Republicans taking away the tax deduction for Mortgage interest.

  • Posted by a hidden member.
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    Dec 21, 2010 10:59 AM GMT
    http://www.latimes.com/la-fi-mortgage-deduction-20101220,0,4774973,full.story
    I noticed an interesting article in the LA times and thought I would ask for responses. I have a fairly good feeling that the tax credits for homes in the US is often seen as a "right" having been in place since 1913, and often viewed as good for the economy and low income earners who wish to purchase a house.

    The article speculates that it will be the Republicans who attempt to remove the tax credits next year and special interest groups are already out to campaign for the status quo.

    The National Assn. of Realtors already is running ads warning that tampering with the deduction would hurt "hard-working American families." The ads point out that 65% of the taxpayers who took the deduction made less than $100,000.

    They make a good point, but the article goes on to state.
    What the group doesn't say is that about 75% of the entire $85.5 billion that people saved in taxes from the mortgage interest deduction in 2008 went to individuals or couples making $100,000 or more, according to an analysis by the congressional Joint Committee on Taxation of the latest data available.

    The other thing to keep in mind is that under the present system retirees (who have paid off their mortgage) and those too poor to buy real estate are subsidizing the 25% of Americans who are able to claim the deduction (who are likely at their peak earning years with mortgages).

    So, I will ask if you would support the removal of this tax deduction and if there would be stipulations for your support... would it need to phased in, would you leave it in place for those earning less that $100 000, would you want to see the money used for social programs, tax reduction in other areas or used to actually reduce the deficit?

    Somehow, I can see support for or opposition to this one falling on whether you are a house owner and benefit from the present system or not rather than falling along regular party lines...

    ***Edit- I realize that the thread title is unfair, biased and anticipating an event that may never occur... but it seems that party politics and including the word Republicans or Democrat gets things noticed.***
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    Dec 21, 2010 11:08 AM GMT
    Somebody's got to pay for all those tax cuts...with a tax deduction.icon_razz.gif

    Super-rich people shouldn't care as much about the mortgage interest deduction since they are more likely to be able to buy property outright without mortgage.

    And, as you point it, the majority of the benefit is for people who can actually buy a home, being subsidized by people who can't or won't (like me).

    I think they should keep the deduction in full for the next several years, simply because if they take it away now, it'll dampen the housing market even more. Phasing it out eventually for people making >$200k-250k a year would be reasonable.
  • GQjock

    Posts: 11649

    Dec 21, 2010 11:53 AM GMT
    Told you so ....................

    700 Billion in tax cuts don't come cheap

    Bend over and assume ....... icon_confused.gif
  • rnch

    Posts: 11524

    Dec 21, 2010 12:29 PM GMT
    as long as the dems control part of congress this won't happen.

    icon_cool.gif
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    Dec 21, 2010 6:17 PM GMT
    q1w2e3 said
    Super-rich people shouldn't care as much about the mortgage interest deduction since they are more likely to be able to buy property outright without mortgage.

    And, as you point it, the majority of the benefit is for people who can actually buy a home, being subsidized by people who can't or won't (like me).

    I think they should keep the deduction in full for the next several years, simply because if they take it away now, it'll dampen the housing market even more. Phasing it out eventually for people making >$200k-250k a year would be reasonable.

    I wonder if allowing the deduction only for properties with a value of, say under $200 000 might not make sense. That way you are only "punishing" those who decide they need a large house. (Realizing that $200 000 buys a mansion in rural Mississippi and a single bedroom in LA.) You could be a millionaire, but if you take out a mortgage on a shack to live in as a primary residence, you would still be treated equally with the rest of the population.

    Though I do, to a point, agree with you on leaving it in place for awhile. It would seem silly to be giving away cash incentives one year and remove tax benefits the next.


    rnch saidas long as the dems control part of congress this won't happen.

    icon_cool.gif

    But that is kind of my point. If the Democrats truly represented the actual poor and seniors instead of the middle class and rich, would they not support removing a tax incentive that disproportionately benefits the rich over the poor?

