Eoin O'Broin: "Rising interest rates for landlords do not result in an increased cost "

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llgon

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That's according to Eoin O'Broin

From Friday's Drive Time:

www.rte.ie

Drivetime Friday 26 May 2023

Sarah McInerney and Cormac Ó hEadhra brings you all the latest news and stories of the day from around the country and beyond.
www.rte.ie www.rte.ie

@ 48 mins

In response to a question from Sarah McInerney about landlords' inability to pass on increasing interest costs to tenants he replied:

'First of all you're just factually incorrect, interest rates are 100% deductible against tax and therefore rising interest rates don't actually increase the costs for the landlords........'

She sought clarification about it and he told her:

'What I'm saying to you first of all is is that if they have an increasing cost because of mortgage interest rate rises they can deduct that 100% off their tax bill; so this idea that rising interest rates whether for tracker mortgages or other mortgages for single property landlords is an increased cost to the landlord is not the case......'

Pat Devitt from IPAV said : 'Eoin is correct, there is 100% there' but that landlords who were making a loss couldn't write this off against their tax.

News to me!!
 
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Is this the financial illiteracy we can expect if we're unfortunate enough to suffer a Shinner led government?
Or does O Broin know exactly why what he's saying is absolute nonsense but continues to say it anyway, in the full knowledge that he's sowing falsehoods, misinformation and division?
Neither option is appetizing
 
He has made a mistake which people often make.

The seem to think that a tax allowance is a tax credit.

How a tax allowance works [Which is how interest works]
Revenue : €10,000
Interest allowance: €4,000
Taxable: €6,000
Tax: €3,000

How a tax credit works [Which is the mistake O'Broin made]
Revenue €10,000
Taxable: €10,000
Tax: €5,000
Interest paid as a tax credit: €4,000
Net tax: €1,000

So if the interest rises to €4,500, the net tax falls to €500
 
The tax allowance helps but still is increased cost to the landlord

Say paying tax high rate 40%
Say 400k borrowing at 4% =16k

Interest 16k
If i make a profit i pay less tax by .4x16=6.4
So still pay extra 9.6k net to the bank


By comparison if interest rates were 1%
The interest would have been 4k
Tax reduced by 1.6k
Tax liability 2.4k

Additional tax due to increase rate hike 7.2k

Formula for increase:
Capital x Rate hike x 0.6 (tax due)
In this case 400k x 0.03 x 0.06

In other words landlord is shouldering 60% of the interest rate hike
 
Brendan Burgess said:
He has made a mistake which people often make.
Click to expand...
People? Yes, ordinary people, perhaps. Maybe ones who haven't thought too deeply about it. Or even thought about it at all. Or stupid people. Or people who can't do sums. Thing is, this kind of people don't generally get to be cabinet ministers making grown up decisions. O Broin presents himself as a minister-in-waiting in the Shinner government-in-waiting. They seem to think he's one of their brightest and best. He's even written books!! He should be judged by higher standards than mere "people" might be. On this evidence, he's intellectually unfit to be a minister.

Brendan Burgess said:
The seem to think that a tax allowance is a tax credit.

How a tax allowance works [Which is how interest works]
Revenue : €10,000
Interest allowance: €4,000
Taxable: €6,000
Tax: €3,000

How a tax credit works [Which is the mistake O'Broin made]
Revenue €10,000
Taxable: €10,000
Tax: €5,000
Interest paid as a tax credit: €4,000
Net tax: €1,000

So if the interest rises to €4,500, the net tax falls to €500
Click to expand...
It's not that hard to understand really, is it? And it's certainly 101 level stuff for aspiring cabinet ministers.
 
What's the surprise? This is how shinner economics work.
On a similar issue, did you hear the one on Drive Time during the week saying high earners should be paying paying 50% tax. Sarah left speechless when high earners were defined as those on 100k plus. Me left thinking those on 40k plus already pay ~50% 'tax'.
 
Wow, that’s some clanger.

And it wasn’t a slip of the tongue, he repeated the mistake.

While I don’t agree with his policies, I’m genuinely surprised that he has such a basic misunderstanding of our tax code.

It’s pretty scary.
 
