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Wed Nov 28, 2012, 11:21 PM

Republicans want to repeal the mortgage interest deduction because they think it's "unfair"

I don't think people understand why Republicans want to repeal the mortgage interest deduction. Republicans believe that the mortgage interest deduction is "unfair." They think that it's unfair that people who take a bigger mortgage get a bigger deduction. They think that people are borrowing more money than they can afford. Their view boils down to poor and middle class people are getting too much money back. They are willing to allow the mortgage interest deduction to be repealed to pay for their rich donors tax cuts.

Based on philosophy, republicans should support this deduction and all others. But not this one. It doesn't benefit them as much as tax cuts for millionaires.

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Reply Republicans want to repeal the mortgage interest deduction because they think it's "unfair" (Original post)
Renew Deal Nov 2012 OP
democrattotheend Nov 2012 #1
Renew Deal Nov 2012 #3
democrattotheend Nov 2012 #6
Historic NY Nov 2012 #2
Kaleva Nov 2012 #11
Historic NY Nov 2012 #17
bluerum Nov 2012 #4
Angry Dragon Nov 2012 #5
hfojvt Nov 2012 #7
Renew Deal Nov 2012 #8
hfojvt Nov 2012 #12
Whiskeytide Nov 2012 #9
hfojvt Nov 2012 #13
Whiskeytide Nov 2012 #18
LiberalAndProud Nov 2012 #10
hfojvt Nov 2012 #14
HiPointDem Nov 2012 #15
LiberalAndProud Nov 2012 #19
RomneyLies Nov 2012 #16

Response to Renew Deal (Original post)

Wed Nov 28, 2012, 11:25 PM

1. I have mixed feelings about the mortgage interest deduction

I believe home ownership is something to be proud of and aspire to and that it would be unwise to hit the middle class with an elimination of the deduction now.

On the other hand, I have always thought it was kind of unfair that those who are able to afford a home get a deduction while those who rent do not. Renters do not see the benefits of the deduction in decreased rent, either, since the deduction only applies to the primary residence.

I also think policies that incentivized home ownership may have caused some people to buy homes they could not afford.

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Response to democrattotheend (Reply #1)

Wed Nov 28, 2012, 11:32 PM

3. "Renters do not see the benefits of the deduction in decreased rent"

I disagree with this. Rent is often used to cover the mortgage and other expenses. If the mortgage paid is more, the rent will be more.

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Response to Renew Deal (Reply #3)

Thu Nov 29, 2012, 12:03 AM

6. You're right, I made a mistake

For some reason I thought the mortgage deduction only applied to the primary residence, which in most cases is not the rental property.

They are thinking about eliminating the mortgage deduction on second homes. I am all for eliminating it on vacation homes, but not on rental properties, as this will jack up people's rent.

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Response to Renew Deal (Original post)

Wed Nov 28, 2012, 11:26 PM

2. Wait until people paying 10-16k a yr in property & school taxes finds out...

the deduction helps offset that hit.

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Response to Historic NY (Reply #2)

Thu Nov 29, 2012, 12:39 AM

11. Damn! I pay less then $600 a year in property and school taxes.

$400 something for summer taxes and $150 for the winter taxes coming out next month.

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Response to Kaleva (Reply #11)

Thu Nov 29, 2012, 08:21 AM

17. Move to NY state....

where depending on which side of a school district line determines how much you pay..Some of the new houses in some development pay more because their kids go to the school in the next town / district over. My house is 60 yrs old and I pay over 5k with no kids .

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Response to Renew Deal (Original post)

Wed Nov 28, 2012, 11:32 PM

4. Raise taxes on the rich. Lower the retirement age to 55.

Extend medicare and provide healthcare to everyone.

Remove the cap for ssi deductions.

Reduce military spending by 10% a year.

if they, the republicans don't shut the fuck up right now the dems need to start rolling out propsal after proposal until republican brains start exploding.



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Response to Renew Deal (Original post)

Wed Nov 28, 2012, 11:42 PM

5. republicans are idiots ......... that is all one needs to know

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Response to Renew Deal (Original post)

Thu Nov 29, 2012, 12:04 AM

7. none of that makes any sense

First of all, why would Republicans, of all people, complain because a rich person who buys a bigger house gets a bigger deduction?

Their whole raison d'etre is to give bigger tax breaks to richer people.

The fact of the matter is that the mortgage interest deducion is a huge loophole and tax break for the wealthy. I am not gonna look up specifics on mortgage interest, because my experience tells me that nobody will believe me anyway.

