Why Allow Joint Tax Returns?

[Pop23]

Personally I think there should be no deductions for children and everyone should file an income tax return singly.

Lower the tax rate for everyone and get rid of all deductions and tax credits.

Keep It Simple Stupid.

Let me guess......Because you don't qualify?

Qualify for what?

This might be hard for you to understand but I don't believe I should force other people to pay for my lifestyle choices.

I own a home and am planning to build a second and I have no problem with getting rid of the mortgage deduction. I don't believe people should be forced to pay more in taxes simply because they don't own a home.

If you have kids you most likely use more government services than people without kids why should other people be forced to pay higher taxes simply because they don't have kids?

Lower the rate, get rid of all the deductions exceptions and exemptions as well as all the bullshit tax credits for buying cars etc.

Reduce the complexity of the tax code, reduce the size of the IRS and save the taxpayers some money.

The deduction for children actually make the most sense.

Couple having/raising children creates a sustained tax base. Ongoing taxes are collected from the child being born. Societies expense to raise a chile, educate the child, is nothing compared to the benefit the child gives back in the future.

They are not only an income tax generator, but a great job creator. Everything from medical to retail sales are largely dependent on children. The couple having a child will provide a taxpayer that contributes to Social Security and Medicare for the individual that has no children while the childless couple or single gets that benefit, while supplying nothing in future support of these programs.

 

[Polk]

Really? In what way is the mortgage deduction more generous than deducting mortgage interest as a business expense?

From the perspective of the renter? Because they're not getting the full benefit of the deduction.

Well, let’s examine that statement. Two landlords have houses for rent; both have a mortgage at the same amount and rate and both incur interest costs of $5,000 per year, and for the sake of argument both are in the 40% tax bracket. Both want to make enough rent to make their cash flow neutral, i.e. the renter pays exactly the costs of the mortgage principal and interest (ignoring other costs for simplicity). Now, landlord 1 can deduct the $5,000 cost of his mortgage interest and therefore his 40% tax savings ($2,000) allows him to rent his property for about $167/month less than landlord 2, who can’t deduct the interest in this example. The renter benefits to the full amount of the deduction. This is true in every case at any positive market rent regardless of the goal of the landlord (whether to be cash flow neutral or make a bigger profit); his cash cost is always less and therefore in a competitive market the rent should reflect that.

In the same vein, the renter benefits from the landlord’s ability to deduct insurance, depreciation and repairs, none of which are available to the homeowner. The homeowner benefits only to the extent that his mortgage payment includes an amount of principal that provides him with equity in the residence, and may qualify for a deduction for interest (although as stated, this is by no means assured due to the availability of the standard deduction and likely more than half do not benefit). So in fact, the tax code benefits renters far more than homeowners. To be sure, there are many advantages to homeownership that have nothing to do with taxes, such as control over the property and the permanence of your rights to remain (unlike a tenant who can be removed) and the potential for increases in market value (tempered by the potential for decreases, as was seen recently), but not because of a generous tax code.

This assumes the landlord rebates the full amount of the deduction to the renter, which is highly unlikely.

 

[BillyV]

From the perspective of the renter? Because they're not getting the full benefit of the deduction.

Well, let’s examine that statement. Two landlords have houses for rent; both have a mortgage at the same amount and rate and both incur interest costs of $5,000 per year, and for the sake of argument both are in the 40% tax bracket. Both want to make enough rent to make their cash flow neutral, i.e. the renter pays exactly the costs of the mortgage principal and interest (ignoring other costs for simplicity). Now, landlord 1 can deduct the $5,000 cost of his mortgage interest and therefore his 40% tax savings ($2,000) allows him to rent his property for about $167/month less than landlord 2, who can’t deduct the interest in this example. The renter benefits to the full amount of the deduction. This is true in every case at any positive market rent regardless of the goal of the landlord (whether to be cash flow neutral or make a bigger profit); his cash cost is always less and therefore in a competitive market the rent should reflect that.

