Obama Panel Eyes killing Mortgage Tax Breaks

[thraashman]

Typical leftist. You have no problem with the government deciding how you should live and then taxing you into that lifestyle. Tax on tobacco? No problem, don't use tobacco. Tax on tanning? No problem, don't go to tanning booths. Eliminate the mortgage deduction? No problem, just rent.

Note that none of these affect me in the slightest; I don't use tobacco or tanning booths, and my house is paid off. I do however have a big problem with government using tax law to force me into the behaviors it deems suitable. Which is why I so strongly support the FairTax. Want to use tobacco? Fine, pay the same tax as on anything else. Want to buy a house? Fine, buy it with the same tax as on anything else. The government needs to be out of the business of running our lives, especially through tax law. When it gives up subsidizing or penalizing other behaviors, then I'll be fine with giving up the mortgage deduction. Until then, this is nothing more than yet another proposal to raise taxes on the dog whilst rewarding the ticks.

Well, actually I have a mortgage and do benefit from the mortgage deduction. However, A) I wouldn't bitch and moan about it if they got rid of it, and B) as I pointed out, they're nowhere near even drafting legislation to eliminate it. It hasn't even been considered.

Also, I've pointed this out before, but the "FairTax" is by no means fair. If you do the math you'll realize that under the "FairTax" proposals that the poorer you are the larger effective percentage of your income you pay in taxes. And that the richer you get the closer to 0% your effective tax rate becomes.

 

[werepossum]

Well, actually I have a mortgage and do benefit from the mortgage deduction. However, A) I wouldn't bitch and moan about it if they got rid of it, and B) as I pointed out, they're nowhere near even drafting legislation to eliminate it. It hasn't even been considered.

Also, I've pointed this out before, but the "FairTax" is by no means fair. If you do the math you'll realize that under the "FairTax" proposals that the poorer you are the larger effective percentage of your income you pay in taxes. And that the richer you get the closer to 0% your effective tax rate becomes.

Under the FairTax, if your family is at the federal poverty line you would pay zero federal taxes. No tobacco tax, no income tax, no payroll taxes, none, and your FairTax expenditures are prebated to you each month. Perhaps your problem lies in dividing by zero? 😉

 

[nonlnear]

And with what result?

It's gonna drive down the value of homes on the market (and thereby all homes).

How will this affect banks with properties in foreclosure? How will this affect the toxic assets? Who's holding those?

In my very first post I said I think that it is not a good time to get rid of the interest deduction. That is my policy opinion. Everything I've said about other scenarios, including options for immediate policy changes. was just brainstorming possibilities. I threw the grandfathering option out as one possible way to soften the blow if they were really that determined to make a policy change right now.

Why, again, did we bail them out? And would this change just be highly antithetical to the purpose/objective of the bailouts etc.?

We bailed them out on the back end to protect them from the wrath that the public would unleash on them if they found out about the real problems - mentioned in the article I link below.

How many billions did we spend on home buyer credits? Again, wouldn't this just be antithetical to that whole program?

I would be in favor of anything that is antithetical to the homebuyer boondoggle.

I see no logic here, they're all over the place blowing money in self-defeating and contradictory ways. These people are economic dunderheads and look to be scrambling about in short-sighted mass confusion. These clowns are scary.

As I said I don't think the timing is right right now. But it won't be long beofr ethere's no excuse not to get rid of bad tax policy.

As for the toxic assets and such, they are currently in a lot more trouble than even you probably suspect. The potential decline in market value that would be caused by any change in tax policy is right now a much smaller threat to the holders of mortgage debt than errors in origination.

The Fed, BlackRock, and Pimco's investigations have identified many billions of dollars of fraudulent loans provided by Countrywide under false reps and warranties. Ambac's investigation found that 97% of the Countrywide loans reviewed by Ambac were had false reps and warranties. Countrywide also engaged in widespread foreclosure fraud. This is not surprising, for every aspect of Countrywide's nonprime mortgage operations that has been examined by a truly independent body has found widespread fraud -- in loan origination, loan sales, appraisals, and foreclosures.

(And to anyone who wants to poo-poo the story because it's huffpo, the article is by William Black, so feel free to discredit him instead of huffpo if you can...)

There is ONE way that an ostrich policy like the bailout-and-inflate policy followed by Congress could actually work in the long term: inflation. The way to make all those underwater homes worth more than their outstanding debt (given that the market isn't going to climb due to strong fundamentals) is to shrink the debts. Unfortunately it also requires a stronger employment situation, so that the upside-down homeowners keep making their payments. Strangely government types haven't figured out a way to conjure these magical circumstances into existence.

