I was browsing through The Corner today and came across David Freddoso lauding the House Republicans’ new housing plan. You will be non-shocked to learn that it consists of a bunch of new tax breaks, including — naturally — elimination of the capital gains tax on investment property. Yawn.
But wait! It turns out that the House GOP’s plan has inspired some surprising comity between right and left: they both hate it. Jerry Taylor gives the conservative rationale for opposing the plan:
I know that there is plenty of political capital to be gained by providing handouts to middle-class homeowners and little political capital in removing the same. But a political party that ostensibly stands for free markets and limited government should not be in the business of underwriting or subsidizing private investments in anything unless we can find some plausible market failure in need of correction (and perhaps not even then).
Matt Yglesias provides the lefty view of why this plan sucks:
Preferential subsidies for investment in housing lead people to, on average, consume more housing and less stuff-that-isn’t-housing than they otherwise would. In other words, bigger houses instead of fancier clothes. This, in turn, has a substantial negative impact on the economy. Larger houses cost more to heat and cool, and larger houses lead to longer commutes. We shouldn’t stop people from buying big houses if that’s what they want to do, but it’s quite harmful to be specifically encouraging them to invest their resources in this way quite independently from the financial crisis. Reduce the tax-side subsidies to homeownership and we’d have somewhat faster economic growth, somewhat more public revenue, and a somewhat cleaner environment.
So: get rid of housing subsidies and we’d have both a freer market and bigger government. It’s a win-win! Except for anyone who actually voted for it, of course. But at least we get this bonus factoidish wonkery from Taylor:
For what it is worth, Switzerland is the only major country I am aware of that does not implicitly or explicitly subsidize housing in any substantial manner. Home ownership rates are somewhere around 35% as a consequence. But no one thinks of Switzerland as poor or deprived somehow because it does not receive the positive externalities allegedly associated with private home ownership.
I suppose not. Still, it didn’t stop the Swiss from buying our crappy mortgage-backed securities, did it?