In the same vein, the renter benefits from the landlord’s ability to deduct insurance, depreciation and repairs, none of which are available to the homeowner. The homeowner benefits only to the extent that his mortgage payment includes an amount of principal that provides him with equity in the residence, and may qualify for a deduction for interest (although as stated, this is by no means assured due to the availability of the standard deduction and likely more than half do not benefit). So in fact, the tax code benefits renters far more than homeowners. To be sure, there are many advantages to homeownership that have nothing to do with taxes, such as control over the property and the permanence of your rights to remain (unlike a tenant who can be removed) and the potential for increases in market value (tempered by the potential for decreases, as was seen recently), but not because of a generous tax code.

This assumes the landlord rebates the full amount of the deduction to the renter, which is highly unlikely.

No, it simply assumes a competitive market. The landlord doesn't "rebate" anything; he simply considers his costs and prices accordingly. Since his cost is lower, he can charge a lower rent and still make a profit. Tenants will naturally seek the lowest rent cost for similar properties and the landlord who doesn't consider the tax deductions in his pricing decision will be above market and is unlikely to attract those tenants. If, on the other hand, the landlord has no competition, then it doesn't matter what the cost is, it simply becomes how much he can wring from the tenant. I don't think lack of competition for rental properties is a big issue here in the US, so I think by and large those tax benefits are built in to the pricing. Or put another way, if tomorrow those tax benefits were taken away, rental charges would rise to make up for the increased cost of ownership.

 

[Polk]

Saying he can charge a lower rate doesn't mean he will charge a lower rate. I'm not saying renters don't receive any benefits from the landlord's deductions, but to claim it's just all cycled to consumers is nonsense.

 

[oldfart]

Saying he can charge a lower rate doesn't mean he will charge a lower rate. I'm not saying renters don't receive any benefits from the landlord's deductions, but to claim it's just all cycled to consumers is nonsense.

Wonderful where the assumption of perfectly competitive markets operating with perfect information and certainty, with well-behaved objective functions and immortality, will lead. The results are as elegant as they are useless unless we examine the sensitivity of the results to variations in these assumptions (theories of imperfect competition, decision-making under uncertainty with incomplete information, game theory, and so on). The action in microeconomic theory moved beyond the perfect competition models about 1900, but don't tell that to the pundits!

 

[BillyV]

Saying he can charge a lower rate doesn't mean he will charge a lower rate. I'm not saying renters don't receive any benefits from the landlord's deductions, but to claim it's just all cycled to consumers is nonsense.

Wonderful where the assumption of perfectly competitive markets operating with perfect information and certainty, with well-behaved objective functions and immortality, will lead. The results are as elegant as they are useless unless we examine the sensitivity of the results to variations in these assumptions (theories of imperfect competition, decision-making under uncertainty with incomplete information, game theory, and so on). The action in microeconomic theory moved beyond the perfect competition models about 1900, but don't tell that to the pundits!

You certainly don’t need to argue “perfectly competitive markets operating with perfect information” to conclude that renters benefit in significant ways from the tax deductions enjoyed by landlords. My point is simply that, while many sources will expound upon how unfair the home mortgage interest deduction for homeowners is to renters, the truth is renters get a similar and sometimes more generous tax deduction which is built into the tax code. But please don’t take my word for it; the Bureau of Labor Statistics did a study and concluded the following:

Column (2) of Table 13 shows that eliminating landlord tax deductions in addition to homeowner tax deductions causes a 3.1 percent decrease in the house price, a 10.2 percent increase in the rent, and a 12.1 percent decrease in the price-rent ratio.
http://www.bls.gov/ore/pdf/ec100090.pdf

It is also useful to keep in mind that the average renter is likely in a lower- or lower-middle class income bracket and would not qualify for any mortgage interest deduction even if they were a homeowner because their interest and property tax costs would still not be greater than the standard deduction, and so would get no benefit, while clearly they do benefit as a renter. Since there are a multitude of individual situations that affect both the ability to deduct mortgage interest and the market rent of a property, it is of little use to debate this in other than broad, general terms. It seems clear to me that rental pricing decisions are affected to a significant degree by landlord tax deductions.

 

[M14 Shooter]

The ONLY legitimate rationale is to allow a caregiver to forgo additional income in order to provide additional care and supervision of children.

False.
For all legal purposes, a married couple has one income.
Filing jointly is therefore "legitimate" on that basis alone.