Bush Tax Panel Considers Limiting 2 Popular Deductions (middle class&lower

[IChing]

By DAVID E. ROSENBAUM
Published: October 11, 2005
WASHINGTON, Oct. 11 - President Bush's tax advisory commission indicated today that it would not propose replacing the income tax with a national sales tax or a value-added tax but would recommend modifications in the popular tax deductions for mortgage interest and employer-provided health insurance.

The commission, scheduled to make its recommendations to the president by Nov. 1 on how to change the tax system, did not take votes and did not address ticklish details, but its consensus on many important issues was clear.

"We're getting focused on the income tax as a base," said the panel's chairman, Connie Mack, a former Republican senator from Florida.

That is mainly what led to an examination of ways to modify the deductions for mortgage interest and health insurance, two of the largest tax breaks now available to individuals. Together, these two deductions will cost the Treasury about $250 billion this year, with the benefits going disproportionately to the most affluent taxpayers.

http://www.nytimes.com/2005/10/11/politics/11cnd-tax.html?ex=1286683200&en=927e1df80ddab3d3&ei=5088&partner=rssnyt&emc=rss

[MichiganVote]

1. Not wealthy? Young and in college? We are soooo screwed

[FVZA_Colonel]

2. "these two deductions will cost the Treasury about $250 billion this year"

Oh how bloody delightful!

[trotsky]

3. But funny how when we're talking about tax cuts for the rich,

it's "YOUR MONEY!" Bunch of goddamned hypocrites.

[ShockediSay]

44. And we're paying about 250 $Bil a year interest on the national debt

that BushCo ran up into the trillions since he took office.

[triguy46]

121. And isn't it about $80B for a little skirmish in Iraq? nt

[WhiteTara]

129. as in per month n/t

[don954]

110. No, 'cause after the health insurance deduction is repealed

then next to no one will get employer health insurance, the un-insured rate will go up to 90%, then the health insurance industry will collapse, then the treasury will not receive all those taxes the health industry pays, which I bet equals much more than this deduction.

[triguy46]

122. We can sit back and watch and experience

employers race to the bottom of the benefits pool as they begin to slash benefits and essentially "dare" you to quit.

On the other hand, I wonder if this could not spur the growth and the resurgence of organized labor. Then instead of dealing with us one on one they would deal with us united. Shades of Samuel Gompers

[AndyTiedye]

4. These are Practically the ONLY Middle-Class Tax Deductions

So of course they are on the chopping-block.

The home mortgage deduction used to be the second most sacred of sacred cows in DC, after Social Security.

They must be very sure of their control of the voting machinez to suggest such a thing.

[Demobrat]

5. Practically - but not quite only.

Children are still adorable little tax deductions. I wonder how long before they start talking about limiting the number of kids people can deduct to no more than two, or one. Or none.

[ekelly]

28. If I get pregnant

can I claim the "child" as a deduction?

[AllyCat]

36. That's what I want to know. If they say life begins at conception

then I should be able to claim a tax deduction this year, not next year when the baby's due.

Welcome to DU, ekelly! :hi:

[RaRa]

52. Me too! eom

[cpamomfromtexas]

138. When I was pregnant I always drove in the High Occupancy Lane HAHA

I figured if they pulled me over, I'd just use their logic to get out of the ticket!

[IChing]

45. See this post, your'e right

[Straight Shooter]

99. Pro rata deductions for children, perhaps?

Rug rat numero uno, 100 percent deduction of maximum allowed.

Rug rat #2, 75 percent deduction.

Rug rat #3, 50 percent deduction.

Rug rat #4 and thereafter, 25% deduction.

Then they'll start doing the same for property taxes, but in reverse as applies to school taxes; that is, each subsequent child increases your property tax as appropriated for your local schools.

Ain't Republicans grand? Always thinking about our money, bless their little shriveled black hearts.

[triguy46]

123. there's still charitable donations

State income tax is still there as a deduction; healthcare expense that exceeds 7.5% AGI; The old business expense category (beware: audit trap). not much else.

[1932]

58. but they're not targeted at just middle class/working/poor

which means they also go to a lot of people who don't need them, and they force home and health costs up as a consequence (the government subsidizes the profits of home sellers, mortgage lenders and health insurance companies by giving people a tax break).

The government needs to find a way to give breaks only to the people who need them so that there isn't an inflationary pressure on the things they give you breaks to buy.

It's the same idea with school vouchers.

If everyone got a government-subsidized sum to spend on private education, private schools are all going to raise their tuition to find the exact same supply/demand/price balance that existed before the subsidy.

[AndyTiedye]

81. If Only Landlords Can Deduct Interest...

...eventually landlords will buy up all the land, because they will
be able to pay more than any prospective homeowner. Turning us all
into renters would not be a good thing -- when the owner doesn't pay
the heating/cooling bills, he has no incentive to insulate or make any
other energy-saving improvements.

The truely rich either own their homes outright, or they "rent" them
from a corporation that they control, and would get all the deductions
anyway.

An abrupt change in tax policy like that would crash the housing market
and wipe out the assets of millions of middle-class people.

[AndyTiedye]

84. Most Working People Would Lose Their Health Insurance...

...if their employers could not deduct it. You seem to think that would
be a good thing, that it would somehow "force" Congress to enact
universal healthcare. Nothing could force Congress to do that. They
won't touch it with a 10,000 foot pole after what happened last time.
They certainly won't touch it as long as people like Senator Bill
"Cat Killer" Frist are running the Senate. The for-profit health
industry has too much power to allow that.

Taking away health insurance from workers will just drive people into
bankruptcy when they get sick.

[DamnYank]

98. And the hospitals as well

If enough uninsured folks come through the doors it will eventually bankrupt the public hospitals (the ones who are required to treat emergency cases regardless of ability to pay). Right now many of the costs generated by the uninsured are subsidized by those who can pay (which increases costs and drives up insurance premiums).

The health care "system" will literally implode. Hospitals will be declaring bunkruptcy left and right and insurance will be so expensive that very few will have it.

<Edited for typos and clarity>

[NeoConsSuck]

130. I think you are reading the proposed law entirely wrong..

it's not the employers who will be paying this tax. It's the employees. Health benefits will be moved from a benefit to an employee compensation.

