Widdekind
Member
- Mar 26, 2012
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Government accounting labels the property taxes, and mortgage interest payments, of homeowners, as "imputed rent". Homes are labeled "rental businesses", and homeowners "rent their homes from their own rental businesses". When homeowners write checks, for property taxes or interest payments, the government labels those payments as "imputed rent revenue" to homeowners' "rental businesses", which are then immediately expensed for taxes (to government) and interest (to banks). Thus, homeowners housing-related payments are accounted as "internal payments", from the homeowner as a person, to their home as a rental business, and then on to governments & banks. By such "double counting", those payments are accounted as "personal consumption expenditures (PCE)", and then also as "taxes" & "interest".
"Imputed rent", of homeowners as persons, to their homes as rental businesses -- representing double-counted payments, primarily of property taxes & mortgage interest -- total over a trillion dollars per year, most of 10% of GDP. "Big Money" (trillions of dollars) is artificially accounted as PCE, inflating GDP by large amounts, even though, in physical reality, no new product was actually produced or sold. Homeowners paying property taxes, or mortgage interest, are boosting GDP, by "buying rent service from themselves", i.e. from their homes-as-official-rental-businesses (which then pay governments & banks).
Persons are accounted as paying
Inexpertly, that seems roundabout, artificial, confusing, and fake. Real US corporations are not producing the "pseudo-product" of "fake rent" of "homeowners from their own homes". If government accountants can fake up to 10% of GDP, over a trillion dollars per year, then what next ?
fake rent, to "homes-as-rental-businesses":
reference:
https://www.bea.gov/papers/pdf/RIPfactsheet.pdf
"Imputed rent", of homeowners as persons, to their homes as rental businesses -- representing double-counted payments, primarily of property taxes & mortgage interest -- total over a trillion dollars per year, most of 10% of GDP. "Big Money" (trillions of dollars) is artificially accounted as PCE, inflating GDP by large amounts, even though, in physical reality, no new product was actually produced or sold. Homeowners paying property taxes, or mortgage interest, are boosting GDP, by "buying rent service from themselves", i.e. from their homes-as-official-rental-businesses (which then pay governments & banks).
Persons are accounted as paying
less taxes (-T)
less interest payments (-i)
more personal consumption (+T+i)
then businesses, officially including homes-as-rental-agencies, receive-but-then-immediately-payless interest payments (-i)
more personal consumption (+T+i)
more "rental revenue" (+T+i)
more taxes (-T)
more interest payments (-i)
The net effect, is to shift the appearance of taxes & interest, from official "persons" (homeowners), to "corporations" (their homes-as-rental-agencies); and, meanwhile, to account those taxes & interest payments as "checks for rent" (from those "persons" to their "corporations"), boosting GDP, by boosting the PCE component of GDP (+T+i).more taxes (-T)
more interest payments (-i)
Inexpertly, that seems roundabout, artificial, confusing, and fake. Real US corporations are not producing the "pseudo-product" of "fake rent" of "homeowners from their own homes". If government accountants can fake up to 10% of GDP, over a trillion dollars per year, then what next ?
fake rent, to "homes-as-rental-businesses":
- inflates GDP revenue of "business sector", i.e. providers of final goods & professional services
- inflates expenses of "business sector", expensed with the property tax & mortgage interest charges
- leaves "business sector" net income (revenues less expenses), ultimately including Personal Income (PI) paid to persons, unchanged
- decreases personal consumption (C) as a fraction of PI
- increases personal interest & taxes (i,T) as a fraction of PI
reference:
https://www.bea.gov/papers/pdf/RIPfactsheet.pdf
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