The COVID relief has helped the rich in the same way that the mortgage tax deduction 'mostly' helps the rich[1]: the majority of the dollars go to aid wealthy people, despite the number of non-wealthy beneficiaries being much higher.

[1] https://thehill.com/opinion/finance/358922-mortgage-interest...

That always struck me as an ass-backwards way of looking at taxes. $100 saved by someone near the poverty line is a big deal to them, $100 saved by someone making six figures is not near as much. The recent doubling of the standard deduction is probably one of the biggest (in terms of impact) tax cuts to the lower/middle earners (read: the vast majority of people) in a long time.

I agree that poor-er people have much higher marginal utility for $1, but I think that observation supports this critique!

The 'cost' of spending $1,000,000 on a wealthy person should be measured in terms of how much utility less-wealthy recipients would get out of that money. In the same way, your example with the standard deduction also, I think, supports this critique: either standard deduction is marginal once you reach a high enough level of income, but at lower levels of income it is much, much better (and results in higher tax rebates for poor people). It's an example of a tax policy that does the reverse of the mortgage tax deduction - it becomes less proportionally beneficial at higher levels of income.

P.s. I may have misread your comment, and if we are actually in agreement I apologize!

I'll be honest, the mortgage tax deduction doesn't deduct that much either as a proportion of income if you make a multi six figures income, much like the standard deduction.

For example, if you have a $1mm house, your interest on a $800k mortgage @ %2.7 APR is a ~$30k/yr interest deduction, which is in the same range as the standard deduction, representing around $15k/yr paid in less taxes. For those kinds of people, it's easier to just make $30k/yr more per year too. These people often live in states with an income tax, so they can't deduct their property tax anymore either, since it gets dwarfed by their state tax bill.

On a dollar aggregate, they of course get the most benefit from the deduction, because most middle & lower income americans don't pay a lot of taxes to get much of an aggregated benefit. But as a percentage of their own income, its not actually that much!

The mortgage deduction on it’s own isn’t such a big deal but it suddenly makes a lot of things tax deductible which aren’t if you take the standard deduction.

The tax code is complex largely to enable such seemingly subtle interactions.

What kind of stuff becomes tax deductible once you get beyond the standard deduction, that doesn't involve having a business, which doesn't have that standard deduction limit anyway? Charitable donations? Medical expenses if you have a really bad time and need to spend more than %4 of your income to cover it?

It’s a long list, the major one is state income taxes, also charitable deductions can cover charities you create which can be a big deal if something you’re doing anyway could qualify.

However, some oddities like theft of investments such as gold or artwork and even some fines can be deductible. So sure on it’s own the mortgage tax deduction isn’t always huge, but it’s rarely the only deduction someone could take.

You can't deduct state & property taxes beyond $10k anymore, that deduction has been neutered significantly.

Charitable donations are not a tax dodge scheme for even the people who make $500k/yr, it's way too complicated and expensive to make it a vehicle to direct tax free spending. As an estate tax dodge, yes it is a thing, but again, many high income people don't have $5mm sitting around where that becomes a good idea too.

Theft is also not a reliable tax deduction, and if it was, it would be fraud! And you just lost something!!! I assure you the vast majority are not doing this.

So please, tell me what actual tax deductions you can take as a high income W2 employee that is actually significant

Someone making six figures still pays a lot more tax, in both net numbers and percentage (=tax brackets) than someone poor(er).

If we want to go down your route, 10% of all clothes in ShoppingCentre(TM) is unfair too, because someone buying an Armani suit saves more money than someone buying a $10 5pack of white tshirts.

Low earners don’t pay federal income tax. Bottom 50% make up 3% Top 1% paid 40% of taxes.

https://taxfoundation.org/publications/latest-federal-income...

Yes, and what did those employees who would have otherwise been unemployed spend their money on? Likely rent was the #1 item, thus transferring wealth from tax dollars to asset holders.

I'm sure the employees would much rather have been laid off to stick it to the asset holders.

With weaker demand rents would have actually fallen a lot more than now. That in turn would have an impact on asset prices in the long term.

Will it be fairer to employees ? I don't know, there will be lot more pain for employees without government intervention.

However with Quantitative Easing or bailouts and COVID loans means the rich are not paying the same price as well, that is why rich are becoming richer, poor suffer either way.

> With weaker demand rents would have actually fallen a lot more than now

In this sentence, is "weaker demand" euphemism for mass homelessness?