[snooper2]

79. Did you read the article?

"Taxpayers can now deduct all the interest on mortgage loans up to $1 million. One proposal discussed today would cap the deduction at the maximum mortgage the Federal Housing Administration will insure. That level changes each year and varies depending on housing costs in each county, with a maximum loan limit now of $312,895 in communities where housing is most expensive and a national average of $244,000, according to a housing administration spokesman."



I don't call someone who can deduct the interest on their $900,000 house note middle class. Do you?

[AndyTiedye]

85. At Today's Housing Prices? Yes

I think the term "Golden State" refers the cost of land here.

[snooper2]

86. Sorry,

but if you can afford a $500,000 home, then you don't need the tax break on interest like somebody who buys a $96,000 home.

Don't get me wrong, I'm also for corporations paying their fair share like they did in the 40's - 50's, as well as raising capital gains taxes.

[LibertyLover]

125. $500,000 houses and not being middle class

Sorry, but you are wrong. I live in a house that is appraised at almost $600,000 because of where it's located. I sure as hell am middle class and I sure as hell need the mortgage deduction. If the GOP tries to get rid of it, I think they will find their docile-as-sedated-sheep base suddenly getting off their collective arses and screaming.

[Milo_Bloom]

131. Yes you do!!!

One of the only reasons I may be able to afford a CONDO that costs over 600,000 is because of the tax break on interest. If it wasn't for that tax break... I would have to stay a renter!

[abelenkpe]

104. In my neighborhood, yes

Houses here seven years ago cost on average 500,000 dollars. Today ,they are going for 1.5 million dollars. the people who are buying them are so over-extended that they can barely afford to do anything other than work and pay their mortgage. Everything costs a lot here: food, energy, health care, day care, schooling, housing, taxes. The people in this neighborhood make between 70,000 and 100,000 a year and are not rich because they have to live in such an expensive area. Because that is the only place in the country where they can do their job. No job, and it doesn't matter where they are. They will be poor and out of work. So while it seems that they would be wealthy if you look at their income or the inflated cost of their home, they aren't. They are wage slaves like everyone else caught in a system that demands 10-12 hour days, and too much time away from the family. I don't think they feel wealthy, so I'd definitely call them middle class.

I know a couple who make together a little over 150,000 a year and own a 700,000 dollar home that can't take a vacation and are always stressed that they can't make this years property tax payment. Personally, it makes me glad not to own a home. I really can't see the benefit. Everyone I know who owns is spending all their free time working on their house and lives on a tight budget just to make ends meet.

I'd like to own, but property prices would need to become more reasonable for that to happen and that doesn't really look like it is gonna happen. So whatever. Long live rent control!

[GinaMaria]

137. depends what market area you live in

There is no housing here for less the 100K. I wish there was. Housing costs have skyrocketed. I bought my 700 sq foot condo for less than 100K over 15 years ago.... Now, I can't afford to buy a bigger place in the same building even with the sale of this place. That's how outrageous property costs have become in some areas. A simple 3 bedroom bungalo home in our area cannot be bought for less than 400-500 K.

We have no affordable housing here. Our raises do not match the cost of living increases. There is no way to keep up with housing costs. That tax break keeps people in their own homes.

Your statement is probably correct for your area, but a lot of us live and work in areas where a price like that won't even buy you a shack in the worst possible neighborhood.

[Elwood P Dowd]

6. Plus they also plan on eliminating taxes on investments

This was from an earlier article today on DU. They want to eventually eliminate most of the tax burden on the rich and shift it all to the middle class and poor.

I know a wealthy person who makes all of his money on investments. Daddy left him very, very comfortable. With no taxes on investments, he would only have to pay the self-employment SS taxes. Those stop at 90K, so he would only pay about $13,000 out of an income of over $500,000. His tax burden would be less than 3%. I'm also self-employed, but have zero investments and make less than $50,000. My tax burden would be over 25%. Ain't life going to be wonderful in the future BushWorld.

[ninkasi]

15. Stupid question, I know...

But why aren't our Democratic leaders screaming about this, holding press conferences, whatever they need to do to get this out into public view? Yeah, I know they can't make the corporate press report...this is so very, very fucked up.

[RUMMYisFROSTED]

21. A look at their bank statements might give you the answer.

Many millionaires and many, many more near millionaires.

[FloridaPat]

55. Return on investments is unearned income. He doesn't pay SS taxes.

[olddad56]

7. makes sense to me...

Eliminate the mortgage deduction and millons of overextended familes lose their homes. That is a good way to get the economy going. But Corporate Fascism being what it is, why not tax everything that the middle class can still deduct.

[dcfirefighter]

8. These are really bad deductions - they should be gone

seriously. After returning the top bracket tax cuts, but they should be gone nonetheless.

The mortgage interest deduction is a de facto tax on renters. Renters don't get to take it, ergo they must pay more than non-renters. The subset of the population that rents is poorer than the subset that owns. It's a regressive deduction. Perhaps better than eliminating it, it should be reduced from two houses & $1 million to one house and half a million, but that is merely a matter of degree.

Furthermore, all of the 'homeownership' tax deductions are really and truly a means of transferring wealth from workers to landowners. As we have seen, easy access to money (low interest rates) doesn't necessarily make homeownership more affordable, it makes property more expensive. As soon as most people can afford a more expensive house, house prices rise.

More explicitly, land prices rise. You can still commission construction at $125-$250 a square foot. It's buying that lot that gets more expensive - and there is no feedback loop. If construction costs rise, new contracters put their hats in the ring, and new construction methods arise (think engineered wood trusses v. dimensional lumber as lumber prices have risen). However, there is no feedback loop with land. No matter how expensive it gets, no one is making more of it.

As for the employer paid health insurance deduction: eliminating this is almost necessarily the first step towards universal healthcare. Currently, if it is possible at all, it is very expensive for an individual to buy healthcare. Corporate-sponsored healthcare puts the employer in the position of the customer to the insurer. In other words, the insurer must keep the employer, who pays the bills, happy, much more than he must keep the insured employee happy.

I expect most of you will disagree with my assessments here, but I stand by them. These are two of the worst tax deductions there are, and they SHOULD be eliminated.

After they roll back his earlier tax cuts.

[AlCzervik]

9. 30% of the mortgages last year were "Interest only", that will hurt

those people in a big way, now i'm not a fan of those mortgages but still thats a lot of people.