The problem with these type of gaffes on prime time broadcasts is people will believe them and thus the narrative landlords continue to make massive profits or landlords can avail of massive tax breaks etc
 
Luternau said:
The problem with these type of gaffes on prime time broadcasts is people will believe them and thus the narrative landlords continue to make massive profits or landlords can avail of massive tax breaks etc
Click to expand...
Out of interest - has any presenter on this show followed up and clarified that the assertion was incorrect? Perhaps our newspapers should follow the Washington Post example and do real time fact checking on our politicians.
 
Brendan Burgess said:
I was astonished by this.

Brendan
Click to expand...
I am not.

The party are in a parallell universe to reality, not only do they not know, technically how things work, they don’t have a coherent and strategic plan.

But, as a large chunk of under 40’s, only read the 1st 2 lines of a news story, and actually believe SF when they say they the housing crisis can be solved with a magic wand, this rental tax grave error and many others like it, won’t make a dam of a difference, and they will be, by far the largest part after the next election, i still can’t get my head around this.
 
fayf said:
I am not.

The party are in a parallell universe to reality, not only do they not know, technically how things work, they don’t have a coherent and strategic plan.

But, as a large chunk of under 40’s, only read the 1st 2 lines of a news story, and actually believe SF when they say they the housing crisis can be solved with a magic wand, this rental tax grave error and many others like it, won’t make a dam of a difference, and they will be, by far the largest part after the next election, i still can’t get my head around this.
Click to expand...

I think that's harsh on under 40s - plenty of people much older than that who voted for Haughey, Healy Raes, Varadkar and other assorted misfits. There are very few voters of any age delving into party manifestos or policy documents.

If you were a young person hoping to buy a home in Ireland why would you support either of the 2 parties who have got us to this point? I have never voted SF and don't plan to but I can absolutely understand why people desperate for change would give them a chance.
 
fayf said:
I am not.

The party are in a parallell universe to reality, not only do they not know, technically how things work, they don’t have a coherent and strategic plan.

But, as a large chunk of under 40’s, only read the 1st 2 lines of a news story, and actually believe SF when they say they the housing crisis can be solved with a magic wand, this rental tax grave error and many others like it, won’t make a dam of a difference, and they will be, by far the largest part after the next election, i still can’t get my head around this.
Click to expand...
I suppose the only consolation is that if they do get into government, their erstwhile supporters fury will know no bounds as it slowly dawns on them that, no, after all, they're not all going to get their a-rated houses handed to them on a plate within a matter of months. Imagine the look on O Broin's face as the opposition get stuck into him when the homeless figures continue to rise (they will, you know) and he realizes with a sinking feeling that house completion numbers can't just be willed upwards by sheer force of his rhetoric.
The Shinner schtick has always been that they're different from all those other leftie parties that over promised and under-delivered. (Labour, DL, Greens etc.) So far, the gullible are swallowing it. When reality dawns, the Shinners will take a hammering at the subsequent election that will reduce them to single figures in Dail Eireann.

Unless they've abolished elections by then....
 
arbitron said:
I think that's harsh on under 40s - plenty of people much older than that who voted for Haughey, Healy Raes, Varadkar and other assorted misfits. There are very few voters of any age delving into party manifestos or policy documents.

If you were a young person hoping to buy a home in Ireland why would you support either of the 2 parties who have got us to this point? I have never voted SF and don't plan to but I can absolutely understand why people desperate for change would give them a chance.
Click to expand...
This point where we’ve full employment and the economy is the envy of Europe?

Why is an Taoiseach bundled in with those other characters?

Idiots desperate for change voted for Donald Trump, Brexit, the Tories under Boris, etc. Look where that got them.

What about all of the young people who have incredible jobs and who can buy homes? We always hear about the whingers who are heading off to Australia. Best of luck to them there. Last time I looked, property was unaffordable in most major urban centres, including places like Sydney, unless people have well paid jobs. There are three solutions; get a better paid job. Cut your cloth according to your measure. Accept a commute like most other citizens of the world.

Does the butcher, baker, or candlestick maker live in Manhattan/Mayfair/Downtown Tokyo?

I suppose Leo Varadkar is to blame for globalisation too?

Property prices are high here also because of the superb jobs in areas like tech, pharma, aviation, finance, professional services. Ireland is in many ways a victim of its own success. We now need to take those spoils (e.g. the corporation tax money) and solve issues like the housing crisis. But in a smart way. Build new towns outside of Dublin and connect them via high speed rail. Build the Metro. Make living in places like Portlaoise easy if you work in Dublin. 200mph express trains etc.
 
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