Not necessarily, demand in Bay Area for example is not really connected to homelessness all that much.

While rents have dropped a bit here, it more likely to get 2 months rent free rather than actual drops.

In a tough economy I would expect rents to drop and in turn asset prices as well.

The 6 trillion pumped in has to go somewhere, if it’s not inflation of consumer goods, it is inflation of capital goods. This has made it incredibly harder for mobility and wealth inequality

It's amazing how sociopathic economics is without context

I have come to realize that many people are haunted by the constant fear that someone somewhere might be making a profit.

I think it's a great thing and a credit to our institutions that millions of citizens of my country weren't evicted last March and April. Who cares if landlords got paid for rent or if a bank received a mortgage payment?

>...Who cares if landlords got paid for rent...

Hmmm...unfortunately, most landlords are people who own a single rental, often the one they lived in previously that they cannot sell. By not bailing out landlords (not speaking of institutional investors here that buy up distressed mortgages in cash by the hundreds), you've hurt average-earning middle income citizens. So yes, with the moratoriums, you've transferred wealth from a chunk of the middle class to a different chunk of the middle and lower class.

Most landlords own a single rental, but most rental properties are owned by large companies (notably REITs like MAA that has over 100.000 properties)...

So what you're saying is both true (in that it saves average-earning citizens) and false (most of the money went to large corporations like https://en.wikipedia.org/wiki/Mid-America_Apartment_Communit... ).

>...most of the money went to large corporations...

As far as I know, no landlord, large or small got any bailout. Are you saying investor-landlords received some type of direct stimulus? If so, can you elaborate?

But they were paying rent or paying their mortgage before it happened too.

All it says is that it's a good thing that the government backed you up when you were in trouble. And I'd rather see the government back up the poor folk instead of them bailing out the stupidly wealthy. It'd cost less money.

This is not what anyone means when they talk about wealth transfers. Yes rent is a huge issue on its own eat the new feudal lords and all that but the problem of people using their wages and salaries funded by taxpayers to pay for things they we're paying for already is something totally different than inflation devaluing dollars, which is the primary asset held by low-middle income people, plus wholesale transfering it via bailouts to the already wealthy.

If the gov't took money from taxpayers to give to companies to pay worker salaries to pay rent and you squint a bit that's just workers paying rent semi-collectively which on a macro scale is like... fine. Not good. But fine.

It's a bit more complex, but even avoiding how much value pleople get from paying their rent, only as much was transferred as there would be empty vacancies from people relocating elsewhere (or losing their homes and having nowhere to go). If elsewhere, they also pay rent to somebody. Plus somebody else would pay the rent when they are gone, just slightly lower (probably). That difference in rent price would be amount being transferred then.

Long story short it's more likely that they were able to buy other necessities and more food than they could without a job.

Your argument would work though if these were high paying jobs - that would likely only result in fewer luxuries being bought.

If money ends up in the hands of employees, then statistically by definition most of them are not the 1% and money equals higher level of living instead of more useless stuff.

I think the idea isn’t that it was a net transfer from individual working-class people to the capital class, but rather a net transfer from city/state/country treasuries to the capital class.

How much of that translates to the rich getting richer, depends on what proportion of those treasuries’ funds originally came from taxes on the rich, vs. taxes on everyone else.

The way I see it, they state money belongs to everyone (bear with me), the transfer between working and capital class happens when it is not distributed evenly, which is what happened at booking.com and is happening quite often because those who work don't have time to research new regulations, don't have experts to analyze them and some yet other people to fill out necessary documents to get money from the state.

That's why I believe many laws like "let's help THOSE people in need" end up on a giant pile that's mostly getting abused by those who have time for it (of course there are exceptions).

Are we saying a rent payment is a “transfer of wealth”? I’m not invested in real estate, but I imagine many people in real estate were just as impacted. Don’t you likely need to pay towards a mortgage and put some aside for capital and day to day maintenance?

Your comment is written as if a rent payment is a transfer from one person to directly to someone else’s savings account. I’m not convinced this is true.

The great recession resulted in the creation of Blackstone's Invitation Homes, which is the largest owner of single-family rental homes in the US.

Homes that used to be owned and rented locally by individuals or small businesses are now rented and managed from elsewhere.

Profits resulting from higher rents and cheaper maintenance flow to stock holders, creating bad incentives. These homes are no longer rotating into the market for sale, reducing inventory.

Even for rental homes rented by local owners, the increased rent due to the commercialization of rented residential housing created conditions for everyone's rent to go up.

https://www.nytimes.com/2020/03/04/magazine/wall-street-land...