[toopers]

10. I agree with you . . .

but we need to replace the current tax system altogether. Put in a national sales tax. That has so many benefits to all classes of people and drives the correct behaviors. The current tax system is a burden to everyone and every step.

[Terran]

12. Sales tax is regressive and hurts poor people.

Sorry, not a good idea--never was. A luxury tax, now there's an idea.

[toopers]

14. Actually, it doesn't hurt poor people.

It allows them to take home all of the money they earn and spend it as they see fit.

[happyslug]

19. At 87% Sales tax rate??????

That is from the Article, I have read other studies that to replace the Income Tax with a National Sales taxes the rate has to be at least 60% (You can drop it to 30% if you include housing, i.e. every time you buy your home you NOT only pay the previous owners what you agree to pay for the home you also have to pay the government an additional 30% of that figure as part of the National Sales tax, renters will also have to pay a sales tax of 30% of their rent).

You must understand when Income taxes where first proposed in England during the Napoleonic Wars it was adopted do to the need to raise revenues, Nothing better has ever been found because an Income Tax taxes people on income generation, which means there is often a paper trail for the income and thus a relatively easy way to force people to pay the Income tax (Unlike Sales tax where people can do the transaction without paper and avoid any documentation that a taxable transaction took place).

Now you may say people illegally avoid income taxes today, yes, but not at the rate people avoid paying sales taxes. Studies have shown that if a sales tax start to exceed 10% people start to avoid paying it. Up to about 10% the sales tax is a nuisance more than a cost, over 10% it is more of a cost and people just stop paying it if they can.

paper's on this subject By William Gale (Who does a better job explaining the problems of a "National Sales Tax":
http://www.brook.edu/dybdocroot/views/articles/gale/20050516.pdf
http://www.budget.house.gov/hearings/galestmnt100604.pdf#search=\'Inclusive%20Tax%20Rate\'
http://kipesquire.powerblogs.com/posts/1116417663.shtml


Here is some pro-"Fair Tax" websites if you want to see the other sides arguments:
First the Farm Bureau, an organization that not only advocates the "Fair Tax" but whats the 1964 Civil Rights Acts repealed:
http://www.fairtax.org/pdfs/Farm_Bureau_FairTax.pdf#search=\'Inclusive%20Tax%20Rate\'

A "Calculator" that shows the advantages of "Fair Tax" (Provided it is no more than 30% rate):
http://www.pafairtax.org/resrcs/calculator.pdf#search=\'Inclusive%20Tax%20Rate\'

Henry George and his policy of taxing the value of land (not Buildings or other improvements but the land itself, George also opposed Sales taxes as taxes that harm an economy, he also disliked the Income Tax preferring taxes on land, for such a tax does the least harm to the economy):
http://www.etes.ucl.ac.be/BIEN/Files/Papers/2004Smith.pdf
http://www.nypl.org/research/chss/spe/rbk/faids/george.html
http://www.progress.org/books/george.htm
http://www.henrygeorge.org /
http://www.henrygeorge.org/hgi.htm

And a previous thread on this subject:
http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=15245#15305

[alcuno]

20. There are certain things you can't avoid buying.

We all need food, for example. If you have a national sales tax of say, 15%, it hits low income families harder than middle or high income families. Lets' say these families purchase $100 of food in a week and pay $15 in tax. If your income is $400/week, that $15 is 3.75% of your income. If you make $1600/week, it's .93% of your income. That's a regressive tax.

[Terran]

23. It's a flat tax

It has a bigger impact on poor people than on rich people. When you buy groceries and you pay, say $5 in sales tax, if you're poor and depend on, for instance, public transit, that $5 could have covered the cost of getting to work and back for a couple of days. For middle class people who drive cars and commute, a similar cost for the same groceries might be $10, depending on the car. But they still pay that same $5 and it means vastly less to them. And if you're rich? Well, you don't even bend over to pick up $5 you find on the sidewalk.

Sorry, any flat tax has a great impact on the poor. It's just simple math.

[NorthernSpy]

64. correct! sales tax is horribly regressive...

The poorer you are, the greater the portion of your income that must be spent on necessities. Taxing things like groceries is an abuse of the poor. All such schemes have the effect of increasing the tax burden of the poor and working class, and reducing the tax burden of the affluent.

[AllyCat]

37. And then the spending taxes them disproportionately.

Sales taxes are regressive taxes. If we eliminate tax on necessities like food, clothing, shelter, and medicine, then this starts to get more fair. But those things will never happen. Thus, I am opposed to a sales tax. 5% of my only $200 for the month is pretty tough. 5% of $2000 to spend for the month is small potatoes.

No way.

[pecwae]

51. Johnson County TN

one of the poorest counties in the state has a 10% state sales tax on everything including food. If the residents want to make a 35 mile drive to a Walmart in TN, then they pay closer to 12% on everything they buy.

[1932]

59. Alabama -- 70% of the land is owned by corporations, so they have no

property tax.

As a consequence they have the highest sales tax in the country. As a result of that, poor people spend a higher percentage of their income on taxes than rich people.

Jim Wallis writes about how regressive tax codes are unchristian and uses Alabama as his case study.

[BamaGirl]

126. We have an awful income tax too

Our income has actually been going down the last couple of years, which really sucks because the less we make the bigger check I have to send the state in April. That's after we increased witholding too. We pay almost nothing in property taxes, but the state definitely gets it in other places.

[CTyankee]

105. tax on food???

My god, how do people put up with this? It is outrageous!

How can anybody support the idea of a tax on a basic necessity? I would not live in a state that had a tax on food. This is horrible.

[pecwae]

116. The way they justify it

is that there is no state income tax. I lived there for 6 years and drove to NC or VA to do ALL my shopping once a week.

[nvliberal]

74. You're kidding, right?

The poor have to spend ALL of their money on necessities, and therefore they will be taxed at a FAR higher rate than somebody like Bill Gates.

A national sales tax is the WORST possible tax the fascists can put it.

This is nothing but yet another wealth-transfer scheme.

I can't believe people buy the right-wing hogwash.

[nonconformist]

135. Yes, it does.

Poor people spend nearly all of their income on goods. Rich people spend a mere fraction of their income on goods.

Do the math.

It's a regressive tax in every sense of the word.

