Who thinks that TRS should be extended in the Budget?

Brendan Burgess

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Apparently TRS will be abolished at the end of this year, although it might be retained in some form in the Budget.

A journalist has asked me if I know anyone who would be prepared to explain why they would like to see it retained and why it's important for them.

If you are interested, send me a PM or email me at brendan at this website.

Brendan
 
There really is no justification for further extending mortgage interest relief beyond the end of this year.

Why should a borrower that bought their PPR between 2004 and 2012 get even further tax relief whereas a borrower that bought in 2013 or later gets no relief at all? That is clearly inequitable.

However, the cost of FF's support of the current minority government included a commitment to retain mortgage interest relief beyond the current end date of December 2017 on a tapered basis.
 
There are a few good reason to extend MIR in the up coming budget :
1. Those who bought between 2004-2012 buy during the boom years and thus took on the most debt and need the support.
2. But the single most important reason to extend this MIR is because its CHEAP for the government to do so ... low interest trackers during this period keep the cost of providing MIR very low and yet think of all that political capital that FF gain from extending the relief.
 
Mortgage Interest Relief makes owning your own home more affordable and unlike e.g. the first time buyers grants does not seem to be a factor in overheating the property market. Owning your own home should be a goal of public policy when we consider the costs that it saves the government and local councils in providing social housing, HAP supplements etc.

If it's inequitable that it's only for people in 2004-2012, well then it should be extended to all PPRs.

I didn't get any FTB grant when I bought my first property, but people today are getting them, which is unfair on the 2013-2015 cohort!
 
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If there's logic for extending the TRS then there's logic for massively increasing the rent relief.

As the recipient of the latter, I don't think there's a need for either but I suppose it's always the case that if everyone else is getting something from the State, equity should grant that to me too!
 
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1. Those who bought between 2004-2012 buy during the boom years and thus took on the most debt and need the support.
Actually, nationwide house prices peaked in 2007, fell dramatically until 2012 and have risen pretty dramatically since then. In other words, the 2004-2012 time period doesn't neatly coincide with our property boom/bubble.

In any event, why should house buyers be subsidised because they bought during a boom? We don't subsidise shareholders that bought their stocks during a bull market.
2. But the single most important reason to extend this MIR is because its CHEAP for the government to do so ... low interest trackers during this period keep the cost of providing MIR very low and yet think of all that political capital that FF gain from extending the relief.
Are you arguing that purchasers with cheap mortgages are more deserving of State support than purchasers with more expensive mortgages? That seems a very odd logic to me.

I certainly agree that the FF promise to extend MIR beyond 2017 was about buying votes.
 
If it's inequitable that it's only for people in 2004-2012, well then it should be extended to all PPRs.

Why should less well off taxpayers subsidise asset purchases by better off taxpayers?

Regardless of your politics, that doesn't seem very fair.

I would prefer to see my taxes being spent on people that are genuinely in need - not on subsidising middle class house purchasers.
 
Why should less well off taxpayers subsidise asset purchases by better off taxpayers?
Regardless of your politics, that doesn't seem very fair.
I would prefer to see my taxes being spent on people that are genuinely in need - not on subsidising middle class house purchasers.

Because I think you will see a lot more people down the line 'genuinely in need' of social housing and rent supplement who could have been helped - for much smaller amounts - to own their own homes. A little help today can save a lot of help down the line.
Given how much tax is being paid by middle class and above taxpayers, I don't believe for one second that this is a grab of less well off taxpayers money. This is just a reduction of what the "people who get up early" are putting in, which in the long run encourages prudent behaviour and financial independence from state supports.
Just like tax relief on pension contributions, for that matter.

It makes much more fiscal sense for the state to encourage responsible behaviour, than to go around giving free housing and everything else besides
to all comers. Very easy to be "genuinely in need" when the state is there to pay for everything for you. And then we'll wonder why in a generation we've no more taxpayers and only people "genuinely in need".
 
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As for 'fairness', if I was behind a "veil of ignorance" (to quote John Rawls) and I didn't know in advance if I would be poor, middling or rich; I think it would a fair and reasonable use of public funds to encourage prudent fiscal behaviour even if it means rewarding people who are of higher income than me; as long as the behaviour also means less demands in the long run on the public purse.

