In 1997 Bill Clinton passed a law that nearly eliminated capital gains taxes on real estate. The result:
"…many economists say that the law had a noticeable impact, allowing home sales to become tax-free windfalls. A recent study of the provision by an economist at the Federal Reserve suggests that the number of homes sold was almost 17 percent higher over the last decade than it would have been without the law."
Are we all still sure that we want to hold Clintonism up as the ideal economic model?
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1 comment:
That's a very interesting perspective I hadn't thought of before.
Even more important than the capital gains loophole you describe is the special treatment the tax code gives the interest paid on home mortgages.
If you borrow money to buy a car you can't deduct the interest. If you borrow money to attend college you can't deduct the interest. And if you rent rather than own your dwelling, you certainly can't deduct your rent.
But if you borrow money to buy a house, you can generally deduct all the interest. It's a HUGE incentive toward home ownership or, you might say, a huge skewing of the free market in favor of houses and away from other assets.
Home ownership is a good thing socially, fostering stability and a sense of investment in the well-being of neighborhoods and society as a whole. But this might be a classic example of the law of unintended consequences.
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