[0007]

91. The luxury tax is the key.

[high density]

40. National sales tax is the worst idea possible

That would let the rich get richer even faster than our current system.

[lumberjack_jeff]

106. You don't live in Washington state, do you?

Here in Washington, the bottom 20% of the population pay over 17% of their gross income in state tax. The top 1% pay 3.3% of their income.

There's a reason that Bill Gates chooses to live here.

Why does it suck so hard? Because we have no income tax, high sin taxes and property taxes that hit property in poorer areas hardest.

... just about exactly what you are proposing as a panacea.

[Terran]

11. Incentive to buy a house.

I must disagree, as you expected. As a new homeowner and renter for the previous 30 years, I can say that I'm going to be relying to some extent on that mortgage interest deduction to help me remain solvent the first few years I own this damn house. You left out one important distinction between owners and renters: owners pay a sh*tload of money out just to maintain their homes. Renters don't have to do *any* of that. And that's not even mentioning little things like paying property tax, homeowner's insurance, mortgage insurance, etc. I don't know about you or most people, but I'm both a "worker" and a "landowner". I'm not getting rich from owning a home; quite the opposite.

[survivor999]

18. Totally agree with you...

It won't pass... Not this year... Remember, 2006 coming up... And after that we have 2008...

[uncle ray]

31. not sure where you rented, but where i rent

the real estate market is high enough that landlords can expect to pass every cost of home ownership on to the renter, every penny, so in the end they get their income properties for free, their property taxes for free, any property improvements are free. good racket if you can get into it.

[RaRa]

54. Ditto!

We bought a 30 year old home and have been repairing everything. New roof, new ejector pump etc. We almost were faced with a new septic system (that would have totally broken us). Without this tax break, I don't know what we would do.

An aside. Such evil fuckers, they are. They want to go back to the "good old days" of the 1950s? (Seems like it). Well, I wouldn't have had to work under Clinton's economy. But Bush's has taken me away from my kids (thankfully only part time). My husband's company is going to rake in (has been already) the money with the new energy bill, but our health benefits are being cut NOW! Hmm, they told him that they were giving the employees more than the norm, so there! - don't want to be "too good" to your employees. I'm simply sick with disgust with where this country is going. End of rant of hormonal pregnant woman.

[CTyankee]

119. We can't get back the 1950s

I grew up then. We were the world's greatest power without having competition from our greatest competitors: Japan and Germany, who were flat on their asses after we bombed the crap out of them in WWII. Also, we had low interest rates and low energy costs (which we are paying for now).

Those days are gone forever and cannot be recreated.

[Wordie]

70. Whoa there! Renters pay ALL those things, FOR the landlord, THRU the rent

payments they make to the landlord, but don't get the additional benefits of equity. The landlord is the one who writes the check, true, but those landlords would not stay in business if they weren't making a profit, over and above all the things you mention that need to be paid for. And did I mention equity?

I don't think the mortgage tax break should be eliminated, but let's not pretend that it's fair to renters and poor folks.

[lumberjack_jeff]

107. Landlords often take a net loss in return for equity

The equity gain and the interest tax break often (usually?) ARE their profit.

If landlords were unable to take the tax deduction, rents will go up too.

Repealing the mortgage tax deduction would suck for everyone... except people like me who have no mortgage nor employer to pay my medical insurance.

[Wordie]

115. I didn't advocate repealing it at all...just making a point to the earlier

poster that there is a pass through of many of these expenses to the tenant in the form of rent. So, the renter is paying for taxes and maintenance, etc., albeit indirectly.

[northzax]

96. congratulations on your purchase

seriously. But your mortgage exemption does nothing good for the national economy. In a world in which the wealthy paid a fair share of taxes, your deduction wouldn't simply be helping the government run a deficit and artificially inflating home prices. think about it, if you can write $200/month off your income taxes, you can pay $200/month more for your house. That's not real money, it's money being borrowed, by the government, from your children and mine. I get no benefit from it, the people who can never afford a house get no benefit, but we pay the costs. how is that fair?

[nonconformist]

136. I totally agree.

I just recently bought a 32 yr old house and have been shelling out the funds for maintenance and updating that was ignored for years, being that this house had been a rental for the last few years. Only the bare necessities were done. Not to mention property taxes and homeowners insurance. When I rented, my out-of-pocket costs were limited to rent. The tax break for mortgage interest is what makes it affordable to own a home for middle class/working class people like myself.

This tax break is extremely popular and beneficial to very many.

[AndyTiedye]

27. You Are Right About the Disagreeing Part

The mortgage interest deduction is a de facto tax on renters. Renters don't get to take it

Not directly. Their landlords get to deduct mortgages on their
rental property as a business expense.

ergo they must pay more than non-renters.

Not necessarily, since landlords can deduct not only their mortgage
and taxes, but also insurance and maintenance. That reduces the
amount they need to collect in rent to stay in business.

In the currrent housing market, rents are often lower than mortgage
payments would be for comparable dwellings.

The subset of the population that rents is poorer than the subset that owns.

That is generally true. Most are too poor to benefit from itemizing deductions, for that matter.

It's a regressive deduction.

It primarily benefits the middle class. Taking it away would
effectively destroy the middle class. Many who have mortgages would
lose their homes and be driven into bankruptcy. The homes would be
snatched up at fire-sale prices by speculators and landlords.

Ending the home mortgage deduction would not help the poor, it would
merely increase their numbers.

Perhaps better than eliminating it, it should be reduced from two houses & $1 million to one house and half a million, but that is merely a matter of degree.

I'll accept that one "principal residence" ought to be enough,
but a hard dollar-limit will disproportionately hurt blue states,
which have much higher property values than red states.

Furthermore, all of the 'homeownership' tax deductions are really and truly a means of transferring wealth from workers to landowners.

I thought it was to facilitate workers becoming landowners.

The truely wealthy don't need mortgages.

As we have seen, easy access to money (low interest rates) doesn't necessarily make homeownership more affordable, it makes property more expensive. As soon as most people can afford a more expensive house, house prices rise.

Does anyone seriously expect interest rates to stay low?


there is no feedback loop with land. No matter how expensive it gets, no one is making more of it.

Of course there is. As land gets more expensive, it gets built to
a higher density. Moving even further out is rapidly becoming an
unattractive alternative with gas prices being what they are now.

As for the employer paid health insurance deduction: eliminating this is almost necessarily the first step towards universal healthcare.

