Today, in another startling vote (politically unbelievable) and what will soon become a huge problem for Gov. Romney, the Republican Platform Committee voted to withdraw the national party’s support for the home mortgage interest deduction:
The Bloomberg story specifically points out this was done to give Gov. Romney room to give corporations and the wealthiest people additional tax cuts.
You’ve got to wonder what these people are thinking.
The MID has been under scrutiny since the Bowels-Simpson Deficit Reduction commission put it on the block. You might have heard the multi-million dollar ad campaign past few months by the NAR claiming “home ownership is under attack”.
Several months ago I was at a legislative town hall meeting and I asked my Representative Ed Perlmutter if he would consider modification or elimination of the MID. (This was at a state legislators town hall meeting he happened to stop by, so I think he was a little surprised at the question, but I don’t throw softballs) Perlmutter comes from a real estate development background (as do I) and is strongly supported by Realtor and homebuilder interests. He stated it is something that should be looked at if it is something that is part of a meaningful overall deficit reduction package.
I believe the MID is something that should be on the table and discussed as an important issue in this campaign. Is it in fact good public policy to subsidize home ownership at a cost of over $80 billion a year to the federal treasury? Should home ownership be subsidized to that extent, and if so why? (the housing crisis taught us that home ownership wasn’t a good thing for many). Or is this just a massive subsidy to home builders and the real estate industry.
If Romney intends to use the money saved by elimination of the MID to enable lower tax rates for business and the rich, as the Bloomberg article suggests, its smoke and mirrors, and smoke and mirrors is what got us into the deficit mess we’re in.
Paul Ryan was on the deficit reduction commission, and that panel also (unofficially) recommended tax increases on the wealthy as part of an overall deficit reduction plan. As Perlmutter rightfully stated, the pain has to be spread around.
So I’m glad the GOP has put it on the table. This is what needs to be discussed and debated in this campaign instead of whether Obama is a Muslim or Romney abused his dog.
My lead story at (in beta development)
The Denver Real Estate News
I think the one I posted from Bloomberg is now working but the story has been modified and now focuses more on the abortion issue.
Politically, I don’t think Gov. Romney has enough time between now and November to explain this to the voters. He proposes to end the MID and impose a flat rate tax on everyone which will automatically mean a large tax cut for the people in the upper income brackets and an increase for those in the lower income brackets. I think that is a hard sell in this environment.
because of the tax increases. Just sayin’ – he’s not interested in spreading the pain.
I think it’s worthwhile to modify the MID, to limit it based on a mortgage worth some reasonable home price somewhat above the national average, for a single primary residence. Killing off the mortgage deduction altogether is complicated at best; if you use it to reduce the deficit, you’re going to whack middle-income taxpayers upside the head with a very very large club.
and in fact the report was never accepted because it didn’t get 14 votes out of the 18 members.
I agree with your modification scheme, killing it off all together just isn’t going to happen. Problem is powerful lobbying groups like the NAHB and the NAR are dead set against any tampering with the MID.
almost all interest used to be tax deductible — auto loans, student loans, credit cards, etc. When interest on loans other than mortgage loans was phased out for deductibility, it was done responsibly and gradually over a period of years.
(There was this slight downside, a conversation for another day pethaps, in that banks and home-equity lenders took the tax deductibility advantage of mortgage interest and began offering loan products at loan-to-value ratios of 100%, then 110%, then 125%, then . . . to certain “qualified” borrowers so that they could payoff and consolidate all those credit cards, autos, etc. Of course, then these “qualified” borrowers often took their new found budgetary easing and ran up more credit card debt on those paid out cards, bought newer bigger SUVs and, well, you know . . . )
My point being that the MID could be reduced in a targeted manner, and over time without destroying the middle class, the real estate, or the construction and related industries . . . in theory. But with Republican trhalls to Billionaires and their mathematically impossible budgetary plans, I don’t have a lot of hope. Maybe in some parallel and logical universe . . .
Answer: None — It was Ronald Reagan:
Because his supply side tax cut in 1981 did not produce the additional economic activity and the corresponding tax revenues that he predicted when he signed the 1981 25% across the board reduction in personal and corporate income taxes. Annual budget deficits increased exponentially after the 1981 tax cut and something had to be done to rein them in.
President Bush tried the same supply side tax cuts in 2001 with even more horrific results for the annual budget deficit.
And what is Gov. Romney proposing. He wants to do it for a third time. We would be fools to follow his lead.
stumbling buffoon who unloosed the Pandora’s box of trickle-down mythology and reignited gilded-age income inequeity. But even as empty-headed as he was, he still operated at a time when a simple-addition grasp of kindergarten mathematics was required. He had to raise revenues somewhere to support his easing of taxes on the wealthy.
That’s something that can’t be said of his current-day ideological progeny.
The Denver Real Estate News
NPR’s Plantet Money team put together a panel of five highly respected economists from the left, right, center, international and domestic and all agreed that the US needs to do six things to help the economy.
One of them is get rid of all tax deductions, incuding the mortgage deduction.
It’s an excellent podcast, I recommend it.
Many people with underwater mortgages have already needed government assistance to keep their homes. The real estate crash fucked over everyone who bought during the bubble. A person losing a home has enormously negative effects on their lifestyle and financial situation, both present and future. A bunch of people in a community losing their homes negatively impacts the entire community. I know I don’t need to explain this to you, but there’s no way the home interest tax deduction can simply be stripped from existing homeowners while there are so many underwater mortgages and people barely making ends meet.
For future loans, maybe, IF the other tax deductions (the 1% variety especially) go too.
I save around $6000 a year on taxes because of this deduction. There’s no way I’m going to give that up unless others, specifically the 1% you mention, also give up something real.
Shared sacrifice – it sounds simple and patriotic, but it is politically impossible.
This is a huge deduction for most people, and with so many people locked into underwater mortgages, this massive tax increase could push many into bankruptcy and foreclosure.
IF this ever got past the talking point stage, you’d have to grandfather existing homes, and gradually phase it in for subsequent home purchases, so as to not kill the home market completely.
It would push up demand for rentals (thus fueling higher rents, but also development of more, denser properties), so the implications spread far and wide.
On the other hand, an alternative solution just came up:
Guess which solution we Dems should get behind? (Because we already know which side the GOP just belly-flopped on to).
If you are rich, it’ because you worked hard and God wants you to be rich.
If not- it’s your fault. And God wants you not be rich.
The only way they can think of to get richer now is to pay even less taxes. And the only way to do that is make the rest of us pay more.
What’s to wonder?
as a televangelist . . .
1st sentence and 2nd sentences are evangelically sound, mostly.
3rd sentence — let me help — The only way you, or anyone, can get richer is by taking God at His promise; give everything to God and He will pour out blessings abundant upon you from His rich treasures in heaven. (Of course, you could give even more if we get that pesky Government out of your pocket, . . . so vote Republican. But, in the meantime just send in everything you’ve got right now . . .). God doesn’t need your loaves and fishes, but your Heavenly Father wants to work through you to bless you and multiply what you have — not two-fold, not four-fold, not ten-fold, not even a hundred-fold . . . but thousands, that’s right — plural — thousands-fold.*
. . . your faithfulness will be rewarded.
*(Of course, past performance is no guarantee of future results. Please ask one of our lay-pastors, or consult our prospectus for further plan details. “God” and “Heavenly Father” are registered trademarks of 21st Centuries Ministries, Inc.)
….but that is great.