 

[zsdersw]

Earning and owning your own home used to be the American dream.

Yes, used to be. That doesn't mean that "dream", an apt name if there ever was one, is etched in stone.

Now it appears that not only are we expected to fund this dream for others, but we should also give it up for ourselves. This is progress how again?

I don't think we should be funding any "dream" for others, nor do I think we should "give up" anything by government decree or economic disincentive. I do think, though, that we all need to look honestly at what is best for us.. to buy a house or rent.. with at least some consideration for our career and the opportunities therein and decide accordingly. For more people than ever before this means that renting is a smarter move than buying.

 

[zsdersw]

Read "dreams of my father". It's all in there.

Even if I buy your claim that Obama wants all of those things in the way you think he does, where the wheels fall off your argument is in the "how's it gonna happen?" department. You're vastly overestimating the power of the presidency.

 

[spidey07]

Yes, used to be. That doesn't mean that "dream", an apt name if there ever was one, is etched in stone.



I don't think we should be funding any "dream" for others, nor do I think we should "give up" anything by government decree or economic disincentive. I do think, though, that we all need to look honestly at what is best for us.. to buy a house or rent.. with at least some consideration for our career and the opportunities therein and decide accordingly. For more people than ever before this means that renting is a smarter move than buying.

Renting is almost always worse than buying. Work on your career some more and you'll find that companies will buy your house from you as part of your relocation package or at the very least they will sell it for you and pay the mortgage/bills after you move.

The only people that think renting is smarter than buying is people who can't afford a house.

 

[zsdersw]

Renting is almost always worse than buying. Work on your career some more and you'll find that companies will buy your house from you as part of your relocation package or at the very least they will sell it for you and pay the mortgage/bills after you move.

Not at all true. Relocation packages may be common in the white-collar world but ones that take care of an existing mortgage are unheard of in other parts of the workforce.

The only people that think renting is smarter than buying is people who can't afford a house.

The only people that think buying is always smarter than renting are people who have never bothered to look at the world outside their gated community and ivory tower.

 

[Nemesis 1]

No, it's not. Most of the right would hate Obama no matter what he did, just as they hated Clinton (they'll say better things now, but had the 'government wants to kill you' bumper stickers at the time, including on Republican Congressperson's cars). The problem is that the economy has such huge problems caused by the policies of the rich, supported by nearly all Republicans and too many Democrats, that force Obama to spend a lot to prop up the economy from more crashing, for a while.

These are the same people who want to do more of the problem causing policies, and want Obama out of their way (the little he's in their way), who these Republicans support.

Everyone IMO wants to cut spending apart from the short term financial crisis, the issue is who will take the cuts - the people, or other interests the right serves.

But saying Democrats - the party that eliminated the Reagan/Bush deficit - are the ones who want irresponsible spending is a more politically effective, simple, straw man.

Pay for enough propaganda with that sort of thing, and you fool a lot of people.

I voted for Billy 2x times. Didn't realize he was a criminal till at the end of his rein. He put into law the Housing bill for people who couldn't afford it or wasn't able to cut back on other things they enjoyed befor buying their overpriced house.

 

[xj0hnx]

Sorry, your interest is moot. You are responsible for those same issues. Whether you like it or not. So if you are really interested in keeping as much Money as possible, it's in your interest to make sure it is done correctly. So far you seem more interested in just perpetuating the problem.

You are under the illusion that any politician has any interest whatsoever in "doing it correctly", they don't. Only a fool thinks that any politician cares about anyone but themselves.

 

[classy]

Well I have to admit. By next year outside of my mortage I'll be completely debt free. I just stopped spending and just whittled away at my debt. But all these folks, no matter what party, just won't stop spending. I think the investment in roads is a terrible idea. If you want to cut tax breaks for working Americans, then why did they pass the freaking healthcare bill. Man I wish Hilary Clinton had won. I love OB, but dude is turning out to be real disaster here at home dealing with economics. He ain't worst than Bush, but he damn sure ain't no better.

 

[Craig234]

You are under the illusion that any politician has any interest whatsoever in "doing it correctly", they don't. Only a fool thinks that any politician cares about anyone but themselves.

xjohnx projects his sleaziness onto all politicians. Tell me of the evidence that Bernie Sanders doesn't care about anyone else. Or Henry Waxman.

 

[Craig234]

I voted for Billy 2x times. Didn't realize he was a criminal till at the end of his rein. He put into law the Housing bill for people who couldn't afford it or wasn't able to cut back on other things they enjoyed befor buying their overpriced house.

I voted for him once, in 96; in 92, I voted for Ross Perot because of one reason, the deficit (I'd change it to Clinton in hindsight).