Ah, I moved into one of invitation homes a few years ago. Looked nice when we drove up, didn’t think about why all the windows were open when we signed paperwork.

Their negligence nearly killed my family, and left us with life long injuries.

The gas line was leaking natural gas, improper installation? the furnace and stove were emoting lethal levels of carbon monoxide. Detector was defective.

A portion of the AC fell into the kids room. One wall got so hot it burned my wife. Only reason we didn’t die is smell was so bad we nearly always had all windows open.

At every stage they lied and did what they could to cover up problems.

I still recall spending an hour each morning trying to wake kids, not realizing we were all being poisoned.

Just last week they tried to settle the matter by paying back my deposit if I agreed to Silence, and gave up all legal claims.

https://lease.invitationhomes.com/homes/665-cranberry-ct-300...

This sounds like an issue with that specific home. I’ve never heard of a home with this nanny life threatening issues not be condemned by fire or county authorities.

There are many descriptions of problems with homes managed by IH.

Reuters covered a few examples in 2018: https://www.reuters.com/article/us-usa-housing-invitation-sp...

Thanks, they are slumlords is seems

House had issues. A simple home inspection would have uncovered a lot. Lots of things out of code.

Various workers IH sent admitted they were told to do as little as possible to make it look good.

All homes are always on the market for sale, regardless of whether they are listed on the MLS or not. If you see one you like there's nothing stopping you from making an unsolicited offer to Blackstone's Invitation Homes.

Invitation Homes raises rents as much as possible.

It seems unlikely a typical landlord would need to raise rent at the same rate because they maintain their own operations and have no duty to shareholders.

An offer to buy from IH would need to beat IH’s own model for returns in such a substantial way that it would be overpriced and affect comparable home pricing in the area.

Thus, it is not similar to making an unsolicited offer to some regular home owner.

Most landlords raise rent as much as possible. Invitation Homes can't charge more than the market rate; their costs are irrelevant.

I hear people say this, but it's definitely not been my personal experience. I've rented at places where the rates were incredibly reasonable and did not increase. One guy let me rent month-to-month for over a year without ever increasing rent. Is there evidence to suggest that private landlords are mustache twirling villains?

In my limited experience with renting, self-managed properties often don’t hike rents annually. Feels to me like this is because the landlords aren’t tracking market movements and so don’t understand they can increase their gross revenue by 5-30% in some years because demand significantly outstrips supply in many metros.

Managed properties the agent generally does have a lot of datapoints about the market and will raise the rents accordingly,. They can see what similar properties are fetching, they can see the result of hikes in terms of people who move out, and their incentive is the management fee is quite often a % of gross revenue.

I’d go as far as saying charging significantly under the market rate for rents is financial mismanagement. You’ve got an asset delivering you income and you aren’t managing the return on the asset to be broadly what equivalent assets are returning to others.

I don’t think charging the market rate makes you a mustache twirling villain.

I think he's saying that at a certain level of wealth, you don't need mortgages anymore. And especially with super low interest rates - bonus points if the interest rate is fixed - mortgages are more of an investment than a liability.

So people with a ton of money can just buy a lot of property which they then rent out. Renovation work can be delayed and property values have only went up in the past 30 years or so (minus the financial crisis, which in the greater scheme of things turned out to be just a blip). So they have an ever appreciating asset that's a constant stream of revenue. Double-win.

Which makes this whole multiple-bankruptcy thing for the former US president even the more baffling :-))

It's the power of capital vs the power of income.

If you have a high salary and no ability to save for a deposit then property can be unaffordable and you're stuck paying someone else's mortgage.

If you have a 5% deposit saved and a high salary, you still can't afford a home because lots of people are in your position and have driven up house prices and rates and leverage available sucks.

If you have 20-25% down and a high income you can afford a home to live in and it's probably cheaper than renting long term.

If you have 100% in cash then you can buy one to live and buy 3 more as buy-to-lets as a side business.

> If you have a 5% deposit saved and a high salary, you still can't afford a home because lots of people are in your position and have driven up house prices and rates and leverage available sucks.

