Bipartisan tax plan trims mortgage deduction (Thanks but No Thanks, 'Gang of Six' !)

Yahoo ^ | 7/20/11 | Stephen Ohlemacher - ap

[NormsRevenge]

WASHINGTON (AP) — A new bipartisan plan to reduce government borrowing would target some of the most cherished tax breaks enjoyed by millions of families — those promoting health insurance, home ownership, charitable giving and retirement savings — in exchange for lowering overall tax rates for everyone.

Many taxpayers would face higher taxes — a total of at least $1.2 trillion over the next decade, and perhaps more.

The details and impact of the plan, released this week by the bipartisan "Gang of Six" senators, emerged as President Barack Obama called congressional leaders to the White House on Wednesday to determine, in separate meetings, their bottom line for extending the nation's debt limit while also cutting spending at the greatest amount possible. The role of additional tax revenue remained a sticking point.

[silverleaf]

the mortgage tax deduction also subsidizes rents by keeping the landlord costs down

if I can't deduct interest, my costs of owning that rental house go up, as surely as the market will allow, I will raise the rent accordingly

plus a lot more people should be competing for rentals if there is less advantage to ownership other than psychological

or of course I could just sell my rental property, right now my property tax bill is double that of a residence next door, because owners get a homestead credit (another loophole to get rid of for owners who are indignant about govt subsidizing their homes)

I would enjoy screwing the city out of about $3000 a year in excess evil landlord property tax that owner-occupants do not pay

[CharacterCounts]

And by lowering overall tax rates to balance the loss of that deduction, all taxpayers - not just those deeply in mortgage hock -would benefit.

Do you seriously think they have any intention of lowering rates?

[F1reEng1neRed]

“The plan would simplify the tax code by reducing the number of tax brackets from six to three, lowering the top rate from 35 percent to somewhere between 23 percent and 29 percent. That could provide a windfall for wealthy taxpayers because the 35 percent tax bracket currently applies to taxable income above $379,150.”

What a joke. Want the true definition of “Tax cuts for the rich”? Look no further. The Dems were so anxious to embrace this to take the attention of C,C&B that they didn’t bother to read the details first. Now that they have, it doesn’t looks so good, does it?

[Britt0n]

Right on.

[CharacterCounts]

I will go along with eliminating the mortgage interest deduction so long as w eliminate the interest expense deduction your landlord receives for the business loan he has on your apartment unit. Of course, ykur rent would necessarily go up, but then you would also be paying your fair share.

[combat_boots]

Mortgage
Charity
401K

I thought so.

Someone else suggested a VAT tax.

[AlanGreenSpam]

Perfectly stated. You’re one of the few “conservatives” who gets it.

The gov’t has no business subsidizing one lifestyle over another thru tax incentives like the mortgage interest deduction. It should be eliminated.

I have a mortgage but would actually “vote against my wallet” by supporting elimination of the mortgage interest deduction OUT OF PRINCIPLE!

Suppose I opted for a renting lifestyle, rather than home ownership? Why should I subsidize other people’s homes (they get a deduction and I don’t, so I indirectly subsidize their homes)??

The Mortgage Interest Deduction is another case of social engineering gone wrong.

[GatorGirl]

I agree but only if we impose a National Sales Tax while outlawing the Income Tax or a Flat Tax with no deductions/exemptions which applies to ALL.

The tax code is way too useful to engineer all sorts of things—case in point: The Earned Income Tax Credit.

If the so-called “poor” get back money they didn’t even pay I better damn well get a mortgage interest deduction.

We need to dismantle the entire social welfare state before taking the meager crumbs away from the middle class.

[Pining_4_TX]

I agree. There is no reason for the government to favor homeowners over renters. However, like all government programs, it is easy to start and difficult to end. People come to expect it. That is why it is crucial to repeal Obamacare before it becomes entrenched.

[CharacterCounts]

And by lowering overall tax rates to balance the loss of that deduction, all taxpayers - not just those deeply in mortgage hock -would benefit.

If you rent, your landlord deducts his interest on the business loan used to construct your apartment. He also gets to deduct 100% of the maintenance costs (a benefit homeowners do not enjoy. You indirectly eceive these benefits via reduced rent. As I said in a prior post, I will give up my interest deduction as soon as the deductions are taken away from your landlord.

[Mike Darancette]

In case thay drop home owner interest deductions.

[Kellis91789]

“I tend to view the mortgage deduction as a mechanism our society has used in the past with the intention to aid and facilitate the family unit in obtaining housing,”

And yet ... it is really a benefit for those willing to go into debt. The higher the interest portion of the monthly mortgage, the higher the tax benefit. Smart negotiation to get a lower interest rate is not rewarded. Paying off the mortgage or buying cash doesn’t yield any reward, so actually OWNING a home does not get favorable treatment at all. This deduction ENCOURAGES you to owe as much money as possible and keep as little equity in a home as possible. Would you like to rethink your position that it didn’t contribute to the mortgage crisis ?