It's one thing to say that if you are able to take care of yourself, you need to also take care of those who can't. But it's a strange kind of fairness which says: "If you try to make it on our own, you'll get nothing from us and you'll pay for those who don't even try."

A government which begrudges a little bit of help now to get its citizens to stand on their own two feet is going to end up with an awful lot of people who are fully dependent on government support - for the rest of their lives.
 
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For the last few years interest rates haven't been moving for variable rate customers in line with the central bank rates.
I suspect a major reason for this is because, as the central bank rates go down the amount of money the banks can make on the tracker mortgages decreases so they take the profit from the only place they can. The variable rate / fixed rate mortgage customers.

So extending the TRS has little to no impact on the tracker customers (they're paying little interest now anyway) which are in the majority for that period, but has a slight affect of slightly reducing the effective mortgage rate to get it slightly closer to European averages for variable rate customers.

It would be better if we had a competent government that encouraged the rates to go down naturally by encouraging competition and allowing banks to repossess houses that haven't been paid for in years. But we don't. So I'll take whatever I can get.
What I save in TRS goes back (several times over) in childcare so I'm not using the savings to live the high life.

I bought during the boom so I saw houses the same as mine for sale a few years later at €60,000 less. So the TRS just means I'm paying closer to what people who bought after me are paying. I know, I know it was totally my fault for buying when I did. At the time we were looking at house prices accelerating away from what we could ever afford so we did what many other did at the time. Buy what we could afford. With my 20/20 hindsight I wish I'd waited 5 years and was paying a hugely reduced mortgage now without the TRS :)
 
The cost of mortgage interest relief to taxpayers in 2015 was €232 million so we're not talking about small beer.

If the objective is to lower the tax burden on middle earners, wouldn't it make more sense to reduce income taxes generally rather than subsidising a random selection of taxpayers?

I happen to know a chap that bought his first house back in 1997. He subsequently got married and traded up to a larger house (with the benefit of a cheap tracker) in 2004. So far he's continuously received mortgage interest relief for almost 20 years! To be fair to him, he thinks it's hilarious that he's going to benefit from a further extension of a tax relief that he very clearly doesn't need.

In my opinion, mortgage interest relief is a wasteful, untargeted way of spending taxpayers' money. It's regressive (higher earners benefit disproportionately) and, as a demand-side support, it ultimately just results in higher housing costs for all.

Beyond the special pleading of vested interests - and political expediency - I can't see any good reason to further extend MIR.
 
The cost of mortgage interest relief to taxpayers in 2015 was €232 million so we're not talking about small beer. If the objective is to lower the tax burden on middle earners, wouldn't it make more sense to reduce income taxes generally rather than subsidising a random selection of taxpayers?

€232 million ... I wonder how that stands in comparison to the total budget for social housing, rent supplements, HAP, emergency housing?

If you just reduce income taxes the money could go on cars, foreign holidays etc etc.
It's not about reducing the tax burden on middle earners, but on reducing future demands on the public purse, and guiding the income of these middle earners in that direction.

If we got rid of marginal tax relief on pension contributions, how much of the money that would have gone into pension pots would end up not in alternative investments but spent by the end of the year?

I think it's entirely legitimate for the state to guide its citzens with incentives into behaviour that is fiscally responsible in the long run.
Just because something is regressive doesn't mean it's wrong full stop.
Should we stop charging for electricity if it shown that ESB bills are proportionately\relatively a greater burden for poor people than rich? Or do we balance that against the greater demands that would place on our energy supplies?
Giving grants to homeowners to improve the energy efficiency of their homes was regressive - yet we did it.

We have to consider the wider equation.
 
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€232 million ... I wonder how that stands in comparison to the total budget for social housing, rent supplements, HAP, emergency housing?

For what it's worth, according to the Department of Housing, the overall exchequer provision for housing in 2015 amounted to €676 million.

However, I really don't what relevance that has to this discussion - it's not like every euro spent on MIR results in a euro saved on social housing.