They have accepted the conventional wisdom that "the mortgage interest deduction is a middle class tax break" and no amount of facts will change their minds.

Just in case, though, here is my piece on who benefits the most from itemized deductions http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=439x915881

"Only 23% of taxpayers with incomes between $10,000 and $60,000 itemize their deductions."

"Those with incomes between $100,000 and $1,000,000. There are only 17.9 million of them which is only 15.4% of adult taxpayers, but they get 44.4% of the benefits as 88% of them itemize. They get $579 billion in itemized deductions versus the $204 billion they'd get from standard deductions. (and the $240 billion they'd get from the proposed higher deduction). That's about $118 billion a year in tax breaks going to a group that is in the top 20%."

But I know, I know, bigger tax breaks fror people with incomes over $100,000 is all the rage in the new Democratic Party and in the new DU. People making $170,000 a year are just middle class, after all.


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Response to hfojvt (Reply #7)

Thu Nov 29, 2012, 12:11 AM

8. It's the other way around which you seem to acknowloge

"They have accepted the conventional wisdom that "the mortgage interest deduction is a middle class tax break" and no amount of facts will change their minds. "

You disagree with their point of view and agree with me about their point of view at the same time. The mortgage interest deduction might be beneficial to millionaires, but it is critical to lower income people. Their view is that lower income people take outsized mortgages and it is unfair to the wealthy.

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Response to Renew Deal (Reply #8)

Thu Nov 29, 2012, 03:15 AM

12. it is absolutely NOt critical to lower income people

77% of those with AGI under $60,000 do not even itemize

And for those who do itemize, the average gain is not very large.

When I wrote "They have accepted the conventional wisdom that "the mortgage interest deduction is a middle class tax break" and no amount of facts will change their minds."

By "they" I meant "the people reading this on DU"

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Response to hfojvt (Reply #7)

Thu Nov 29, 2012, 12:31 AM

9. The mortgage interest deduction ...

... only allows you to deduct the interest on the mortgage. The wealthiest borrowers get a lower tax rate, so it doesn't benefit them as much as a percentage of the amount of the mortgage. They don't need the deduction. They may like it. It helps them. But they don't need it. They have accountants who spend their lives helping them find many ways to shave their taxes.

On the other hand, if you are a family of 4 living off $65,000 a year, you can't buy a modest home without the deduction, especially at a sub-prime rate. It IS a lower middle class tax break that improves the quality of people's lives exponentially. It will hurt good people to lose it.

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Response to Whiskeytide (Reply #9)

Thu Nov 29, 2012, 03:56 AM

13. there you go - spouting that conventional wisdom in the face of the facts

Of course, the wealthy don't NEED it. They don't need the Bush tax cuts either, but most of them are bound and determined to keep them anyway, need or not.

A $65,000 couple cannot buy a home without it? Oh bunk. I bought a home or three without it, and my income has generally never even been HALF of $65,000.

But let me make some caluclations. Let's say that couple buys a $200,000 home with only 5% down. That's over 3 times their income, so I doubt if they can afford a much more expensive home, mortgage interest or not, even though in California you cannot buy a 600 square foot mobile home on a postage stamp lot for less than $600,000. So $190,000 is financed, say at 5% interest. The interest for the first year will be less than $9,500. Well, whoop de do. The standard deduction for a couple is already $11,600 for a couple filing jointly.

So they have not made a dime from the mortgage deduction until they come up with another $2,100 in deductions.

But let's just assume they have another $11,600 in deductions and then the $9,500 is fully deductible. Since they pay taxes at the 15% marginal rate, the absolute MOST this deduction will save them is $1,425 a year or $119 a month. Their income is $5,416 a month. Do you really think that $119 a month is the only thing that makes it possible for them to buy a home?

I don't buy it>

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Response to hfojvt (Reply #13)

Thu Nov 29, 2012, 11:47 AM

18. I see your point, but I think your...

... dislike of the 1% is coloring your judgment. There are a lot of ways to make the deductions work in your favor, and having the MID is pretty handy depending on your tax situation otherwise. To me its simple. $1,400 to an income of $65,000 means a lot more than $22,000 to an income of $1m. And it encourages home ownership, family stability, and investment.

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Response to Renew Deal (Original post)

Thu Nov 29, 2012, 12:38 AM

10. If you can afford to pay cash for a home, the mortgage deduction is no advantage.

A mortgage for the wealthy is an optional feature of home ownership. That is not so for the average Joe who usually carries a 30-year mortgage, and often a second to cover the cost of maintenance and improvements.

