments about the "rich" and multi-billionaires miss the point.
But are "upper-middle" class really the problem here? Again, look at the distribution of mortgages, at most someone is writing off like $40k worth of interest, which will net them $20k a year. Does that really make the whole housing market that much more expensive?
Why not attack the bigger problems, like off the top of my head...
how housing has become a commodity and large equity firms and snatching up real estate...
the amount of foreigners buying homes...
the fact that we've barely built ANY housing in major cities in the past 30 years...
how our population has grown significantly, but our housing stock hasn't...
how people are living longer and staying in their homes longer for lack of better options...
There are a lot of families making $1 million gross ($500K net) in income. They live in SF and NY. Both parents work 10 hour days. They live in an uncomfortably small house and have a $1 million mortgage. They can barely save for college after paying for childcare costs and the mortgage. But they're "rich." Yeah, right.
Not sure about your numbers here. A million dollar mortage today represents just under $5k per month or $60k per year. that's well under the recommended 30% for a $500k income. I have a hard time believing "They can barely save for college after paying for childcare costs and the mortgage" - I have no idea what childcare costs are, but I would be shocked if they were in excess of $300K-$400k per year.
Their choice to buy a house like that in such a market and have a kid on top of a huge mortgage with almost no free time. Consider an alternative: live together in a tiny $3k/mo apartment, save hundreds of thousands of dollars a year, move to a low-cost market, and retire at 35 with an amazing amount of money. THEN have children while the investment portfolio goes bananas over the next few decades ...
1.) If you truly are "rich," then you pay for your home in cash. You do not take out a mortgage on your house. Look at a distribution of loan amounts, the vast majority are around $600k. Very few are are >$1M [0]. Home loans are a product for middle-class Americans.
2.) A lot of rich people don't really pay income taxes like middle class people do. This is something a lot of people fail to understand. For example, you can be multi-billionaire and make $0 in given year and still be a multi-billionaire.
3.) If you're rich, do you really care about the $20k deduction you get every year? Probably not.
4.) Interest rates are so low that the deduction is becoming less relevant. For example, if you take out a 3.75% loan on $600k, your deduction really isn't that much, you get to deduct a whopping ~$20k, which even if the highest tax bracket, you'll get back ~$10k The deduction argument holds a lot more weight when interests rates are high.
But glad to see more attacks on the "bourgeoise middle-class" from the trusty NYTimes.
[0] http://lenkiefer.com/2016/10/11/hmda-viz1