No, it just means that almost everyone will lose their health insurance.
That will not result in universal health care. They killed
that whole idea dead, dead, dead during the Clinton administration.
Nobody will touch it again in our lifetimes, no matter what.

This would just mean that if you get sick, the hospital gets your life's savings.

If that were not enough, if we Democrats are so foolish as to propose
these things, it will give the Rethuglicans a free ride for the next
20 years of elections, even without Diebold.

[dcfirefighter]

68. Owners rent out at market rates

having nothing to do with 'staying in business'. If property specific taxes go up, they have no choice but to pay them. They've already raised their rent as high as it will go. General property taxes, such as a $100/yr rental license, DO get passed on.

All the Mortgage deduction does in ensure high house prices. Which means that people who don't have a house now, have to pay a high price to someone who does have a house now.

It would be simple to eliminate without stranding anyone. #1 give a timeline for eliminating the second home deduction, say 5 years from now. #2, take $100,000 off of the limit each year for the next 10 years. I'd even allow a geographic modifier. If you still owe $500,000 on your house five years from now, you are either extremely wealthy, or you have a very bad mortgage.

[roguevalley]

30. getting rid of either will bankrupt me and my parents. The fuckers.

I just hope they burn in hell for what they do.

[MarsThe Cat]

32. It should stay intact for primary residences-

but i could see doing away with it on 2nd(3rd, 4th...etc.) homes. b ut if they do away with it or limit it unrealistically- they're going to screw(i.e. PISS OFF) a lot of people.

as to the deduction for employee healthcare- i never thought it was a fair deduction- especially when my last job didn't have a plan to join.
plus- when you don't have insurance, the hospital charges you FULL PRICE.

[stevebreeze]

42. mortgage deductions are only available for 2 dwellings under current law

[MarsThe Cat]

43. thanks- having only one myself, i wasn't sure...

and if things work out right- we'll be free and clear owners of our one home by this time next year- and even after we are, i still think that the mortgage deuction should stay- but only for primary residences.

[girl gone mad]

41. If I could nominate a post,...

I would nominate yours. I think you are correct on both points.

[Justice]

53. Interest on Mortgage Deduction is the only way most people

can afford to own a home. It would be crazy to eliminate it.

[dcfirefighter]

69. it's a scam

Deducting the mortgage interest allows people to afford a larger mortgage, yes.

Since it applies to everyone, there are many many people who can afford a larger mortgage, yes?

Since more people can afford more of a mortgage, house prices go up, yes?

Since house prices go up, that mortgage doesn't buy as much house does it?

So you're back to square one. You have to work 2 weeks a month to be able to afford a mortgage on a house somewhere near where you work. Mortgage interest deduction or not.

The mortgage interest deduction DOES NOT MAKE HOUSING AFFORDABLE. It makes it LESS AFFORDABLE. It makes HOUSES MORE EXPENSIVE, which is good if you ALREADY OWN A HOME. But if you are POOR, or SINGLE, or otherwise DON'T OWN A HOME, you just have to pay more to the guy you want to buy a house from. It's also great IF YOU ARE A BANK, because you make more on a $500,000 loan than you do on a $250,000 loan.

Millions of families own one home. In most cases, it is their single largest asset. Their ownership should be protected. But the Mortgage Interest Deduction should go, or at least get smaller.

[NorthernSpy]

60. I like reading your posts

They are very interesting and thought-provoking!

:toast:

[dcfirefighter]

72. Thanks for the beers n/t

[dean_dem]

67. I agree with you in theory...

...but what happens if we eliminate the mortgage interest deduction? I worry this so-called housing bubble will almost immediately deflate, and the already slow economy will really take a hit. I'm not sure that's a good solution.

Besides that, I really doubt how much traction the Bush Administration has on this, given that the mortgage interest deduction is immensely popular. It has been a huge benefit to most of the homeowners in this country, and homeowners vote. Mr. 37% Approval Rating might do well to not alienate anyone else at this point.

This will probably just go the way of Private Social Security Accounts and the Flat Tax.

[Wordie]

75. I agree with you, but to just eliminate either of these without replacing

them with something better, or somehow protecting those who made financial decisions based on the existance of these deductions is unthinkable.

The tax on land isn't the only thing driving it's price up; there is the natural pressure of increasing population, which drives increased demand, so land prices will always rise as long as population does.

The idea of eliminating the deduction for a second dwelling, and limiting the amount of the deduction IS a good one, and a good first step, but I agree these should only be taken in concert with a roll-back of the earlier tax cuts.

To try to shift the tax burden onto poor and middle-class persons, while favoring their wealthy patrons, is so typical of this out-of-touch administration and their RW cohorts. I hope the average American will recognize this and throw the bastards out in 2006.

[dcfirefighter]

76. Taxes on land

decrease their purchase price, or push their price down.

[progressivebydesign]

83. I totally and vehemently disagree with you. They WORK.

Those deductions are typically the ONLY deductions that middle class working folks can get. Unlike the upper income people that are able to deduct everything and have the actual resources to hire a tax accountant to figure that out, this was the ONE THING that made home ownership affordable for most people. The deduction allowed them to catch up in a world where only CEOs making millions were getting ahead. Home ownership, however precarious YOU seem to think it is, is a MAJOR influence in the health and well being of children and families.

[dcfirefighter]

87. not very progressive of you

They work in that they allow people to afford the mortgages they currently owe, and for that they shouldn't be yanked immediately. It should be phased out over a decade. But don't get a mortgage tomorrow that won't be affordable without a deduction that won't be there.

But more than that, they work by increasing the price of homes. This benefits people who already own homes, or land, or lots of homes.

If you want to get people into homes, and increase the level of homeownership, like I do, you'd investigate. You'd realize that the HMI deduction only helps AFTER you take on a mortgage, and furthermore, all it does is raise home prices.

#1 Get more homes built. Do this by lowering the tax on buildings, and on labor. See #3.
#2 Get more brownfields redeveloped. Get more intensive development in urban areas. Do this by raising the tax on land values.
#3 Allow people to earn more for their labor. Do this by lowering wage (payroll) taxes.
#4 Allow people to spend less money on other living expenses. Do this by lowering sales taxes and protective tarriffs.
#5 Allow people to save money for a downpayment, without taxing them on it. Expand IRAs. (I believe they already allow you to make a penalty free withdrawal for a home downpayment. If they don't they should)

[Captain Hilts]

93. Agreed. Get rid of the mortgage deduction. It's unfair. nt

[Puglover]

124. Id be curious to know

the percentage of people on this thread that are clamoring to get rid of the interest deduction that are home owners.

