NoRegretsCoyote
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In conceptual terms a pension is simply deferred income. You aren't being taxed on it today because you will be taxed on it when you draw it down.
Otherwise pension fund is not a tradeable asset.
Why mortgage interest relief should not be reintroduced
- Thread starter Brendan Burgess
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Otherwise pension fund is not a tradeable asset.
time to plan
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That's not entirely true when you consider the tax free lump sum.
Ok, so it may not be tradeable but it is private though, only for the use of that person. If it is ARF, part of it could be inherited (and yes taxed but then so can inheritance of property). The government in the auto enrollment scheme are contributing directly to the seed for that fund.
The tax free portion has also been mentioned.
You will also be taxed on your property annually via LPT.
If mortgage interest relief was introduced up to a max amount say, then it seems strange to me to object to it and not auto enrollment - on that specific basis.
Right Winger
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I think there's a language issue here. I wouldn't use the term "subsidising" to describe the application of a tax exemption or tax credit.
If the state gives me money to buy stuff, that's a subsidy. If the state allows me to keep some of my own money to buy stuff, that's not a subsidy, it's the absence of a penalty.
Normalising the use of "subsidy" in this way simply normalises the idea that it's ok for the government to take as much of your income as it likes, and leave you with whatever they see fit. The bit you are left with after taxes isn't a subsidy; it was yours in the first place!
If the state gives me money to buy stuff, that's a subsidy. If the state allows me to keep some of my own money to buy stuff, that's not a subsidy, it's the absence of a penalty.
Normalising the use of "subsidy" in this way simply normalises the idea that it's ok for the government to take as much of your income as it likes, and leave you with whatever they see fit. The bit you are left with after taxes isn't a subsidy; it was yours in the first place!
What tax credit/exemption are you referring to? I thought the issue here was the govt giving relief to individuals on interest charged by banks on mortgages?
Right Winger
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The relief was proposed to be given by way of a tax credit for mortgage interest.
If people are in arrears they hardly get evicted in Ireland. If one continues to pay at best of one’s capability I would say that chance to be evicted is very very minimal. And it’s not that a repossessed house would mean that it is not becoming again part of the property or rental market. The house would not be “lost”.
So where are we with this debate.
Relief on a struggling familes PPR mortgage interest isnt same as giving a wealthy individual a grant to buy an expensive car. Ok the car is less bad for environment hence the grant but the families PPR provides a vital utility and should be protected.
In light of above isnt it wrong to say that this is subsidising private asset?
Not all mortgage holders availed of this relief in its past existence. Many will have drawn down on their PPR since it was abolished. Surely the logic behind itt last existence still stands i.e to relieve pressure on already struggling families.
Why again would this be opposed?
Relief on a struggling familes PPR mortgage interest isnt same as giving a wealthy individual a grant to buy an expensive car. Ok the car is less bad for environment hence the grant but the families PPR provides a vital utility and should be protected.
In light of above isnt it wrong to say that this is subsidising private asset?
Not all mortgage holders availed of this relief in its past existence. Many will have drawn down on their PPR since it was abolished. Surely the logic behind itt last existence still stands i.e to relieve pressure on already struggling families.
Why again would this be opposed?
To me the most significant issue is that usually I’d expect to see a ‘relief’ be somehow time bound for a crisis with a likely end date. For example, the energy credits made sense because there was a temporary spike in prices which it’s reasonable to expect will come back over time.
You can still get a c.3.5/4% fixed mortgage rate today. It’s slightly higher than last year, but it’s also a very reasonably assertion to say mortgages will never be cheaper in the next 20 years and weren’t cheaper for much more than a few years in the last 100. Therefore it’ll just be some indefinite subsidy at huge cost that’ll be almost impossible to remove as mortgage rates rise even more in future.
Add in that home owners are far better off than renters on average. It seems like a blanket giveaway to the better off in society. On a personal level, be great if it came in, but I can’t see how it can be justified beyond a FG/FF populist move pre-election year.
Classic populist arguments.
Kick off with the straw man, who mentioned expensive cars?
Then add the emotive language - “struggling families”.
Is the SF proposal limited to struggling borrowers? Nope.
Is it limited to families? Nope.
No, that’s exactly what it is.
Because it’s a terrible idea.
You stated that the state shouldn't subsidize a private asset as a general rule.
It seems valid to point out the state does this as a feature of recent policies one of which was a grant towards the purchase of electric cars, and yes they are expensive.
