Simply put, it appears that for anyone with a tax rate much greater than 15%, then this proposal will work as a tax increase:
Simple example: 200K net income after taking a reduction of 40,000 for mortgage interest paid (gross 240,000).
assume 30% tax on 200K
tax on current system: 60,000 in taxes
Now, instead of deducting the 40K you go with this new system:
240,000 x 30% = $72K less 6K "tax credit" = $66,000 in taxes owed.
This crap is nothing more than income distribution once again, and the middle class gets screwed. Moreover, how is this going to affect mortgage interest on business offices, second vacation homes?
Unless this is phased in gradually, you are looking at a Depression. The only people who would be for it are the:
the extremely wealthy who are not dependent upon the real estate market or housing industry for their continued success, or who don't really care if their real estate holdings take a 5 to 10 year hit, and who can also weather a strong recession/mild depression; and,
the lower class who are renters and are too stupid to understand how this plan could really screw up the economy along with their chance for gainful employment (I guess they hope to one day see housing prices fall so they can get that starter home for under 100K along with that longed for above ground pool, pink flamingos in the front yard, and enough outdoor electrical outlets to power 50,000 christmas lights so as to beat out Verne's display next door).
One more thing. I'm all for tax changes that will either reduce the general tax taken and/or bring about a more simple efficient system.
But this can't be done on a drastic scale such that it punishes the vast majority of WORKING americans who have played by the rules, saved their money, made down payments, put in sweat equity to improve existing properties, taken entreprenurial chances based upon the existing tax structure, and have generally honored their obligations under their social contract with this government and their fellow citizens.
People who advocate doing away with the mortgage interest rate deduction are, in all likelihood, class envy idiots who don't realize how this can end up screwing them due to a recessionary economy. Even those who live in a house which they have paid off and don't owe a mortgage will suffer due to the falling value of their home.
Whatever simplification is done to the tax code has to be done such that homeowners who relied, in good faith, upon this deduction, don't get the shaft.
I agree with you 100%. Let's be fair, though -- the current mortgage interest deduction is nothing more than an "income distribution" measure itself, isn't it?
Unless this is phased in gradually, you are looking at a Depression.
That's right. I wouldn't expect the tax code to undergo such a dramatic change without being done over an extended period of time.