Just asking.

[Inland]

112. Ideally, I would phase them out over twenty years.

year one, multiply interest by point 95, year two, by point 9, everyone adjusts, nobody gets screwed except to the extent the government stops putting sixty billion a year into residential home purchases.

[4dsc]

117. de facto tax?? That's funny

I have no idea where you came up with this crap(de facto tax), but if you don't support one of the last deductions for the middle class taxpayer just say so!

[mopinko]

133. pretty nihilistic view you have there

as a former landlord, i can tell you that the interest deduction is passed along to renters. it lowers the costs of owning property, which is the basis of rents. money goes around and around, ya know.

and although universal health care is a laudable goal, it can be achieved rationally. you don't have to punish the people who are lucky enough to have it now.

eat the rich is really not any more effective as an economic policy that eat the poor.

[Carolab]

13. This is all part of Wall Street's scheme to get people to invest.

They are floating the big scare about the housing bubble for precisely the same reason.

They want people to put their money into rentals for their fat rich landlord friends, and they want people to put their money in tax-deferred investments for their fat investment broker pals.

This is ALL about getting people OUT of investing in real estate, where there is REAL, SAFE appreciation and TRUE ownership and into the FAUX INVESTMENT world of "IRAs, 401ks, etc.", which are just giant pools of money for THEM to steal and rob us blind!

Where are the lobbying groups for the real estate and mortage companies on this? This CANNOT pass!

[catzies]

24. Yup. And gives me deja vu for the "private accounts" scheme he shopped

and schlepped around ad nauseaum last spring.

Last spring. x( Seems like so long ago now.

[raccoon]

65. That is a very good question.

"Where are the lobbying groups for the real estate and mortage companies on this?"

[nvliberal]

78. If you really believe there isn't a "housing bubble" in many parts

of the country, you are living in a fantasy land.

Houses out west where I live are going for probably twice or three times what they are worth. In my neighborhood, a relatively poor one, older houses are on the market for over $300k, and no way in hell are they worth that much.

Speculators and retired Californians are coming in buying these properties, driving the prices up even more, and more individuals and families cannot even afford to buy them. Many of those who can buy are doing so because of "interest-only" schemes, but a few years down the road they will not be able to afford to pay on the principal.

They don't even OWN the houses, yet they are throwing money down a rathole.

At some point the market will crash, and it will crash big time when people can no afford to buy houses.

That's part of the right-wing mantra, for pretty soon only the wealthy will be able to afford to buy property, just like in feudal times.

[Carolab]

113. But, see, that is EXACTLY part of the plan!

They are deliberately creating this bubble effect in order to prevent John & Jane Doe from owning property!

People should not engage in panic selling over this, or be afraid to invest in real estate themselves for fear of their property depreciating. Property does NOT depreciate. But you cannot count on other investments.

As far as "interest only" mortages go, etc. people should beware of getting themselves into more than they can comfortably handle. And it is just INHUMANE after the mortgage industry allowed so many people to get into this to now suggest these people not be allowed to deduct that interest.

People need responsible lenders and mortgage instruments that are appropriate to their individual circumstances.

[IChing]

16. Health Care

I am an invalid (severe arthritis)
I own a condo
I lost my pension and my medical

My place was burned down and then flooded
it will be replaced

Fuck the middle class or anyone in pain

[Wordie]

80. IChing...did these things happen to you? Maybe I don't understand

your post. Could you explain?

[CBHagman]

17. Great. Go after housing and health care, in a fashion.

Some months back I heard an NPR report about a particular company paying a dividend based on the fact that taxes had been cut on investments. One person cited in the report got a $300 million tax break. That's just his tax break! That's what three missile defense tests cost.

But someone getting a deduction for taxes on the fixer-upper, or for paying for health insurance? Away it goes.

These people are worthless, steaming mounds of excrement.

[FrankBooth]

22. This is really going to piss off the middle-class wingnuts

They rely on that mortgage deduction, it is going to hit them where it hurts.

[forintegrity]

25. fuck them!

The rich get richer and the poor get poorer. Welcome to fucking bushland.

It's SCREW THE LITTLE GUY time!

Is it 2006 yet?

[tandoori]

26. SludgeReport said the home deduction would be capped at $350k

That should cover even the upper middle class NICELY! It sure as
hell would cover my $16,000 deduction for mortgage interest.

[Infomaniac]

33. In certain housing markets, a cap that low would be unacceptable.

My husband and I live in NYC. We recently purchased our first place. For the two years we searched for a home, we looked at $500,000 dumps. We saw places listed for the high 300s that were no bigger than a bread box. Most banks require 20% down on dwellings in NYC. The average hovel here would require a mortgage of between $400,000 to $500,000. The minimum down payment plus the mortgage amount for a huge number of potential buyers would still be over the cap. Mayor Bloomberg would be run out of town on a rail. I think that proposal is headed the way of the private accounts. Dead on arrival.

[truthisfreedom]

34. wait a minute. it looks to me like they mean $350k/year in interest is ok

it's interest amounts we are paying in ABOVE $350k/year that won't be deductible.

if i was paying in all interest (first few years of the mortgage) i would be able to have a $29K mortgage payment EACH MONTH and still write off all of the interest. i think the house would be over 4 million in value at that mortgage level.

i get the feeling there is no loophole or monkey-business in this deal. it looks like it's really a great deal for the middle class and lower class... we get to keep our interest deductions and only the wealthy with multi-million-dollar homes will be paying more tax.

woohoo!

[onenote]

108. no, its interest on a 350K loan

Currently the cap is $1million --- not the amount of interest, but the amount of the loan. The proposals are to limit the deduction so that it only applies to the first 350K (or thereabouts) in home acquisition debt.

I think its a crappy,politically unsellable idea. Hell, most members of COngress have mortgages over 350K I suspect, so I don't see them going in that direction.

onenote

[Lithos]

120. It also coincedentally

Focuses itself towards the East and West coast urban areas which are traditionally Dem.

