Posted on 11/02/2005 5:57:15 AM PST by austinite
The Presidential Advisory Panel on Tax Reform has released its recommendations on reforming and simplifying income tax laws, with the result that the real estate industry was expecting -- the panel is suggesting eliminating the mortgage interest rate deduction and giving a credit of 15 percent of mortgage interest paid to all homeowners. Currently, only homeowners who itemize take advantage of the mortgage interest rate deduction. In addition, a $1 million limit on mortgages eligible for the tax break would shrink to the average regional price of housing, ranging from $227,000 to $412,000.
This is one time that robbing the rich might not work. Home values have escalated dramatically, causing more people to borrow more money and put less money down when buying a home.
Outgoing NAR President Al Mansell, speaking at the opening session of the National Association of Realtors convention in San Francisco last week, warned the panel before they made their recommendation that cutting the mortgage interest rate deduction would hurt middle-income families the most and it could cause a housing bust of as much as 15 percent of home values.
"Eliminating the mortgage interest deduction would hurt middle-income families the most," he said. "According to IRS tax return data from 2003, 52 percent of the families who claim the mortgage interest deduction have household incomes between $60,000 and $200,000."
In addition, the typical homeowner could lose $20,000 to $30,000 in housing equity.
"Housing is the engine that drives this economy and to even mention reducing the tax benefits of homeownership could endanger property values," warned Mansell. "The tax deductibility of interest paid on mortgages is both a powerful incentive for homeownership and one of the simplest provisions in the tax code. It should not be targeted for change," Mansell said. "NAR will continue to tell Congress that Realtors® strongly oppose any attempts to alter the current tax treatment of mortgage interest."
Mansell urged reformers to look at the past -- The Tax Reform Act of 1986 proved that when the tax benefits associated with real estate ownership are curtailed, the value of real estate declines. In this case, the resulting loss of value in the commercial real estate sector was 30 percent, he said.
The current cap permitting deductions of the interest paid on mortgages of up to $1 million has not been modified or indexed since it was adopted in 1987.
"We are surprised that the panel would even consider reducing the cap," said Mansell. "Basing the cap on complex regional loan limit calculations makes no sense. In California alone, more than a dozen Federal Housing Administration (FHA) limits are in effect in various parts of the state."
The panel appears aware that its recommendations are "bold," and Treasury Secretary John Snow said he did not know what ideas the administration would embrace after the Treasury makes it recommendations.
"Now it's up to us," Snow said. The Treasury Department will "take the report, review it carefully, understand the implications and use the report as a starting point for recommendations that we will make to the President."
"The effort to reform the tax code is noble in its purpose, but it requires political willpower," the group said Tuesday in a letter to Snow. "Many stand waiting to defend their breaks, deductions and loopholes, and to defeat our efforts."
An AP report suggested that "members of the panel urged taxpayers and lawmakers to look at the whole plan, not just individual components," so they would know that "withdrawn tax breaks" would be replaced by "simpler benefits."
As the tax-writing House Ways and Means and Senate Finance committees will review the recommendations, so will the NAR. The Board of Directors has pledged to authorize a report on the financial impact of the loss of the mortgage interest rate deduction.
what you say is well and good, but how do you feel about changing the rules of the game midstream for some 50 million people or thereabouts who made investment decisions based on the rules that are allowed? remember, real estate is long term, not short term.
Actually, it's quite good for first-time homebuyers, because it means an instant reduction in housing prices right out of the gate - as long as you're still shopping, that is.
If you have one penny in credit card debt you are an economic moron and your silly opinion on economic matters is worth the same as a roll of used toilet paper.
How much credit card debt do you have?
Looks like Fanie Mae has had to do some shifting around to make up for thier big scandal?
http://www.poughkeepsiejournal.com/apps/pbcs.dll/article?AID=/20051102/BUSINESS/511020320/1003
Fannie Mae meets reserve requirement
WASHINGTON — Mortgage giant Fannie Mae has met the government-imposed requirement to boost its reserve cushion against risk to 30 percent surplus capital, federal regulators said Tuesday.
The Office of Federal Housing Enterprise Oversight ordered Fannie Mae to increase its capital reserve following an accounting scandal last year at the government-sponsored company, which is the biggest buyer of home mortgages in the United States. The office said in a statement Tuesday that Fannie Mae had an estimated $9.1 billion capital surplus as of Sept. 30 — giving it an additional $752 million over the required 30 percent surplus.
In recent months, the company has been raising fresh capital by selling off chunks of its portfolio of mortgage investments. Fannie Mae also issued billions of dollars of preferred stock and in January slashed its dividend payout by half, to 26 cents a share.