[Kellis91789]

Rather than fight each and every lobbyist group over these pet deductions, I’d like to see an end-run around them.

Let everybody figure their deductions, exemptions, and credits, and the existing tax rate tables ... but make everybody subject to a modified AMT. The way the AMT works is you figure your taxes with all the deductions, credits, etc. but at the end of it all, if the tax owed is less than 10% of AGI or greater than 15% of AGI, you owe 10% or 15% respectively. Everybody pays somewhere between 10% and 15%, which would raise $1.5T from the Federal Individual Income Tax and allow abolishing the Corporate Income Tax entirely while being slightly revenue positive. Nobody gets off scottfree and nobody gets raped. Everybody has enough skin in the game to care about wasteful, unconstitutional, government spending but we are not applying punitively high marginal rates on additional success. The incentive to make an extra buck is higher when you know the Feds won’t take more than 15% than it is when you know they’ll take 40%. Corporations are freed of the expense and hassle of Income Tax planning, accounting and preparation; they are free to make money for their shareholders and pass it on to them where it will be taxed as personal income rather than double taxed as Corporate Income and then again as Dividend Income.

[ImaGraftedBranch]

And also a huge subsidy for liberal enclaves where home prices are far above the average: Calif/NYC/Chicago/WashDC
Yes, and removing it would cause them to move out where I LIVE. No thanks. Libs can stay where they are and leave real Americans alone.

[oldmomster]

The problem with taking away that deduction now: house prices have just dropped out of sight. My property taxes are not going down - if anything they will be going up. What we have now is the situation where people nearing retirement age that face increased property taxes can no longer say ‘this neighborhood has gotten too expensive - lets sell our house for a nice profit and retire’.

So, we are stuck where we are, can’t sell, taxes going up, so lets take away that mortgage deduction on current mortgages?

All of this to fund obamacare.

[MSF BU]

Eh, well let’s stop “subsidizing” college degrees first, especially those zero value added degrees that don’t prepare anyone for future employment. If we’re going to eliminate subsidies, let’s eliminate the ones that are direct payments first, as opposed to tax credits geared toward promoting productive ends. Another credit that we could look at eliminating are those for local and state taxes. Why should people from low tax states subsidize those from high tax states?

[mvpel]

Smart negotiation to get a lower interest rate is not rewarded. Paying off the mortgage or buying cash doesn’t yield any reward, so actually OWNING a home does not get favorable treatment at all.

You seem to misunderstand the meaning of the deduction.

What actually happens is that you are not taxed on the part of your income which you use to pay your mortgage interest, because the mortgage lender will be taxed on it.

If you're paying $1,000 a month in interest, and you could be paying $500 a month instead by getting a lower interest rate, the incentive is that $500, not the fact that the $1,000 or $500 that you're paying out is not considered taxable income when it comes in.

Paying off or buying in cash is still better, simply because you're not paying $1,000 a month in interest. You might wind up paying $350 more per month in income tax, but that still leaves you $650 per month further ahead than you would be if you had a mortgage.

[silverleaf]

have tent, will relocate
I do not consider this an implausible scenario

just locally in my community

an upcoming extra $200 per month in property taxes for the “average residence”, hikes of $1000 per year in utility fees (water sewer), unaffordable electric rates (guess who's living without central a/c this summer) plus an extra couple hundred (or more) per month in tax obligations

sends a lot of middle class out of their homes, and looking for a whole new way of life in the future

tax bills that force people to come up short on money to pay basic living expenses and hopefully leave some leftover for savings - will make many lives a whole lot more basic

and I do not thin k these cloistered oligarchs inside the Beltway realize that

I bet the obamas do not know ANYONE living on $250K a year, except maybe some trust fund babies who get that as an allowance

it is coming to this

Excoriate people all you want for not saving enough or being prepared, but it sure has been hard trying to do that since 2008 when many started to realize the game is changed - forever

Paying your mortgage and worrying about next year's tax increases when all around you are people squatting and govt-ordered banks chasing minorities to give them homes??

I don't think so

[Reeses]

The mortgage deduction needs to go the way of agriculture subsidies and ethanol.

Are you also for rental property owners giving up their loan interest, utility, maintenance, and repair deductions? How about the deductions for loan interest by all businesses?

[Neoliberalnot]

How anyone but a prog can label welfare for those seeking to pay less in taxes is beyond me. Welfare applies to deadbeats (aka parasites and others who pay no taxes, don’t work, and make no contribution to society) and the prog notion that allowing taxpayers a bit of relief is hardly welfare.