L-

[tandoori]

114. EXACTLY.......the proposal only hurts super rich

which excludes me lol.

[Inland]

111. Don't you get smacked with AMT anyway?

With that large of mortgages, you would need large incomes and take large deductions....don't you run into the AMT?

[Infomaniac]

118. AMT in high personal income or property tax states...

like California, New York and Kansas, generally hits married couples at with adjusted gross income over $150,000. I know this one from personal experience. My husband and I get screwed every year now since we married.

[Inland]

127. Right, so

would the elimination of mortgage deductibility in the largest of mortgages actually HURT anybody?

So the only changes would be to the less than rich classes.

[IChing]

29. There are times we speak of....no taxation without representation.

Morally what do your taxes represent?

[IChing]

35. the military, halliburton, and the rape of this country?

state and local, yes

no longer can I support
this nation morally

they will arrest me.

[Mr Rabble]

38. This will be the end of the economy, and * with it.

If * decides to push this, 37% approval will be seen as the glory days.

This will no doubt ruin the housing market as well.

[flaminbats]

39. man, how badly do these idiots want to lose??

it's another 86' tax punch, only with ten times the force! :spank::spank::spank::spank::spank::spank::spank::spank::spank::spank:

[bklyncowgirl]

46. NYT: Tax Panel Says Popular Breaks Should Be Cut

"The tax commission said it would recommend limits in deductions for mortgage interest and health insurance."

http://www.nytimes.com/2005/10/12/politics/12tax.html

Would someone please explain to me how raising taxes on the rich hurts the economy but cutting deductions that mainly benefit the middle class is somehow a good thing?

My simple mind is unable to comprehend this inconsistancy.

[Aunt Anti-bush]

47. It makes no sense at all.

Just like almost all of this administration's policies...

[coyote]

48. I´ll take....

"How to screw the middle class?" for a 1000 Alex.

[screembloodymurder]

49. Stop paying taxes.

I did. I refuse to support this administration and it's unholy wars.

[wordout]

90. same here and agree 100%

I have a relative who didnt pay taxes for 11 years then retired. See, the IRS doesn't catch *everybody*. It also helps if people claim married with 9 dependants which = more $ in the paycheck :) Furthermore, I'm ready for winters unrestrained capitalist greed by having decided in advance to just not pay oppressive heating bills. No, I am not going to pay them. NO, I am not going to choose between heat and food. Come summer i'll place the utilities in someone elses name. IMO every american should bare their collective ass to these greedy capitalist nazi bastards. Way i see it, america is a sinking ship. might as well givem the finger before i drown.

Stay warm everybody. I will.

[bklyncowgirl]

50. Whoop sorry admins. didn't see the other thread. nt

[FloridaPat]

56. Reagan tried to get rid of mortgage deduction. The insurance companies

and banks got very upset. They will again.

And isn't health insurance a percentage deduction? The amount has to be over a certain percentage of your income? Or did that change? I seem to remember not being able to deduct it from my taxes when I had it.

[salin]

57. those who think the health care cut is good as it moves us towards

national health care - be careful what you wish for.

First, this administration has run us so far into annual debt, with a great increase in the annual budget expenditure on interest on that debt - that it is unlikely that any congress soon would add such a huge cost item. Simply said, this administration has changed that reality. The only way it could happen is if it happened at the same time as the cut for employers along with some kind of fee employers pay that is equal to or less than what they already pay for health insurance, so that it is viewed as a savings in terms of future health costs (due to the sharp annual rises seen in the past six years.) Without that - it won't happen.

So for all that wishful thinking, the end result will be that for some period of time millions of folks who currently have health insurance will join the millions who don't. And there will be a huge push from the rightwing to make health insurance all "private" through "private savings accounts." But the thing is there will be no extra money (from govt or employers) to create these - so suddenly folks will have to either self-insure at huge rates (5,000 to 10,000 a year) and or put a similar amount a year into a savings account all of which will NOT accumulate to cover catastrophic health costs were they to arise.

This is a foolish thing to wish for at this time. May you be so fortunate that it doesn't bite you or your family in the behind. This isn't a "theoretical" issue to support in hopes that SOMEDAY (5 or 10 years from now) that it moves us towards universal health coverage.

[Bridget Burke]

62. "Things have to get much worse before they can get better"

I've heard that one before, too.

The tax cut might EVENTUALLY lead to National Health Care. But how many people will suffer in the years between?

[salin]

100. exactly - the damage - esp now with the bankruptcy bill passed into law

will harm many additional folks than are already at risk due to not having access to health insurance and not earning enough money to self-insure.

[dcfirefighter]

89. Gov't already pays 60% of healthcare

or so say the pro universal healthcare folks. I believe them.

Get it out of the hands of the employers. Put it in the hands of the people. Then we have a real market. One where premiums actually have to be competitive on the INDIVIDUAL basis.

[salin]

101. but only for those who have an extra $10k of earnings

to spend on health insurance. It is not likely that businesses will pass their "savings" by no longer having to pay for ins. to employees (just gives them bigger profits) thus there is no additional $ for individuals to pay for the insurance. Given that wages are now declining per cost of living (as has been the case for several quarters) there will be many, many, many people who lose insurance and cannot afford to buy it individually. Not much of a competitive market if few can afford to play.

[sendero]

61. The right wing nutcakes..

.... continue to hand the Democrats new bullets, but the Dems cannot find their guns.

This idea is going nowhere, but if it really got any traction at all, it would be disaster for Republicans. Now you are messing with the voting classes.

Trust me, this is going nowhere.

[RedEarth]

63. Who would have guessed .... put more of the tax burden on working folks..

[midnight armadillo]

66. What we need is a wealth tax

How about 1% per year on all non-primary-residence over say $2million. Assessed annually, no exceptions, no deductions, nada.

And tax the FUCK out of wealthy heirs & heiresses like waste-of-oxygen Paris Hilton. How about a 100% estate tax for anything over $10 million. Take half of the revenue collected and distribute it to every citizen as an annual tax credit. That'd still leave families very wealthy, but would eliminate the landed aristocracy.

"Riches are the savings of many in the hands of one." ~ Eugene Victor Debs

[dcfirefighter]

71. Don't forget to exempt Labor built wealth

cuz if you don't, you discourage employment. EV Debs wouldn't be happy.