I did indeed.
The fact that the State gives grants to encourage one form of transport over another doesn’t change my opinion.
Well I have a concern that the State through its current housing policy is creating enormous liabilities for itself, where it will be compelled to provide far higher levels of housing supports to retired people - because they were never able to afford their own home. No principle will be violated by that, yet it could end up costing far more than measures such as this. It will be drifted into, and state liabilities will creep ever higher.
Now maybe interest relief across the board, or interest relief in general is not the right way to reduce those liabilities.
But that's my concern and so far I haven't heard anything convincing as to why the state shouldn't subsidize the purchase of a private asset, if that makes sense for policy reasons (transport, cost of future housing support, cost of future pension supports).
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That’s fine. I’m not trying to convince you of anything, I clearly stated that it is my opinion, you are obviously free to disagree.
Most government grants and subsidies have some overarching policy objective. For example, to encourage more energy efficient homes, transport, etc.
What is the policy objective of mortgage interest relief? It’s a transfer of resources from taxpayers (including renters) to borrowers. For what purpose?
It’s totally regressive - the larger the mortgage, the greater the benefit.
It’s un-targeted - it takes no account of a borrower’s circumstances.
It’s inefficient - any subsidy ultimately gets baked into house prices.
I have no issue with the State investing in housing, whether directly or otherwise. But the re-introduction of mortgage interest relief is not the way forward.
Most government grants and subsidies have some overarching policy objective. For example, to encourage more energy efficient homes, transport, etc.
What is the policy objective of mortgage interest relief? It’s a transfer of resources from taxpayers (including renters) to borrowers. For what purpose?
It’s totally regressive - the larger the mortgage, the greater the benefit.
It’s un-targeted - it takes no account of a borrower’s circumstances.
It’s inefficient - any subsidy ultimately gets baked into house prices.
I have no issue with the State investing in housing, whether directly or otherwise. But the re-introduction of mortgage interest relief is not the way forward.
NoRegretsCoyote
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It would (all else equal) encourage owner-occupancy which has positive social benefits - people who own their own homes are more likely to take care of the neighbourhood, engage locally, build communities, etc. People entering retirement with mortgages paid off also has positive social benefits and means less of a resort to the taxpayer for housing.
I don't support the mortgage interest relief as it would be so poorly targeted but that's not to say it wouldn't have (limited) positive policy outcomes.
time to plan
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In a democracy, it is OK for the government to raise taxes. In a Randian state, it isn't. There are value judgments here.
I would say that if the government removed all taxes (VAT etc.) from new cars costing more than €200,000 and also gave a tax relief claim from fuel duty and VAT for these cars, that would be a subsidy. But I accept that you wouldn't say that.
That very much sounds like the type of arguments that the Tories put forward in the 1980s to justify selling off their social housing stock.
I personally take the view that the State should be agnostic on tenure. There are also societal benefits to having a strong, professionally managed PRS sector, which is the norm on the continent.
It has always been the case that a significant proportion of our population will never be able to afford to buy a property. Should those folk be required to provide a subsidy to their better off neighbours that can afford to buy?
Look at the Irish state. Are they capable of a strong, professionally managed PRS sector? Have you seen Dublin City Council's rent debts? The reason why DCC got out of providing social housing wasn't for Tory reasons, but because it was too much cost in management of properties and debts.
So at the moment the choice isn't between such a sector and private housing, but HAP.
At the moment the state is taking money from people who can't afford to buy a house, to build social housing to a better spec than private purchasers, and granting them a house for life at below market rent for life, one that can be passed on to their children. How is that not a subsidy?
NoRegretsCoyote
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The same policy was pursued in Ireland which everyone forgets! More social housing was sold than built in the 1980s in Ireland. Again, this policy may have gone too far but the general principle was not a bad one. People owning a house have a greater stake in their own community which has positive social benefits.
I fully agree and never claimed otherwise! It's not an either/or.
This is a myth. Ireland's tenure patterns (68% OO, 20% PRS, 12% social in 2022) very close to EU averages below which are for 2018.
I disagree. A healthy PRS is very important especially for people in the early phase of their career. However I think there are social benefits to owner occupancy that the tax system should provide moderate support for. For me the current situation (CAT exemption for your PPR and help-to-buy) is probably already too generous and I don't in the slightest support any revival of mortgage interest relief.