Democrats on President Barack Obama’s financial commission are considering the wisdom of permanent tax breaks such as the mortgage deduction and corporate deferral. Calling them “tax entitlements,” senior Democratic lawmakers have argued they should be on the table for reform just like traditional entitlement programs Medicare, Social Security and Medicaid.Not that I think anything will happen. Companies like Toll Brothers have powerful lobbies. It is fun to watch, though, as people who consider themselves libertarians twist and squirm to justify this market-distorting welfare scheme for the wealthy and the people stupid enough to pay $600k for tract houses in California.
One commenter writes,
Notice that Obama does not mention the deduction for state/local income and property tax deductions. Those deductions allow people in high tax (usually Dem controlled) states to pay effectively lower federal income taxes than people who live in the more frugal states. Why should people in one state, who make the exact same income as people in another state, pay lower FEDERAL income tax?Well, yeah. Nuke that piece of welfare too. It's absurd that residents of states without state income taxes are subsidizing states that do have income taxes. End the welfare. It's the libertarian thing to do. Plus it's good old-fashioned sense and fair play.
15 comments:
I think we need to examine which states are net tax contributors vs those who take more from the federal dole that what they pay in.
http://www.scribd.com/doc/8229012/Tax-Donor-or-Contrib-States
Here is a hint california has only33% more people than texas, but contributed almost 4 times as much in net taxes to the federal govt from 1981-2005. So per capita we still with all these 'unfair' tax breaks are not taking advantage of folks in texas or any other states with more affordable housing prices. We are still per capita contributing more in taxes. If you want to limit the mortgage interest deduction to a certain amount I'd be all for it. But I think eliminating it is a mistake.
I've addressed this tired canard many times.
Let's hope that the American people elect leaders with real world experience during the next several cycles....buying votes with other people's money is not a joke as in the end the "other people" becomes each of us and our children and their children. I do fear that the future of my kids and grand kids has been wasted on liberals buying power via running up obligations which conservatives will have to figure out how to cut and pay...so the libs look like the good guys and the cylcle starts again.
Indeed, let the market decide, but institute the change gradually, over five or ten years, and be sure to say this is to elliminate distortion of markets, and will be permanent thereafter.
Why I say this is we are seeing from all branches of government change proposals of all sorts, which is just the sort of thing that causes private decisionmakers to freeze up, cash in their chips, and wait.
FDR's "bold" "persistent" "experimentation" should carry much blame for the bold persistence of the Great Depression, and maybe some of the international conflict, then war that came with it too.
Of course they should eliminate the mortgage interest deduction, just as they should be responsible stewards and spenders of tax payer dollars. Niether will happen.
Right. First you distort the market, then after everyone has factored the distortion into their personal financial calculus you remove it?
What's next? I can't depreciate my avocado trees? I can't write off my quad?
What did my 3.1% effective Federal tax rate ever do to you?
If we're going to eliminate the deductions, might as well eliminate some of the taxes as well.
I've temporarily relocated out of state and am renting my house out. I've only been able to charge just enough to pay for my mortgage and taxes. Uncle Sam thinks my rental income is some sort of gravy train and thus taxes me for all rent income less expenses.
11:11, that's reasonable. The principal portion of your mortgage is not an expense, it's a return of capital to your lender. The interest and taxes are expenses and are deductible.
I don't think eliminating the mortgage interest deduction is a good idea, unless your goal is to make property harder to sell and force a good percentage of homeowners to default on their mortgages. Losing the deduction would cost me about $150 per month, assuming there's no change in the standard deduction. If the standard deduction is reduced to eliminate the portion that applies to average interest costs, then I would probably pay $300 more per month. I could live with that, but a lot of people would struggle. And, my mortgage is under $200K.
Most people don't get the benefit they think...first of all how much of income is taxed and at what rate, second what is the deduction net of foregone standard deductions...not to mention limitations and AMT...I'd give it up in a minute to keep the rates down since over a life time the value of the annual deduction goes down but the rates stay high.
Why is it a subsidy. You don't get any money. They just let you keep more of YOUR money, which I like.
I'd like a income subsidy, or what ever. And a sale tax subsidy. Any tax subsidy, such that I don't pay any tax. I don't want anyone one else s tax. I just want to keep what is mine.
I don't see how keeping my money is a subsidy.
I'd be happy to forgo the mortgage deduction if they would eliminate SS, Medicare and Welfare and other entitlements. but it'll never happen.
As a first step, disallow mortgage interest deduction for the portion of the mortgage over the jumbo limit in your state.
"They just let you keep more of YOUR money, which I like."
Fair enough. That's why most people would favor offsetting the mortgage tax increase with tax cuts elsewhere. Taxes discourage behavior.
By taxing income, we discourage people from earning income.
By taxing debt, we discourage people from taking on debt.
Using this logic, the state tax subsidy is OK by me. Federal taxes discourage state taxes. But I'd rather pay state taxes than federal taxes.
Maybe state taxes on federal taxes could discourage federal taxes? In theory, voters would be more likely to hold federal officials accountable for raising taxes. Perhaps people would stop electing politicians based solely on wedge issues like abortion.
"I don't think eliminating the mortgage interest deduction is a good idea, unless your goal is to make property harder to sell"
Sounds fine to me.
Why not CUT SPENDING?
Obama wants all of this new spending so he can pay off the unions that helped him get elected. THAT is the libertarian thing to do.
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