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Why Ending the Mortgage Interest Deduction Would Save the Economy
CNBC ^ | Feb. 14, 2011 | John Carney

Posted on 02/14/2011 2:49:47 PM PST by fightinJAG

Earlier today, the White House released a budget proposal that included trimming the mortgage interest deduction for taxpayers in the top income tax brackets.

This is the first step in eliminating what many economists view as an expensive and inefficient housing subsidy.

Unfortunately, many of the critics of the mortgage interest deduction focus on its immediate costs. If it were eliminated, it might bring in more than $2 trillion of new revenue for the government or—as I proposed this morning—allow up to $2 trillion of new tax cuts for the American people.

Actually, I think getting rid of the housing subsidy could be an even better deal than that—providing it is done by expanding the deduction into a general tax cut instead of closing the “loophole” and raising taxes.

(Excerpt) Read more at cnbc.com ...


TOPICS: News/Current Events
KEYWORDS: boa; chase; corruption; elections; finreg; flattax; foreclosures; fraud; gloomboomdoom; goldmansachs; govtabuse; housing; jpmorgan; mers; mortgages; porkulus; qe1; qe2; qe3; qe4; qe5; qe6; qe7; qe8; toobigtofail; wellsfargo
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To: fightinJAG

the flat tax would do the same.


61 posted on 02/14/2011 3:52:29 PM PST by television is just wrong
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To: fightinJAG

These commies don’t deserve an extra nickel in revenue. Better to starve the beast; at least the private sector will have something left.


62 posted on 02/14/2011 3:56:25 PM PST by grumpygresh (Democrats delenda est)
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To: fightinJAG; All

Screw the mortgage interest deduction, it’s just a big giveaway to the mortgage industry and Freddie and Fannie.

If you want to help the home buyers, make the principle deductible.


63 posted on 02/14/2011 4:04:39 PM PST by ROCKLOBSTER (Celebrate Republicans Freed the Slaves Month)
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To: fightinJAG

These utter morons will twist and turn and writhe like serpents, but will consider EVERYTHING except curbing their out-of-control spending!

Here’s a thought: why not just demand all Americans simply sign over their entire paychecks to the government and then go find an empty packing crate in which to live.


64 posted on 02/14/2011 4:14:59 PM PST by Jack Hammer
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To: spokeshave

Agree... a tax hike by any other name...


65 posted on 02/14/2011 4:20:01 PM PST by blade_tenner
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To: fightinJAG

These knotheads STILL don’t get it.

They seem to labor under some notion that if only taxes can be raised to some previous level of confiscatory nirvana, everything will be OK.

It’s over, folks. The corpse has been long ago raped and gutted. They’ve moved on to greener pastures, if you haven’t noticed, leaving the rubes holding the bag.

The US can’t grow its’ way out of this, the US can’t tax its’ way out of this, etc. For all that, the notions of taking money from one to give to another is only theft, but everyone seems to think that’s fine, as long as congress votes on it.

Whatever.


66 posted on 02/14/2011 4:28:42 PM PST by Freedom4US
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To: cynwoody

It would appear that you missed my point. Please allow me to try and discribe in more detail.

Our homeowner currently has a tax break for the interest on the mortgage. We then change the laws so that they no longer get the tax break. The homeowner then responds by creating a holding company and transfers the ownership of the home to the holding company. The holding company then rents the home back to the home owner for the cost of the mortgage, HOA, taxes and insurance.

This then allows the homeowner to have the company take the cost of the house via depreciation, plus the cost of interest, plus the cost of the HOA and insurance as an operational expense under the business. This in effect becomes a deduction.

So instead of just allowing the interest to be a tax deduction, you now have a lot more that can be deducted. The law of unintended consequences and the law of adaptation of the market will cause the revenue to be far short of the anticipated $2 Trillion. It might even create an environment where there is even less revenue because so many of the targeted tax group adopts tax mitigation strategies.


67 posted on 02/14/2011 4:30:11 PM PST by taxcontrol
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To: RobRoy

You’re an idiot if you believe that handing thousands of dollars of additional tax to the feds via elimination of the mortgage interest deduction is a good idea.

This one tax increase would gut the housing market, force down property values and force folks already on the brink due to tax increases (and de facto increases via inflation) into foreclosure.

Dumbest idea in a long time.


68 posted on 02/14/2011 4:31:38 PM PST by sbMKE
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To: Freedom4US
In Texas we've got a big budget deficit. The Rats are out of power, but their suggestions are to use the entire rainy day fund (10 bil) this year, and increase taxes on cigarettes by a dollar a pack, and add taxes on beer, and "sugary soft drinks." Please note the focus group tested phrase "sugary soft drinks," which is designed to remove all sympathy from the organizations that make them. One of the major soft drink companies has closed 38 bottling plants in Texas. All they'd do by increasing taxes on them is close down more bottling plants. They also want to increase taxes on businesses, remove early tax payment discounts, and charge sales taxes on service industries that didn't previously charge sales tax. You're right. They STILL don't get it. Unemployment in real terms is around 20%, and underemployment is a significant force. People don't have any money. Those of us who are still solvent are getting our taxes upped (would you believe that according to the county my property increased in value, despite the fact that property values have fallen about 20% in my area?) I've already switched from major soft drink brands to store brands, and if the prices go up, I can go off them completely.

On the cigarettes, beer, and "sugary soft drinks," they're not even doing their song and dance about health anymore. They're finally honestly saying, "we need the money to feed the beast."

