Wealth Distribution, Income, Government Spending, Tax, and Credit Policy

[Joe Leote]

Variety of topics concerning US government policies:

How much is U.S. debt costing YOU?

Joe

[William Meyer]

Tax credits for real estate purchases?  I'm surprised Trump hasn't brought him into the administration.  

Looks like some real estate is finally beginning to buckle like mcmansions but the young folks either still can't afford them or aren't intetested.

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[Joe Leote]

I thought he argues for tax credits for lower income working class folks to purchase stocks, homes, or other assets, but not tax credits for wealthy households to accumulate yet more wealth. The mortgage rates dipped below 3% during early years of Covid pandemic, and owners with such low rates would be reluctant to sell/move if forced to refinance a new home purchase at higher rates with prices sticky, so the owners being reluctant to sell seems to be keeping supply off the market:

Data Spotlight: The Impact of Changing Mortgage Interest Rates | Consumer Financial Protection Bureau

Joe

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[William Meyer]

It may not be intended for wealthy households but it is intended to validate their asset valuations even if the government provides for a portion of the purchase price?

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[Joe Leote]

Many distinct government policies theoretically help validate asset prices up to some limit where market psychology stops driving the asset price bubble and starts driving the asset price collapse. Free market advocates never describe the market mechanisms driving the bubble, collapse, and market bottom, although greed, fear, and purchasing power all must play a part in the market dynamics. Modern governments favor pro-growth policies with mild inflation including difficulty imposing progressive taxes on the super-wealthy, efforts to stop an asset price collapse before the market determines the bottom, etc. Government policies that favor asset purchase by the working class would tend to redistribute wealth in a different pattern than a free market economy or an economy where the super-wealthy (Oligarchs) capture the government and keep compounding their wealth via low taxes, government spending programs, etc.

Joe

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[William Meyer]

What is the rationale for credits associated with asset purchases as opposed to a housing voucher to be used on rent/down payment/utility cost/repairs per the individual's wishes?

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[Joe Leote]

I take your point. I think vouchers for consumption of education, housing, etc. are associated with government spending policy. Spending is covered by government receipts (including taxes and fees) or the issue of fiat money or the issue of government debt. Theoretically an income tax can be progressive, since higher taxes can be imposed on higher incomes, whereas a sales tax is considered regressive. In practice the highest income earners often pay lower taxes measured as a percentage of their income. Mitt Romney famously blundered when he said 47% are takers, who pay no federal income taxes, and the taxpayers are makers. Even super-wealthy families (e.g., Romney, Bezos, Musk) might show zero or negative income in some periods and thus may also qualify for low income government tax deductions or tax credits. The earned income tax credit is for families with little or no investment income during a tax period. That is not the same as a voucher, but rather, it means income can be saved or spent at the earner's discretion instead of paying taxes up to the extent of the credit.

Joe

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[Joe Leote]

More details about income and tax strategies under the US tax system:

Our Tax System Should Make You Furious | The Ezra Klein Show

Joe