17 replies to this topic

[Steve Heard]

From KCRA.com

ROSEVILLE, Calif. -- To reduce its debt the Federal Government may do away with a major tax break for home owners: the mortgage interest deduction.

It’s all part of the federal debt ceiling plan. A special committee formed to cut trillions from deficit.

That committee could cut back the mortgage interest deduction for home owners to increase revenue to the government.

Real estate agents tell KCRA 3 the move would crush the recovering housing market.

“This is one of the biggest factors that is going to affect this market,” said Kevin McDonald, an agent with Prato Real Estate in Roseville. “It will have a drastic effect on the economy and the housing market but its going to prevent people from making the decision to actually purchase a home.”

For many home owners the mortgage interest deduction is one of the biggest tax breaks they get, so doing away with it will hurt financially.

“I think it’s a huge deal,” said a Roseville home owner who would only give us his first name, Aaron. “It’s a significant chunk of change.”

But some home owners believe rolling back the tax breaks for mortgage interest is a good thing.

“I am not thrilled about it, but it would be good,” said John Carroz, a Roseville home owner. “(the government) needs to raise the revenue somewhere.”

The end to the tax break could come by the end of the year. The special committee has 100 days to reach a decision on deficit reductions.
Read more: http://www.kcra.com/...l#ixzz1VJ31GT5k

I don't know how much tax revenue it will add, but I imagine it will be significant. Overall, is this a good thing for the country?

[nomad]

From KCRA.com

ROSEVILLE, Calif. -- To reduce its debt the Federal Government may do away with a major tax break for home owners: the mortgage interest deduction.

It’s all part of the federal debt ceiling plan. A special committee formed to cut trillions from deficit.

That committee could cut back the mortgage interest deduction for home owners to increase revenue to the government.

Real estate agents tell KCRA 3 the move would crush the recovering housing market.

“This is one of the biggest factors that is going to affect this market,” said Kevin McDonald, an agent with Prato Real Estate in Roseville. “It will have a drastic effect on the economy and the housing market but its going to prevent people from making the decision to actually purchase a home.”

For many home owners the mortgage interest deduction is one of the biggest tax breaks they get, so doing away with it will hurt financially.

“I think it’s a huge deal,” said a Roseville home owner who would only give us his first name, Aaron. “It’s a significant chunk of change.”

But some home owners believe rolling back the tax breaks for mortgage interest is a good thing.

“I am not thrilled about it, but it would be good,” said John Carroz, a Roseville home owner. “(the government) needs to raise the revenue somewhere.”

The end to the tax break could come by the end of the year. The special committee has 100 days to reach a decision on deficit reductions.
Read more: http://www.kcra.com/...l#ixzz1VJ31GT5k

I don't know how much tax revenue it will add, but I imagine it will be significant. Overall, is this a good thing for the country?

Somebody should enlighten this John Carroz fool that the problem is SPENDING and not the need to keep raising revenue by eliminating the best incentive to even purchase a home.

[nomad]

Looking into this a bit more did you know that this is only for 500k and above loans?

[Dave Burrell]

More info on this

After decades of being considered politically sacrosanct, why are homeowner mortgage write-offs suddenly on the chopping block? Sheer size is the No. 1 reason. The congressional Joint Committee on Taxation estimates that the home mortgage interest deduction will cost the federal government $100 billion during fiscal 2011 and $107.3 billion in 2012. Between 2008 and 2012, the cumulative write-offs for mortgage interest are projected to total just under half a trillion dollars.

Among the options open to the super-committee:

• Lower the maximum mortgage amount eligible for interest deductions to $500,000 from the current $1.1 million;
• Replace the deduction with a tax credit that would be usable by lower- and moderate-income owners as well as those with higher incomes;
• Eliminate interest deductions on second homes; and
• Phase out the deductibility of homeowner property tax payments.

Defenders of the write-offs argue that high levels of home-ownership are essential to economic growth and social stability and fully justify the tax system preferences they receive. National opinion polls regularly find widespread support for the write-offs, even among renters.

Also, academic and trade group studies project that any abrupt, across-the-board reduction in the deductibility of mortgage interest would have a severe impact on home values, possibly sending them plummeting by as much as 15 percent.

Critics, on the other hand, consider the write-offs inherently unfair: They're skewed to benefit upper-income owners disproportionately and are highly concentrated geographically along the West Coast, the Northeastern states and Mid-Atlantic.

[Redone]

Looking into this a bit more did you know that this is only for 500k and above loans?

aka " the rich "
same ones with 2nd homes...


It will hurt everyone's market---period. No more Robbing Hood.

[SacKen]

Regardless of the arguments for or against, I think it is wrong to make this retroactive to include existing mortgages.

That said, I'm actually for this... with an asterisk. I think it should be removed for all mortgages, not just the "rich". The same with all other deductions. Then convert to a Fair Tax or Flat Tax system. Everyone pays a straight-forward fair amount, with no gimmicks.

[caligirlz]

I don't know how much tax revenue it will add, but I imagine it will be significant. Overall, is this a good thing for the country?

NO, the government has already proven that they are incapable of staying within their budget....do they even have a budget? Or do they just spend whatever they want?