    Even if you did not want to take that money and use it to remove the deficit, would it not make sense for the Democrats to support removing the tax incentive and demand that the 87 billion be used for socially progressive needs? Perhaps rasing the cut off for the lowest bracket for income tax- perhaps using it to pay for Michelle Obama's wish for better nutrition in lunch programs in poor areas. Perhaps taking that money and setting up child care for impoverished single mothers so that it actually makes economic sense for them to work if they wish (rather than work and fall further behind because they have to pay day care to watch 3 children.)

    I really don't want this to turn into another Democrat / Republican thread. If the Republicans repeal it and just bank the money to pay for their other tax cuts it would seem to be a rotten thing to do. However, for Democrats to support a tax break that only goes to 25% of the population who can afford a home and gets larger as your mortgage increases seems like a tax that only benefits the middle class to rich with nothing at all for the poor...
  • Webster666

    Posts: 9217

    Dec 21, 2010 10:09 PM GMT
    This is nothing more than wild speculation.
    We'll have the Senate and the President to stand in the way of Republican lunacy spewing out of the Republican controlled House of Representatives.
    That doesn't give me a lot of reassurance, but a little...
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    Dec 21, 2010 11:48 PM GMT
    southbeach1500 saidA flat tax is the answer.

    With a flat tax system:

    * We won't have all this whining from the poor that the tax system has loopholes to favor the rich.

    * We won't have all this whining from the rich that the tax system has all these loopholes that favor the poor.

    * We won't have all this whining from the middle class that the tax system has all these loopholes that favor just the rich and poor.

    And, every citizen would be contributing something to the treasury, as opposed to 48% of households currently paying no income tax at all.



    You know, it's not even a good theory, let alone practice. Here's why:

    Let's call the flat tax 25% and we have to families of four paying that same rate.

    The first family earns $50,000 pre-tax because one spouse works full time and one works part-time and does child-care.

    So after-tax income is $37,500. Housing for a two-bedroom apartment in a reasonably sized city about $10,000 per year (27% of their take-home pay).
    Health insurance (assuming under flat tax employers have no incentive to provide it) runs $11,000 between premiums and co-pays/out of pocket.

    So now,they have $16,500.

    Basic utilities (heat,water,electric, etc.) are probably $300/month, so now they have $12,900.

    Subtract food at about $500/month, now they have $6,900.

    Car ownership = $5,000, so now they have $1,900 per year to everything else (movies, sports clubs, after-school programs,clothing, etc).

    Now, let's look at that same family of four with a pre-tax income of $250,000 per year. Post-tax they have $187,500.

    Let's say they live a little larger then necessary in a 4-bedroom house with a separate family room and they rent. That's going to run them about $30,000 per year, leaving them with $157,500. Post-health insurance they have $143,500.

    For argument's sake, we'll enrich the other elements as well.

    Utilities are $500 a month with a larger house to heat and cable = $6,000.

    Food = $10,000

    Cars (2) = $20,000

    They are now left with $107,500.

    So let's say they live even a bit higher on the hog:

    Private school for both kids = $30,000 per year.

    $77,500 to buy clothes, entertainment, and, guess what? save!

    Now the majority (90%) of Americans are like the first family.

    And our economy is built 70% on consumption with no change in sight.

    Your 25% flat tax prevents 90% of Americans from contributing to the growth of the economy beyond meeting their basic needs. They cannot save for college for their kids, or save anything for themselves or their retirement.

    And the 10% of the families that can spend will not spend enough to grow the economy in a meaningful way, so the US economy continues to stall as the middle class market hobbles along unable to engage in any real discretionary spending.

    Sounds, great, huh?

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    Dec 22, 2010 12:16 AM GMT
    southbeach1500 saidNow why did you go to all that trouble without asking me first?

    Here's the idea:

    A tax rate somewhere between 15% and 20% on taxable income (total income minus savings and investments minus a threshold income of, oh, to make you happy, $25,000).

    And that's it. icon_wink.gif


    So, you don't actually want a flat tax if "savings and investments" are off the table? What you want is a tax code that favors wealthy people and corporations over the majority of middle and working class Americans who have no savings or investments."

    The next time someone accuses you of being for elite business and wealthy interests, please don't try to deny it. icon_rolleyes.gif