Thursday, June 29, 2006

A couple questions...

I'm trying to get a million (well, maybe, like, 10) things done before I got out of town on Saturday and I don't have time for much writing these next two days. So, I'll just post a few questions and see what happens.

The first comes to us from a letter to the editor in today's Howard County Times. There were three similar letters (and the cynical side of me thinks they may have been related/coordinated), but only one writer offered some possible solutions to our county's zoning problems.

Mr. Ulman says he needs ideas. How about these: 1) Hire an attorney to represent the citizens of Howard County through their associations to make sure the zoning laws that exist are followed. 2) The zoning board might actually consult with the public and listen to what the public wants. 3) Once zoning decisions are made, make sure that the developers and the county follow them.
Well, what do you think?

My quickie take is that 2 and 3 aren't really specific enough to be considered solutions but are instead good guiding principles that to a large extent already exist (but this is subjective and I'm sure some of you will disagree -- our experiences are different). Meanwhile, the first one presents a host of problems that I think doom the idea; for instance, how do we decide which groups get representation and for which cases? Seems like the answers to these questions would be a full-course meal for cynics.

Finally, I've been thinking a lot about the home mortgage interest deduction.

What if we just got rid of it?

Total federal spending on housing assistance for poor people (less than $20 billion) is dwarfed in comparison to the amount of tax revenue forgone each year (around $120 billion last I checked) because of these deductions, and that's to say nothing of the impact it has on home prices and development in general. And it covers houses worth up to $1 million.


mary smith said...

The spirit of the suggestion list is understandable considering recent events.

However, this particular item may have been written by an attorney, based on the knowledge (from non-attorneys) that representing clients is the least of their concerns.

Permanent solution: We need some real choices to elect better leaders.

hocomd said...


Hear Hear.

Relative to eliminating the mortgage interest deduction. Hayduke, you sound like Steve Forbes. I am impressed. Forbes admits it would drive down the value of homes but "so what?" he asks. The deduction artificially raises the prices of real estate and as a result lowers the prices of alternative investments, like stocks and bonds.

Yet it's stocks and bonds that people need for their retirements. I don't plan to retire on the equity in my house.

Lower housing costs would spur more home buying, less real estate speculation (although I am not sure about that), increase the tax payer base. People could live closer to work which would help alleviate congestion.

Why won't it happen? Follow the money. Lower home prices means less margin for developers, smaller commission for the Real Estate industry, lower margins for builders, etc. The industry is a gorilla sitting atop the deduction.

So, do you also support a Flat Tax? I do.

mary smith said...

I just heard that the comp lite referendum will not be pursued by the board of elections. Can anyone confirm?

Hayduke said...

Lower housing costs would spur more home buying, less real estate speculation (although I am not sure about that), increase the tax payer base.

I’m not so sure about these. I’ve been running the hypothetical through my creaky old brain, but I have yet to come up with a outcome that satisfies me.

Preliminarily, I think it would cause less selling, as current homeowners (a.k.a. the majority of this country) finding themselves looking at the prospect of selling a house for a considerable loss. They would, therefore, be expected to hold onto property until inflation has at least brought the non-mortgage deduction prices up to what they were before we took away this entitlement.

But then, this would have major impacts on the entire economy and it’s hard for me to even run through all of the possible scenerios.

I don’t think, however, that developers and real estate agencies are the ones who would protest getting rid of the deduction. Rather, as you say, “follow the money” all the way to who benefit most and ultimately have the most influence — us, homeowners, voters, the majority of this country. Some say social security is the third rail of politics, but they’ve never even considered going near this one.

Sadly, I don’t support a flat tax. Well, I might under certain circumstances. Namely, negative tax rates for those earning less than, say, 200% of poverty. Zero tax rates for those earning up to, say, 60% of area median. And same rate applies to capital gains. No deductions for anyone. And estate tax remains in effect. But then, at this point, it’s not very flat anymore. But it’s less confusing.

(Cross posted at HoCoMD's place).

Yes, Mary, the elections board decided not to pursue it.

Anonymous said...

Diane Butler's three suggestions stem from thousands of hours of effort on her part and many others (and lots of resources devoted, too) to preserve their community and improve shortcomings in the system. Granted, giving the suggestions the discussion they need can't really be accommodated in a very brief letter to the editor.

If you're looking for an informed and active organization when it comes to zoning, development, etc., the St. Johns Community Association ranks right up there. So, go to the next SJCA meeting. I'm sure you'll be able to get plenty of clarification.

Nonetheless, all three letters did rightly point out the recent private meeting on zoning's lack of transparency/inclusion/openness. If the best solutions are to be attained, get as many people in the discussion as possible, especially the folks in our community who've been continuously active and knowledgeable when it comes to this issue.
When you say, hoco, that eliminating the mortgate interest rate would lower home prices and this would spur more home buying, I disagree.

(The following numbers are very rough and have no relationship real home costs in the County.) Let's say under the current system, Jane Q. Homeowner has a $1500 per month house payment, and gets back maybe $3000? annually in refunded mortgage interest. If she then doesn't get that $3000 refund, that's $250 per month less she can afford to spend on a house. So, sellers (assuming static sellers and buyers in the County) would wind up having buyers offering to buy homes for which they could only spend $1250 per month mortgage. Home prices might come down to meet that new spending point, but you wouldn't see more people being able to jump in and buy at that price.

If, for some reason, my numbers are wrong, it's arguable that:
- any uptick in home ownership would be so modest that overall lower home values wouldn't be offset by these additional owned homes
- if the goal is to increase residential population, there is a general consensus that the residential tax base falls short of paying the costs of residential services (schools, roads, services).

One could argue the mortgage interest deduction appears to encourage home ownership which, in turn, strengthens communities.
That aside, the concept of a flat tax is appealing to me if for no other reason than the millions of man hours it will spare us all calculating and submitting our tax returns. Even H&R Block got their own taxes wrong the past couple years.