WWL>Topics>>3-25 9:20am Tommy, mortgage interest deduction

3-25 9:20am Tommy, mortgage interest deduction

Mar 25, 2014|

Tommy talks to Loyola Economics Professor Dan D'Amico about the effects of the mortgage interest deduction

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Automatically Generated Transcript (may not be 100% accurate)

I Tommy Tucker talking about the on home interest. Home mortgage interest deduction one professor would you said he -- though does help rich people. Pat in a car before we go to a professor Dan Demeco at Leo please say that. I'm not -- you are. You want. An. Edge and -- and can't -- A million dollars a year in mortgage interest. -- You're. Not. On anymore. The though to an industry is using interest up to one million dollars -- Your. You -- It me. Or. Yet they were saying the same thing different but pat I'm glad you called thank you so much did that make a professor of economics at -- good morning sir how -- Thanks for taking the time so when it comes to. Homeownership. And deducting for -- federal taxes the interest rate on that mortgage. And they get two questions one of them is. Does that really make a difference when it comes of people deciding whether to buy award to rant. And the second one would be. To be investment wise. In the nineties your own home but in the nation I mean they tract housing starts apparently. That's a pretty important area of the economy jump in where you feel comfortable. Well I think. Your previous caller woods was pointing out it is necessarily that. Tax break only helps which people but it's a bad policy your goal is to help more people per say. Put the world -- -- just divide between pitching war. There's a lot of people who were in the middle class especially when you're counting our family income as opposed to just single earners. I do think that you'll be -- would discourage. Homeownership among single poor households. Because if you're. A -- independent quarter you don't have deductions from. From spouses or children and so homeownership is one of the few areas where you get that now. Tracking the homeownership by the person has also been using this instance because. Then it. He can you encouraging you to get relatively larger mortgage or larger hole which which in -- since he's more homeownership. It isn't sure what to say. Like -- the government put its program in place to encourage homeownership it's not surprising that doesn't really encouraged everything that it. Said it will that's the nature of government program that they're gonna. The government programs that accomplish what it is that they set out to accomplish. Well it's gonna be hard to get it because people planet around people. Have have been owning -- home and have been taking that deduction and so it apart represented -- hike by were yelling get. You've got problems recessionary economy -- what we -- important -- But see -- open and I'm confused about your educating me here. Com is that I thought this was initially done not to help people not for altruistic reasons but. To stimulate the economy get people build houses because I guess when housing starts. Our trek is that because of the ancillary affected and hands on the economy Hillary -- it just a measure that that always confused me. Well I mean altruism and help the economy -- sort of similar in in in intense but different in rhetoric and I've. Well wait yeah and that that's on the -- early to get back to an amended and I've always question because you've been saying we'll have a company lays off people. Nom then eventually they'll find work in the marketplace somewhere Els and if not new lenders he's developed global bobbled. In terms of altruism that means a lot of discomfort so a lot of families so we -- that too often don't go together dealing. If that's it that's what. We're noticing it turning into a discussion that well the people are going to hurt by the action -- -- rich and you know really matter that much either. All that could have repercussions in terms -- -- -- people running small business news off -- -- leverage from home equity. Are back the issue. As well the fact that it it is. It's a fraction of your personal income that is insulated by that tax -- that you run your small business out of which creates jobs spur other people. They knew I had this sort of tax increased could ripple effect on employment or -- Lower. Lower Egypt he economic stat that people aren't directly affected by the -- -- arm and I mean to say that. That. Policy get the award not because of their intentions but because they Serbia. Political interest so. The people who. Particularly benefited from an effective tax rate were mortgage companies real estate brokers -- developers as well like. Middle income and operate from Campbell. So that brought the pride he needed that policy get put through because so many people are sort of made better off by it. It's going to be very difficult politically to repeal policy like that. You know and I guess in trying to ask in my own clumsy way is. In terms of those people that you just mention a benefit from -- and I -- -- I I guess again I'm not real sure of loan deducting the interest rates. Leads to more people buying houses are not as any data that shows and. Well it's certainly. Lower interest rates on our -- it is equipped with higher. Higher real estate participation absolutely. And building houses are presumed new houses. So when you tract housing starts. Is that because. When you build a house there's so many other things associated with a appliances windows doors what have you paint. And it's an important. The economy. Lower interest rates have a tendency to continue investment into capital intensive productions. And back in the profit tax break like what. What we're talking about court could be just from artificially low interest rates for the Federal Reserve. Set the general history we will basically if you were they -- authorities say oh early money's cheap. So I'm going to borrow much money in something with it's a lot of note again. Machines with that loan that -- hire Rita returned that interest level. That's profit so I'm willing to take that cheap money from banks -- the problem is that being in the last round of housing bubble. Set that interest rates so -- we basically build more houses than there were people willing to buy them it would. And so win what you realize that what you produce. Is far beyond. What do you actually willing to consume that whatever but he apt to say -- committed the interest rate wasn't indicative of people preferences. It was indicative of just bad political decisions. And and then we know Miami net allotted him with people get -- houses they couldn't afford a lot of that went -- load died no doc loans and those kind of things right. Right right I mean that's like the sub prime aspect that. That people were achieving that demand for homeownership would far -- -- interest rates -- equity issues of the hole. To you buy out a little bit beyond your -- You envision the equity will buildup. Because the valuable buildup on the mortgage and working near you revealed the sell off -- it you have. Low immigration Regent University war housing -- just all about where the financial system makes it hard for people leveraged. But -- mortgages then they're gonna be stuck with an asset that is it worth what you pay for what exactly what happened out. In them in the macro level at what point we got to go to new users nominate a quick answer and I hate to ask you that but. Where does that factor in that if you take away this deduction it's more money toward the government. And then I get -- pay off the debt they history relatives -- just find some I'll spend money on does that go back to it. Whether more government spending simulates economy or the economy or consumer spending simulates. I mean tax increase that level you should grow by. A heart pumping like in play into an apartment -- like -- spending. I don't think that it's a melt represented huge. In -- in government revenue that they could help due to budgetary deficit issues. If anything we should keep the ball in play so that government -- the word power and on a smaller budget. I appreciate your time I really do professor I enjoyed talking to -- Thanks so much other.