Tax the crap out of fiat wealth: titles, licenses, permits, granted annually at full market value.
Comes to about $4-5 Trillion a year. Enough for existing government and about $5,000 per capita left over.

[ramapo]

73. Mortgage deduction should be limited

The rich get a huge benefit from this deduction as they're the ones with the million dollar mortgages which are underwritten (in effect) by the majority of taxpayers.

[LatinoSocialist]

77. how come they don't consider deducting

rich people's income and raising their taxes.

Those measures are popular and would fund our much needed revenue needs.

Cough it up, rich people. You also have to sacrifice for this war and for this spending-crazy administration.

[progressivebydesign]

82. But they ARE going to abolish investment interest.

We are living in a monarchy, folks. There IS NO DEMOCRACY left. Babs Bush and her toxic children will not be happy until everyone earning less than they and their cronies, are left penniless and begging to sweep up after them. Fuck the whole lot of them. TRICKLE DOWN ECONOMICS DOES NOT FUCKING WORK!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[dcfirefighter]

88. There are two types of interest

one good one bad.

Real interest, what you get for letting someone use your machines, factories, tools, knowledge, buildings etc. is a return to Capital. This is good. We want to encourage people to build machines, factories, tools, knowledge, and buildings. These are the things that employ people and improve living conditions.

The other kind isn't really interest at all, it's RENT. It's what you can demand payment for if you hold the legal title/license/permit for land, extraction rights, pollution rights, broadcast rights, patents, etc. Allowing individuals to collect rent leads to inefficient allocation of resources. For example. Say my parent's left me a valuable lot on Madison Ave in Manhattan, nestled between two skyscrapers. Say I don't do anything with that lot, but pay taxes on it. Perhaps I put a parking lot, or a small bodega on it, just enough productive investment to pay the property tax. It's a valuable lot, so taxes are significant, but they are a mere fraction of the taxes on the lots to either side. So, here I am with my title to that lot, which is worth many millions, and yet all I have to do is pay a pittance in tax to keep my title. A title that was created by government decree. From a government that was created of, for, and by the people. Heh. What a deal.

I could sell that title for millions. Or I could wait and sell it for millions more. Or I could lease that lot for a couple million a year. Yet I've not made one bit of productive investment.

If someone wanted to build an apartment building that would house a 100 families on that lot, they'd have to meet my price. They'd have to take out a loan that cost them a million dollars a year, just to buy the lot from me.

Now, if NYC decided that they wanted to tax only land, and not buildings, suddenly the tax on my lot would go way up (and the tax on the two neighboring skyscrapers would go way down). What could I hold out for? A higher price for my lot? Who's going to pay a bunch of money for a lot thats going to cost them a million dollars a year in taxes? No one, that's who. That lot is only worth a million a year. When the city didn't tax it, I could charge someone a million a year to use it. But if the city takes a million a year to recognize the title, that doesn't leave much for the landowner. So I have to sell, and sell for a pittance. Either that or build on it myself, but I'm not the productive investment type. So I sell it to the ABC Development Co. They were going to have to spend a million a year on the lot, either way. They're real happy though, that they (under the wonderful new tax scheme) don't have to pay any taxes on the building. So they're going to build one hell of a building. They're going to build a $100 million building. 500,000 s.f. They're going to have to employ an army of workers to build it. They're going to have to employ a small army of workers to clean it, secure it, operate it, and maintain it. This building is going house 100's of retail and professional jobs, as well as provide homes for a 100 families.

So which sort of investment do you want to tax? Good investment, or speculation? I say tax speculation. Tax land values. Tax licenses and permits. Heck, tax high incomes for all I care. Just don't tax buildings, or factories, or work equipment. It keeps people out of jobs, and keeps wages low.

[LincolnMcGrath]

97. Just heard a few minutes of ElRushbo, he is livid over this proposal;

He said it will lower the rate from 1,000,000 to 300,000 dollars.

Is this true, anyone?

What percentage of americans have a mortgage over $300,000?

[mopinko]

134. all the ones that live in big cities

(read- dems) bingo. you can barely buy a decent 2 bedroom condo in chicago for $300,000. i'm so glad i bought a long time ago.

[second edition]

92. If Bush tries to do anything with these two deductions he will see

a revolt. What he needs to do is roll back the ridiculous deductions he gave to the rich.

[Mountainman]

94. They need to reverse the tax cuts and stop the wars.

Basically these ideas are further means to shift wealth away from the working class to the already rich. The mortgage deduction is the only thing I have and not all of that because I got hit with alternative minimum tax.

I think they need to increase the rates on the wealthy and bring back the consumer interest deduction.

Nothing repukes come up with helps most of us.

[Matariki]

95. somehow I can't imagine this passing

What politician seeking re-election is going to vote for this one? It would be political suicide.

[Roland99]

102. Well, one of the ideas isn't bad. Limit the size of the mortgage.

If they limit the interest deductible to be mortgages equal to FHA maximum loan values for the region, that will hit the upper-middle and rich.

[onenote]

109. odd thing is...there already is a cap on the deduction for the "rich"

Not sure exactly how "rich" -- but there is a formula in the 1040 Form that ends up reducing the amount that an individual can deduct. The article cited in the OP refers to it, indicating that high end taxpayers only can take 35 percent of the interest deduction. Not sure how limiting the loan size on which the deduction can be taken will really impact folks who are subject to the existing reduction (unless they apply both).

onenote

[ignatius 2]

103. I read today on Bloomberg news that the tax panel also wants

to reduce or eliminate entirely the tax on investments.

Let's see..reduce home mortgage deductions,reduce employer(business) expense on employee health care costs and cut the tax on investments owned mostly by the wealthy.

That on top of 4 tax cuts which gave 60% of the cuts to the top 1% of wage earners.

$350 Billion deficit, Iraq costs $7 Billion a month and Katrina guestimated to cost around $200 Billion. Meanwhile,Halliburton and other Bush cronies reap the big tax funded contracts making the rich even richer.

The treasury is being used like a personal piggy bank for the rich while the poor and middle class pay the bills.

Who will stop these greedy bastards?

[Yo_Mama_Been_Loggin]

128. Cocksuckers!!!!

:argh:

[zann725]

132. Question #1: Why do we all continue paying taxes? When those paying

benefit least (if at all) from government expenditures? I think we been "had"...bad.