I also don't see why you think it's fiscally responsible for the State to subsidise the acquisition of property by a random cohort of private individuals. How is that fiscally responsible? It just drives up the cost of housing.

MIR was finally abolished in the UK back in 2000 - it's long past time that we followed suit.
 
For what it's worth, according to the Department of Housing, the overall exchequer provision for housing in 2015 amounted to €676 million.

And in 2017 it's now 1.2 billion and it's not clear if that includes local spending from property tax:
http://www.irishtimes.com/news/soci...cial-housing-funding-up-50-to-1-2bn-1.2823729

So let's set assign 1.2 billion for social housing but nothing for helping people to stand on their own two feet and put a roof over their head.

Cap Mortgage Interest Relief and extend it to everyone.
Otherwise, don't ask why our social housing budget goes up and up and up.
 
There really is no connection between MIR and social housing.

MIR is a demand-side support - it increases the overall cost of housing.

All MIR does is subsidise house purchases for one cohort to the detriment of those that don't receive the relief.

You seem to be conflating "middle class social welfare" with fiscal rectitude. That just seems bizarre to me.
 
All MIR does is subsidise house purchases for one cohort to the detriment of those that don't receive the relief. You seem to be conflating "middle class social welfare" with fiscal rectitude. That just seems bizarre to me.

Is it fiscal rectitude to have marginal interets relief on pension contributions? To encourage to set aside money for retirement? Or is that middle class social welfare as well?

If home ownership drops, I guarantee it, there will be more demands placed on the public purse for housing supports.
But it's ok, if the people who need support don't own their own homes, they won't be middle class anymore so the state will be happy to subsidide their every need.

Not a penny for the middle classes. Billions for the unworking classes.
Net result, no more middle class.
Ireland's class problem solved.
 
We're not talking about the UK's housing policy. Or tax-advantaged pensions, energy efficiency grants or (!) electricity prices.

We are talking about the wisdom of the decision to extend MIR on a tapered basis for a limited cohort of borrowers beyond the end of 2017.

Your argument, if I understand it correctly, is that MIR should be extended beyond the end of this year because there is a vast amount of money spent on the underpriviliged and you want your fair share of the pie. With respect, that's just the special pleading of a vested interest - it's not a coherent argument.

Thankfully, the decision has already been made to phase out MIR - all that remains to be decided is how and when.

Home ownership has already fallen quite dramatically in Ireland - roughly 30% of households are now renters according to the CSO. This trend is not an Irish phenomenon - the proportion of households that rent has been increasing for years across the developed world.

Again, why should those households that rent their homes be expected to subsidise house purchases by better off households?
 
Your argument, if I understand it correctly, is that MIR should be extended beyond the end of this year because there is a vast amount of money spent on the underpriviliged and you want your fair share of the pie. With respect, that's just the special pleading of a vested interest - it's not a coherent argument... Again, why should those households that rent their homes be expected to subsidise house purchases by better off households?

It's a coherent argument, as coherent as the argument in favour of tax advantaged pensions, even though by your 'logic' it means that those people who don't have pensions are subsiding pension purchases by better off people? So why is it incoherent when applied to housing but coherent when applied to pensions?

I'm not convinced either of the point - given the respective net tax-benefit contributions of the different cohorts, that those without pensions \ owning own homes are subsiding the situations, but even if we allow that point, I don't think it is a red flag on its own.

Presumably the pensions policy is favoured to encourage people to make their own (income) provision into retirement rather than reaching retirement and being dependent (for income support) on the public purse.
Arguing for a 'fair slice of the pie' is not the point being made, being encouraged and allowed to make your own provisions is. And if people are not so encouraged and permitted, the end result will be more people requiring support.
Vast amounts spent on those that end up 'underprivileged', precious little on prevention of the problem rather than treating the symptoms.

Why did we ever have mortgage interest relief? Presumably, to encourage people to make their own (housing) provision rather than being dependent (for housing support) on the public purse.
 
We're not talking about the UK's housing policy.

I refer you to post #15 where you expressly referenced UK policy in relation to mortgage interest relief.
Has mortgage interest relief nothing to do with housing???
 
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