Clinton wasn't a 'criminal' for his desire to increase housing for poorer people.

 

[Jadow]

Well, he won't end MY mortgage tax break, because my family makes under 250k, and he promised NO tax increased for households making < 250k. And I trust the word of the President.

 

[werepossum]

Well I have to admit. By next year outside of my mortage I'll be completely debt free. I just stopped spending and just whittled away at my debt. But all these folks, no matter what party, just won't stop spending. I think the investment in roads is a terrible idea. If you want to cut tax breaks for working Americans, then why did they pass the freaking healthcare bill. Man I wish Hilary Clinton had won. I love OB, but dude is turning out to be real disaster here at home dealing with economics. He ain't worst than Bush, but he damn sure ain't no better.

Good for you, that's a smart thing. I took the opposite approach, paying off the house first and then playing. 'Cause I can live without the toys, but I'm really committed to living indoors.

 

[IronWing]

Actually the lock box model is exactly how regular bonds work. If I buy a 10 year bond, my money is locked unless I take it out prematurely and get raped on fees. GICs work the same way. You put money in a box with a written guarantee saying it stays in there for maybe 5 years, and you get a return on that money.
The government's approach to SS is totally different. It's not locked at all. If you, as a politician, feel like using that money to pay for random bullshit projects, you're allowed to. I think that's fundamentally dangerous. Would you dip into your own retirement fund to buy a car then promise yourself to pay that money back at a later time? That's what the gubment does.

As you have said, you loan your money to the bond issuer for a set period of time and at the end of that period you get back your money plus interest. Now think about the other side of the bond transaction. The only reason a bond issuer would agree to the bond arrangement is that the bond issuer wants to do something with the money you loan them. In the case of corporate bonds they might build a factory, buy out a competitor, refinance older debt, or some other activity. The issuer hopes to make sufficient future earnings to pay back the bond with interest and make a profit on top. In the case of government bonds, the government wants to fund programs, wars, refinance older debt, build roads. The government intends to pay back the bonds with interest through future taxes. In the case of SS taxes, the government collects the taxes and issues bonds to the SS Administration equal to the value of the taxes collected. As the bonds mature they are redeemed and the government pays off the bonds plus interest using non-SS tax dollars.

If the government simply locked away the SS money collected and let it stack up on some ledger the result would be no interest earned at all on the taxes collected. There would be no bonds issued, no current use of the money, and no reason to pay interest.

Corporate bonds and the bonds issued by the Treasury to the SS Administration are really no different. If you asked a corporate debt issuer if you could look in some vault to see the money you lent them, there would be nothing there. They spent the money just as Congress spends the SS money and repays it according to the bond schedule.

 

[IronWing]

I voted for Billy 2x times. Didn't realize he was a criminal till at the end of his rein. He put into law the Housing bill for people who couldn't afford it or wasn't able to cut back on other things they enjoyed befor buying their overpriced house.

Oh he did not. Not a single poster here has produced a shred of evidence that the government forced lenders to loan money to unqualified borrowers. Lenders made those loans out of pure greed and stupidity.

 

[ShawnD1]

As you have said, you loan your money to the bond issuer for a set period of time and at the end of that period you get back your money plus interest. Now think about the other side of the bond transaction. The only reason a bond issuer would agree to the bond arrangement is that the bond issuer wants to do something with the money you loan them. In the case of corporate bonds they might build a factory, buy out a competitor, refinance older debt, or some other activity. The issuer hopes to make sufficient future earnings to pay back the bond with interest and make a profit on top. In the case of government bonds, the government wants to fund programs, wars, refinance older debt, build roads. The government intends to pay back the bonds with interest through future taxes. In the case of SS taxes, the government collects the taxes and issues bonds to the SS Administration equal to the value of the taxes collected. As the bonds mature they are redeemed and the government pays off the bonds plus interest using non-SS tax dollars.

What you're saying is right. You lend them money (social security) and they are expected to grow the economy and pay it back through taxes. Instead of actually doing that, they count social security as an income stream then throw out tax cuts. Instead of counting social security as debt (which it is), they count it as revenue. Then when a bunch of people try to claim social security it's OMG THIS IS SUCH A HUGE EXPENSE. No it's not a huge expense. It only seems like a huge expense because it was incorrectly classified as income rather than debt. The government fucked up because they didn't lock box it; they didn't work it into the budget to account for that as an expense.