I don't think there is any question that the mortgage deduction primarily favors the middle class. It's not an accident that this is th revenue-enhancing target they choose.

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Response to LiberalAndProud (Reply #10)

Thu Nov 29, 2012, 05:28 AM

14. so IRS stats that say

In 2009, there were 8,274 returns with over $10,000,000 in income. As a group they had $238 billion in income. Giving them an average income of $29,000,000. Of that group 3,996 of them took a mortgage interest deduction. They deducted interest worth a total of $143.9 million. For an average deduction of $36,011. Given that they pay taxes at the highest rate the mortgage interest deduction was worth on average $12,600. And as a group it is a tax cut of $50.4 million dollars. Only 48.3% of them claimed mortgage interest.


Now look at another group, Those with income between $1 million and $1.5 million. There were 74,173 of them who itemized mortgage interest. For a total value of $2.3 billion. For an average deduction of $30,954. Again paid at the highest rate, this is worth $10,834 each or collectively $803 million in tax cuts. Altogether there were 108.096 returns with income between $1 million and $1.5 million. So 69% of those people itemized mortgage interest.

Just a tiny little benefit to the country's millionaires.

Now let's look at a more "modest" income group. Those making between $75,000 and $100,000. There were 11,463,725 such tax filers in 2009. Of that group 6.622 million of them claimed mortgage interest deduction. For a total value of $68.84 billion, or an average deduction of $10,396. A married couple with over $65,100 in taxable income pays a tax rate of 25%. So the deduction is worth $2,600 on average or collectively $17.2 billion. Less than 60% are claiming it.

Trouble is that $75,000 in AGI is not really that modest. There were 73.96 million returns with less than $75,000 and more than $15,000 in income. (and I am ignoring the 37.6 million with less than $15,000 in income as including a whole bunch of teenagers, even though I was part of this group for many years as an adult. There's no way that I know to tell how many are adults and how many teenagers.)

For example, of the 14.37 million filers with incomes between $30,000 and 40,000, only 2.63 million claimed a mortgage interest deduction. A mere 18.3%. The total value of those deductions was 21.5 billion. For an average of $8,183. For an average deduction of $1,227, and a total value of $3 billion.

And going lower, it is worth even less. Of the 10 million filers with between $20 and $25,000 in income, only 889,000 of them claimed am interest deduction - less than 9%.

Even more curiously though. 348,561 tax returns with incomes between $5,000 and $10,000 claimed mortage interest deductions of $3.2 billion or an average of $9,180. Tell me, how does a person pay $9,180 in mortgage interest out of an income of less than $10,000 and still eat? They must have much higher amounts of non-taxable income if their expenses are accurate.

So, to summarize.

At $40,000 over 80% do not claim any mortgage interest deduction, for those that do, it is worth $1,227
At $100,000, 42% do not claim any mortgage interest, for those that do, it is worth $2,600
At $1.5 million, 31% do not claim mortgage interest, for those that do, it is worth $10,834
At $10 million+, 52% do not claim mortgage interest, for those that do, it is worth $12,600

It only "primarily favors the middle class" if $2,600 is greater than $12,600 somehow.

Further, is the $75,000 to $100,000 in the middle? There are 74 million below them and only 17 million above them. They are UPPER-middle, at least some of them. 3 million of them, or more, would be in the top 20% And yes they do benefit from it far more than the lower middle.

There's no question in my mind that it is worth more to the top 20% than it is to the bottom 40%

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Response to hfojvt (Reply #14)

Thu Nov 29, 2012, 06:33 AM

15. "348,561 tax returns with incomes between $5,000 and $10,000 claimed...deductions of $3.2B"

 

wow, that *is* interesting. do you have a link?

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Response to hfojvt (Reply #14)

Thu Nov 29, 2012, 12:40 PM

19. Those are some interesting numbers.

As for $9,180 of deductions on a $10,000 income, would tax credits help to explain that anomaly? I'm no CPA, but that does make one wonder.

$2,600 is a much greater percentage of wealth for low- middle-income earners compared to $12,600 for top earners. Isn't that our argument for progressive tax rates, after all? The top 20% have resources to pay off their mortgages. As soon as the tax deduction disappears, it's likely that the mortgages would also disappear. I don't think that the fact that the wealthy take advantage of the deduction disproves my assertion.

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Response to Renew Deal (Original post)

Thu Nov 29, 2012, 06:58 AM

16. They want to kill the mortgage deduction so the housing sector tanks

 

Pushing the US into a second recession and Obama gets the blame, killing any legacy of his administration.

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