It never should have been in the tax code to begin with. It is simply one of the thousands of lines in the tax code designed for social engineering.
If the tax code is to help housing, then we should get a deduction when we buy a car. Oh, of course the wonderful government WILL give us a deduction if we buy the RIGHT kind of car, in their opinion.
Or how about a deduction for the RIGHT kind of golf clubs?
That is a big industry.
How about a deduction for movie tickets as there are thousands of people in hollyweird that depend upon us going to the movies?
This is just a wrong as when the low life bill clinton said in Buffalo, NY that he supposed he could reduce the taxes and HOPE we would do the RIGHT thing with the money.
We need to take back, by any means possible, our government. We don't need them deciding what is the right use of our money and rewarding the little people when they do the right thing.
Zero.
If you have one penny in credit card debt you are an economic moron and your silly opinion on economic matters is worth the same as a roll of used toilet paper.
The notion that someone might carry credit card debt for legitimate reasons appears to be beyond your understanding. Having said that, I'll stack my "silly opinion on economic matters" up against anyone else's on this site.
This kind of measure would really screw a lot of homeowners. The ones who stand to lose the most are those in suburban areas of the Northeast where property taxes are the highest. Eliminating the interest deduction would mean that these people would lose an enormous tax benefit at the same time escalating property taxes make these homes damn near "worthless" (from a net income/cost standpoint) anyway -- which means a lot of these homeowners are going to find themselves owing a lot of money on homes they can't sell.
Meanwhile, I'm paying for a $200 million bridge to Nowhere, Alaska. I think the gov't can find the money between the couch cushions, but it's easier to screw us.
1. Put down everything you made last year.
2. Send it all to the IRS..
The notion that they might do crack cocaine is also beyond my understanding.
Are there any taxes you don't like?
Just cut my freaking taxes.
That's all.
Nothing complicated about it.
I pay way too much. I need to pay less. Much less.
Just cut my freaking taxes. Please.
The same tax plan eliminates the Alternative Minium Tax.
Other reasons for the S&L failure is in the name. When the gov't made it too easy for S&L's to do commercial loads there was a flood of "Banks" that converted to a Savings and Loan. Because they required less capital to write commercial loans they over did it and when the commercial market fell the S&L's quickly became distressed.
If all the goobermint wanted was the revenue, they would switch to a flat tax tomorrow. But with the code as it is, they get both the revenue and the ability to manipulate private behavior, effectively bribing the public with their own money.
Of course, as long as Congress has power to tax income without limit, that stuff which you call "your money" really isn't.
I know you were speaking to Alberta's Child, but here's how I use "credit cards."
I ALWAYS take advantage of long term, zero interest, no up front fee, credit card offers for large purchases (I probably get a dozen or so a week in the mail.)
We needed a new piano, I bought it on a zero interest credit card. We had money available to pay for it, but why use our money when a credit card company is willing to give me money for 12 months free, and I can leave my liquid assets invested. I just pay the credit card off by the end of the assigned period.
We decided to buy a generator before hurricane season, signed up for a Home Depot card, got 10 percent off, zero interest for 6 months, and paid it off in the six months.
Same goes when I have any large expenditure. I just take advantage of one of the credit card offers, even though I have the cash to pay for it.
Credit cards aren't a bad thing, you just have to use them so they pay you, and you don't pay them.
Valid point son of caesar and because the government is supposed to be prohibited from passing ex post facto laws, simply change the law going forward.
In fact, this should apply to ANY change in the tax code. For X number of years existing deductions of this type are allowed then if you purchase a new whatever, NO FURTHER SOCIAL ENGINEERING.
See why I said it is insidious? They hook the taxpayer with the deduction lure and now the taxpayer is forced to stay on the line.
Taxes are to support the legal functions of the government as WE THE PEOPLE allow. Any other purpose is a road to ruin.
Anyone who gets themselves that far in debt because they have a tax deduction cushion is flirting with danger and should know better.
Because of the growing size of the personal exclusions for income reporting, only about 30% of all taxpayers have been ABLE to claim the "mortgage deduction".
And it always puzzled me why anyone would be motivated to incur $100 in greater liability (for payment of mortgage interest) to save $15, or $25, or $28 on tax payment. Why not shop around for a cheaper mortgage? Or curb your borrowing so you don't HAVE to go into a second mortgage? Pay off the credit card bills you have NOW, even if it means sacrificing a lot of otherwise "discretionary" income.
At the upper end, the mortgage deduction is phased out anyway, so on very large annual gross incomes, it becomes meaningless.
And that's a good thing, a lot of people don't realize what the AMT is going to do to their tax bill when it hits them.
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