I keep hearing this trope and reading about it. Not positive why it gets repeated. It doesn't take long to do a realtor.com or trulia search to find a shit-ton of affordable homes. It seems to me that, there's a certain class of people, many of which I gather hang out on HN, that don't have either a long enough lifetime behind them to possess an acute perspective or just outright completely have false expectations. My home value in the midwest hasn't risen in 15 years. My value actually decreased by 10K two years ago. Within 6 blocks of my house in SE WI, I can find about 80, 3bdr, single family houses for sale, many if not most under 120K. I'm looking at a 3bdr, 1bath now for 60K that I would love to fix up and turn into a rental. If you feel like 120-130K is not 'affordable' to someone with a 5% deposit saved and a "high salary", let me blow your mind. Nobody, and I mean, not a single person on my block makes more than 48K/year. Me and my wife bought our house for 124K, while making 28K/year jointly!

Right now all I hear near Seattle is properties that are relatively unexceptional, that people bought 2-4 years ago for $800k, and are now being listed at $1.2M.

They’ll list on a Friday, get 35 viewings over the weekend, and the seller has 10+ offers by Wednesday and accepts $300k over asking with all contingencies waived.

I’ve personally heard over a dozen such examples in the last 90 days. I’m sure someone’s looked at MLS data and done a better analysis.

Lenders continue to appraise nearer the initial asking, availability of capital is tightening up because of risk and underwriting has become more conservative since Summer 2020, typically meaning buyers need >740 credit and good debt-to-income ratios to do 5% down, and then they also need the $300k cash to bridge the gap between appraisers valuations and what it actually takes to do a deal in this market.

Despite COVID purporting to offer more work location flexibility, what we seem to be experiencing in WA is downtown renters looking to buy within 30 miles of work, perhaps for a “Hybrid” future, rather than packing their bags and moving to WI.

I'm in the UK. House price inflation nationwide has been running at 7-8% a year for 20 years and price:income ratios are at all-time highs.

The mortgage rates on 5% down are like 3.5% and the mortgage rates on 20-25% down are like 1.5%, so effectively your monthly mortgage payment could get 50% higher with a 5% deposit.

124/28 is only 4.4x income.

Property in the UK is more like 9x.

Not at all. Their equity remains the same, and chances are you can stay solvent for a couple years if you own a second property. It just means they get to earn 1/30 less rent (in its original meaning) over the whole mortgage.

Just a data point here. My company got a five million loan that got written off. The company claimed that around 120 jobs were at risk. However the truth is that since we are a consulting firm and our clients continued our services, the jobs were never really at risk and the owners made off with 5 million. For a company that has yearly profits in the low one million range, the owners did hit a lottery while cutting our salaries at the same time .

If it’s truly as simple as what you describe then the owners committed fraud.

Two things: One, this was the supposed goal of such a loan (keep jobs, and not sign multi-million bonuses to CEOs). Two, you could give this to a small business and keep as many jobs (on total) if not more. However, bigger companies have better means to navigate complex governmental schemes. This means people who have substantially more wealth (owners of big companies) get an easy ride during such a crisis while the smaller guys get screwed.

Or, you know, don't give money to anybody. You'll have some people bailed out through deflation, and some other screwed because they are over-leveraged. Whatever happened to being responsible and putting some money aside for a crisis?

the company basically got free labor for 2 months. instead of needing to pay employees, the company got to keep its cash (and pay them out to the owners).

Sort of. $ can go to payroll, but net revenue is still up by PPP amount. So owners can get a performance bonus, and it just happens to be the PPP amount. But if there was no PPP, there wouldn't have been that extra cash, so less $ for bonuses.

This only works if the company was breakeven, or had $ reserves (eg, VC funded w expectation of ever-growing losses)

That seems ancillary to the GP's point, which was pointing out an overall wealth transfer rather than inveighing against COVID loans.

What did they do with the regular income they had during that period that would have gone to rent, salaries, etc.?

Paid it out as to owners/execs as dividends/bonuses, this is what happened in my industry to the companies that took PPP loans but had plenty of work and receivables to pay the bills. Plenty of PPP money was ‘used for payroll’ when there was already money for payroll, then the company is free to do as it wants with it (cash out to owners)

You’re asking what booking.com (a travel booking agency that lives on fees earned when people are traveling and using them to buy it) did with all that money they were earning from their normal business operations given the collapse of travel volumes from March of 2020 to now?

No, the post I was replying to was talking about his wife’s company.

you're so close...

>Wife's company got COVID loans. They were forgiven.

those relatively useful (at least in the cases where it wasn't abused/cheated) programs is a minor part and basically a window dressing of that multi trillion transfer of wealth to the rich. It is just a bone thrown to the populace to detract the attention and to derail the public discourse they way you just did.