I don't mean the give the impression that this is just a social security problem. Governments in many different cities, states, and countries do this kind of accounting. In business world accounting, things you commit to are counted as expenses right away. If I borrow $10 today and say I'm going to pay you $11 in a few years, private companies count that as a $1 loss due to interest payments. Government accounting is completely different. They count it as a $10 profit today and they don't write down that it was an expense. That money doesn't need to be paid back yet, so it's not an expense yet. That sounds like a simple mistake, but the consequences are unbelievable. They look at the numbers and say "wow look at how much profit social security brings in. we can totally lower the taxes and increase spending." Regardless of which party is handling the money, they will increase spending. Then the due date for that social security bond is up. Oh shit. We didn't work that into last year's budget because it wasn't due yet and we're already running a deficit this year, so we either need to borrow a ton of money to pay this back or we jack the taxes up in the double digits which nobody would support. It creates an endless cycle of growing debt.

The simple problem it creates is that the government over estimates how much money it has and under estimates how much debt it has. While most people think the US debt is about 10 trillion, it's a hell of a lot higher than that if you do the accounting the way a private company would. Lock box. You need to make a plan for how you're going to pay this stuff back before the due date.
http://video.google.com/videoplay?docid=-7461407498377956300#


edit
It's worth noting the first baby boomers will be eligible for medicare in 2011. Medicare is not exactly a lock box program either. The government has no plan of action for how they will pay for any of this stuff, so naturally it will come from borrowing more money. Obama picked the absolute worst time to president. Regardless of what he does, 2011 will be a really bad deficit year and 2012 will be even worse.

 

[xj0hnx]

xjohnx projects his sleaziness onto all politicians. Tell me of the evidence that Bernie Sanders doesn't care about anyone else. Or Henry Waxman.

We all know you love your overlords, can't think for yourself, and can wait for your nanny state to tuck you in at night.

 

[spidey07]

You can for sure see the leftist point of view in this very thread.

Owning property = bad
Owning property to make slaves of renters = good
Incenting owning property = bad
Incenting owning property to rent slaves = good

See the pattern here? The entire mind of the leftist is "my life needs should be provided by others and I give you a few hours of work, I will never be wealthy so I will not even try".

Capitalist says - "Dumb fucks want to give me money for providing shelter, so I charge them much higher than it actually costs to do so, and yet the dumb fucks still give me money! God Bless America!"

 

[IronWing]

You can for sure see the leftist point of view in this very thread.

Owning property = bad
Owning property to make slaves of renters = good
Incenting owning property = bad
Incenting owning property to rent slaves = good

See the pattern here? The entire mind of the leftist is "my life needs should be provided by others and I give you a few hours of work, I will never be wealthy so I will not even try".

Capitalist says - "Dumb fucks want to give me money for providing shelter, so I charge them much higher than it actually costs to do so, and yet the dumb fucks still give me money! God Bless America!"

So you support the government distorting the real estate markets through tax policy? Okay.

 

[spidey07]

So you support the government distorting the real estate markets through tax policy? Okay.

What the hell are you going on about? Tax policy incents certain behavior and disincents others. Since property and ownership is the American way of life that should be incented. Renters depend on others for their shelter and should not be incented (aka, no incentive for you slacker).

No matter, this is just another indicator of Obama's war against personal property and ownership. Naw, naw, naw, reject middle class America he says.

 

[nonlnear]

What the hell are you going on about? Tax policy incents certain behavior and disincents others. Since property and ownership is the American way of life that should be incented. Renters depend on others for their shelter and should not be incented (aka, no incentive for you slacker).

No matter, this is just another indicator of Obama's war against personal property and ownership. Naw, naw, naw, reject middle class America he says.

You just said that essentially everything that the people want should be subsidized by the government - as long as enough of them (to legitimize their desire as being "the American way" of course) want it badly enough. It's absolutely hilarious that you are completely blind to the fact that you are the epitome of the "leftist" boogeyman you believe stands for everything that is wrong with politics. On the other hand when people argue for simplified tax code, fewer subsidies, and less meddlesome market intervention you accuse them of being lefties. Good one! 😀

 

[ElFenix]

What the hell are you going on about? Tax policy incents certain behavior and disincents others. Since property and ownership is the American way of life that should be incented. Renters depend on others for their shelter and should not be incented (aka, no incentive for you slacker).

No matter, this is just another indicator of Obama's war against personal property and ownership. Naw, naw, naw, reject middle class America he says.

government handouts when it benefits me but if not, fuck 'em!

 

[IronWing]

Renters depend on others for their shelter and should not be incented (aka, no incentive for you slacker).

Psst: renters pay rent. They pay for their shelter.

 

[lothar]

I voted for Billy 2x times. Didn't realize he was a criminal till at the end of his rein. He put into law the Housing bill for people who couldn't afford it or wasn't able to cut back on other things they enjoyed befor buying their overpriced house.

False.
That started with Ronald Reagan.