69 posted on 02/14/2011 4:44:27 PM PST by Richard Kimball
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To: Normal4me
Let’s really screw the Government and just start living in our vehicles......oh wait, then they will raise the vehicle tag tax, CRAP!

Bears repeating!

The government must stop spending.

70 posted on 02/14/2011 4:45:59 PM PST by fightinJAG (Americans: the only people in the world protesting AGAINST government spending.)
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To: LowTaxesEqualsProsperity
Not only will the taxpaying homeowner have to pay thousands more in taxes every year, the value of his/her home will plummet another 20% or so, wiping out a lot of equity.

There does seem to be a general lack of attention to the fact that if a house costs a buyer more per month (as in, if there is no mortgage interest deduction), then the price of the house has to go down to meet the buyer's per month budget.

71 posted on 02/14/2011 4:50:23 PM PST by fightinJAG (Americans: the only people in the world protesting AGAINST government spending.)
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To: kcvl

Yep.


72 posted on 02/14/2011 4:51:30 PM PST by fightinJAG (Americans: the only people in the world protesting AGAINST government spending.)
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To: fightinJAG

Doubt it would make a nickels worth of difference.

If Congress taxes more, they will just spend twice as more!!


73 posted on 02/14/2011 4:52:09 PM PST by djf (Sometimes you are The Old Man and the Sea. But most times, you are the fish!!)
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To: fightinJAG
Why ending the mortgage interst deduction would save the economy put the final nail in middle class real estate ownership.

Fixed it.

Cheers,

knewshound

http://www.knewshound.blogspot.com/
74 posted on 02/14/2011 4:54:57 PM PST by knews_hound (Credo Quia Absurdium--take nothing seriously unless it is absurd. E. Clampus Vitus)
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To: GraceG
"When the Government Subsidizes something you end up with more of it, and people wonder why there was a housing bubble....."

People have to live somewhere. I don't consider a tax break on interest on home ownership when the alternative is rent much of a subsidy.

I don't think we have too much housing. What we have is too little industry, so that some of the housing has been abandoned in areas in the most economic pain. Fix the unemployment, and you'll see the housing fill up again. Right now you have families that are having to squat with Mom and Dad because of the economy.

75 posted on 02/14/2011 4:56:51 PM PST by DannyTN
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To: Richard Kimball

One only has to look at European and other countries to realize that it is entirely possible to be a bankrupt government and yet still tax everything and everyone far beyond what is sane or rational. Approx. 6 (six) of the 10 (ten) dollars a gallon they pay for gasoline is tax.

There is no way out of this mess that doesn’t include a lot of pain. We knew this 30 or 40 years ago. When it goes, it’s going to be quick as lightning.


76 posted on 02/14/2011 4:58:02 PM PST by Freedom4US
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To: fightinJAG
True enough. The mortgage interest deduction is, indeed, a subsidy -- encouraging people to own their own homes.

In wanting to remove this subsidy, this administration's primary interest is NOT increased tax revenues. Instead, their aim is to eliminate the incentive to own one's home. And, thus, force people into government-funded housing and apartments in the cities.

This is all about the socialization and forced urbanization of America.

77 posted on 02/14/2011 5:16:20 PM PST by okie01 (THE MAINSTREAM MEDIA: Ignorance On Parade)
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To: sbMKE

>>You’re an idiot if you believe that handing thousands of dollars of additional tax to the feds via elimination of the mortgage interest deduction is a good idea.<<

I agree, I would be. ;)

I believe in eliminating deductions AND lowering the tax rate at the same time. Seems to me Reagan did that. And tax revenues actually increased.


78 posted on 02/14/2011 7:10:36 PM PST by RobRoy (The US Today: Revelation 18:4)
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To: DannyTN

[ “When the Government Subsidizes something you end up with more of it, and people wonder why there was a housing bubble.....”

People have to live somewhere. I don’t consider a tax break on interest on home ownership when the alternative is rent much of a subsidy.

I don’t think we have too much housing. What we have is too little industry, so that some of the housing has been abandoned in areas in the most economic pain. Fix the unemployment, and you’ll see the housing fill up again. Right now you have families that are having to squat with Mom and Dad because of the economy. ]

I disagree, when the government started subsidizing houses (both through the tax break and freddie and fanny)it caused the price of housing to rise. This created a false bubble where housing costs in some places twice as much as it should if the regular market forces were left alone.


79 posted on 02/14/2011 8:17:14 PM PST by GraceG
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To: taxcontrol
Our homeowner currently has a tax break for the interest on the mortgage. We then change the laws so that they no longer get the tax break. The homeowner then responds by creating a holding company and transfers the ownership of the home to the holding company. The holding company then rents the home back to the home owner for the cost of the mortgage, HOA, taxes and insurance.

My point was, Creating a holding company, yada, yada is beyond the paygrade of your typical homeowner. However, that's no reason your typical homeowner should therefore be denied (most of) the benefits of that particular tax avoidance strategy. All that's needed are some smart (and hopefully honest, LOL) entrepreneurs to offer to buy and rent-back and take a cut of the savings, to the detriment of the government. Yet another creative financial service! Brought to you by people who could be searching for the cure for cancer but instead are finding ways to screw the government as expressed by the majority of sheeple leeches! The sheeple having only themselves to blame!

Whenever the pundit class brings up the Law of Unintended Consequences, one should hope for its vigorous enforcement!

80 posted on 02/14/2011 9:55:44 PM PST by cynwoody
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