Even if we were to give 100%+ of our income to them, they still would not be able to stay within their means, and they would still be looking for ways to bleed John Q Public.

[old soldier]

now this over $500000 just might work. to me we have rich folks, middle folks and poor folks. the rich pay lots of taxes, the middle folks pay till it hurts and of course the poor folks pay none. they in fact have figured out ways to get free money from the govt. Actually its not hard, cause the govt seems to give money for the3ir votes since all votes count the same.

now the rich folks are not rich cause they are stupid. they have money to hire smart attorneys and accountants who know their way around the tax loopholes that their legislature buddies (usually more attorneys and accountants) have made, so they find ways to save the rich folks money and make some for their selves for the effort.

this week I read about this warren buffet and how his smart folks really reduce his taxes. it would seem it the legislative folks could trim the loopholes and make the rich pay a little more, but at the same time not screw the middle folks, it might be good for the country.

now before you get excited about old soldiers idea you got to remember the rich folks are the ones who make the big political contributions, and there lies the problem.

[The Average Joe]

The easiest thing to do to satisfy both the "tax the rich!" folks and the "no new taxes" folks would be to tax wealth instead of income. Those of us poor slobs working for a living would see an increase in disposable income, while those sitting on vast sums of assets would be forced to pay a percentage based on those assets. Revenues go up, taxes for most go down...everybody is happy...except those pesky wealthy folks who pay very little tax on income, but have substantial wealth.

Still, no matter how much you take from "the rich," the fundamental problem is the government can't afford to pay for the promises it has made. Unfortunately, the left has hyped the class warfare card so loudly for so long, we have a whole generation believing the rich do not deserve their money.
I really don't care how rich someone is...as long as they made their money honestly. Most of the fairly wealthy people I know took a risk, worked their arse off and were lucky enough not to have a calamity befall their efforts.
Oh, and enough with the millionaires and billionaires bs. A billionaire has 1000 times the wealth of a millionaire. It would be like me putting someone with a thousand dollars and someone with a million dollars in the same group. Makes a good soundbite tho....

[rpo]

Say I bought a house a long time ago for $250,000 and it is now worth
$500,000. Would that be the next step in this taxation idea?

Or is it just going to be the mortgage amount, and that's it? I personally doubt it.

That would never work as the federal government does not know the value of the property. It would have to be on the mortgage amount as the mortgage interest deduction is what is being reconsidered.

[The Average Joe]

Say I bought a house a long time ago for $250,000 and it is now worth
$500,000. Would that be the next step in this taxation idea?

Well, I would guess it would be counted as an asset and taxed accordingly. You do pay capital gains taxes on such situations already (although you get a one time exclusion that covers most people). I would imagine the tax would be paid upon the sale of the property, or there may be a split situation where you pay a federal asset tax yearly, and a much smaller lump sum upon sale.

Asset tax...sounds kinda catchy....I hope they cut the substantial fat before they consider such things. I also would prefer a consumption tax rather than an income tax.

To make any mortgage exemption no longer acceptable would be a huge mistake if it is applied retroactively, and would decimate an already abysmal housing market. We all would lose far more than the yearly deduction.

[Carl G]

The easiest thing to do to satisfy both the "tax the rich!" folks and the "no new taxes" folks would be to tax wealth instead of income. ....

The problem with taxing wealth is that a person is paying taxes on something they've already paid taxes on. If I won $250 million in the lottery, the fed and state would take about 45% of my money. Then the next year they would take even more. And then the next year they would take even more. I'm not sure what rate "more" is, maybe 15%? After ten years my $250 million would be down to just under $38 million.

I'm guessing you don't feel sorry for anyone who won $250 million in the lottery, but what about the farmer. What do you do for the farmer with about a $5 million farm who makes $100,000 a year, or about 2% on their investment? That farmer would pay $750,000 in taxes on an income of $100,000. This is fair how?

The solution to the problem is a fairly flat tax rate with virtually no tax deductions. The first $40K or so would be tax free for everyone with tax brackets of 10, 15, and 20% after that. Everyone's 1040 tax form would be one page.

[cw68]

As an example, our income tax. It was only supposed to be for a short period of time, because of war expenses. Then it was made permanent when it was thought that we needed a huge army.

It was kept so that Prohibition could be passed. The temperance movement couldn't really gain any national foothold because the government depended so highly upon liquor taxes. The income tax replaced that. Then during the 30s and the Depression the income tax revenue decreased so drastically that liquor taxes were needed again. A fair amount of wealthy individuals supported repealing Prohibition because they thought it would end corporate and income taxes. However, once Prohibition was repealed we needed the taxes to support the war effort for WWII.

[Steve Heard]

The solution to the problem is a fairly flat tax rate with virtually no tax deductions. The first $40K or so would be tax free for everyone with tax brackets of 10, 15, and 20% after that. Everyone's 1040 tax form would be one page.

That makes too much sense to ever become reality.

Even in discussing it with otherwise reasonable people, they start coming up with exceptions; 'the family with 3 kids pays the same amount as the single guy with no kids? How unfair!', or 'Without deductions the business owner won't invest in his company and won't hire people', or 'paying 10% hurts a family that makes $50,000 per year than it does the guy making $500K', etc.