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OMG! Dems snuck in a 3.8% tax increase on home sales!

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Uben Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Sep-17-10 12:30 PM
Original message
OMG! Dems snuck in a 3.8% tax increase on home sales!
I had a real estate agent friend who sent me an email stating that if you sell your home, you will have to pay an additional 3.8% tax that was passed as part of the healthcare bill. She is, of course, a republican, who doesn't know shit about politics and believes every thing she reads.
So, being skeptical, as I always am of any republican emails, I ran er across the folks at factcheck.org., and of course, it was a lie, or in this case a half-lie.

Here's what Factcheck.org says-

Weve been flooded with queries about this one ever since the health care bill became law. At the last minute, Democratic lawmakers decided on a new 3.8 percent tax on the net investment income of high-income persons. But the claim that this would amount to a $15,200 tax on the sale of a typical $400,000 home is utterly false.

The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still wont apply to the first $250,000 on profits from the sale of a personal residence or to the first $500,000 in the case of a married couple selling their home.

We can understand how this misconception got started. The law itself is couched in highly technical language that only a qualified tax expert can fully grasp. (This provision begins on page 33 of the reconciliation bill that was passed and signed into law.) And it does say the tax falls on "net gain attributable to the disposition of property." That would include the sale of a home. But the bill also says the tax falls only on that portion of any gain that is "taken into account in computing taxable income" under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence (or $500,000 in the case of a married couple) is excluded from taxable income already. (That exclusion doesnt apply to vacation homes or rental properties.)

The Joint Committee on Taxation, the group of nonpartisan tax experts that Congress relies on to analyze tax proposals, underscores this in a footnote on page 135 of its report on the bill. The note states: "Gross income does not include excluded gain from the sale of a principal residence."

And just to be sure, we checked with William Ahern, director of policy and communications for the nonprofit, pro-business Tax Foundation. "Some home sales would see a tax increase under this bill," Ahern told us, "but it would have to be a second home or a principal residence generating more than $250,000 ($500,000 for a couple)."

So there you have it. The sort of people who would have to pay the tax might include, for example:

■A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit. His tax on the sale of that vacation home would amount to $1,900, in addition to the capital gains tax he would have paid anyway.
■An "empty nester" couple with combined income of over $250,000 a year who sell their $1 million primary residence to move to smaller quarters. If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the half-million-dollar exclusion). Their health care tax on the sale would amount to $3,800 over and above the usual capital gains levy.
However, a typical home sale would not incur any tax. In March, for example, half of all existing homes sold for $170,700 or less, according to the National Association of Realtors. Obviously, none of those sales could possibly generate a $250,000 profit, and so none would be subject to the tax.

Thus, for the vast majority, the 3.8 percent tax wont apply. The Tax Foundation, in a report released April 15, said the new tax on investment income (including real estate) "will hit approximately the top-earning two percent of families" when it takes effect in 2013.

Footnote: Some of the chain e-mails that claim ordinary home sales will be taxed include a copy of an article written by Paul Guppy, a policy analyst with the conservative Washington Policy Institute (thats Washington state, not Washington, D.C.). The article appeared March 28 as an op-ed in the Spokane, Wash., Spokesman-Review, and Guppy claimed that "iddle-income people must pay the full tax even if they are rich for only one day." That brought a quick rebuttal from Sara Orrange, the government affairs director of the local Realtors association. She wrote a letter to the newspaper calling Guppys article "inaccurate" and saying, "Most people who sell their homes will not be impacted by these new regulations. This is not a new tax on every seller, and that correction needs to be made." In a news article the next day, business reporter Bert Caldwell confirmed that only "a very few" home sellers would pay the 3.8 percent tax.

The Internal Revenue Service says that to qualify for the $250,000/$500,000 exclusion, a seller must have owned the home and lived there as the sellers "main home" for at least two years out of the five years prior to the sale.

Brooks Jackson

Correction, Sept. 2: We originally said that the footnote of the JCT report appeared on page 139. Its on page 135.

Sources
Joint Committee on Taxation. "Technical Explanation of the Revenue Provisions of the Reconciliation Act of 2010, As Amended, In Combination with the Patient Protection and Affordable Care Act." 21 Mar 2010.

Ahern, William. E-mail to FactCheck.org, 22 Apr 2010.

National Association of Realtors. "Existing-Home Sales Rise on Home Buyer Tax Credit and Favorable Market Conditions." Press release. 22 Apr 2010.

Fleenor, Patrick and Gerald Prante. "Health Care Reform: How Much Does It Redistribute Income?" The Tax Foundation. 15 Apr 2010.

Guppy, Paul. "Health Laws Heavy Impact." Spokesman-Review. 28 Mar 2010.

Orrange, Sara. "Home sales tax clarified." Letter. Spokesman-Review. 1 Apr 2010.

Caldwell, Bert. "Realtors take aim at health care tax claim." Spokesman-Review. 4 Apr 2010.

Posted by Brooks Jackson on Thursday, April 22, 2010 at 2:30 pm
Filed under Ask FactCheck Tagged with 3.8% tax, chain e-mail, health care, health care reform, investment income, taxes


**************************

I keep telling this woman to check EVERYTHING she reads in emails that are forwarded. This is the umpteenth time I have exposed as a lie something she got in email. Republicans are mostly idiots who believe everything they are sent, as long as it is something they want to believe. You'd think after so many times of being exposed as lies, she would stop sending this shit to people, but, it was something she wanted to believe, so she didn't check it. Hell, I don't even think she knows how to check to see if something is a lie or not. I've sent her links to Snopes and Factcheck.org several times, but she refuses to use them. So, now I get to laugh in her face and say "I told you so!"
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bbgrunt Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Sep-17-10 12:39 PM
Response to Original message
1. k and r. thanks for the informative post.
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alstephenson Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Sep-17-10 12:42 PM
Response to Original message
2. Ha! Being a real estate agent and all...
you would think she would be more interested in learning the facts about a tax like this...
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4lbs Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Sep-17-10 12:44 PM
Response to Original message
3. It's the same Repuke BS logic they use about the Bush tax cuts for the wealthy.
Edited on Fri Sep-17-10 12:52 PM by 4lbs
Because only 2% of the population will be paying more taxes on the amount of income above $250,000, by their stupid logic, that means that EVERYONE will be paying more taxes, and the end of the world is months away.

To them, "EVERYONE" is everyone that is like them: rich and white.

EDIT:

Thus it boils down to this, the same people that are affected by these 3.8% tax increase on home sales are the exact same that will be paying more when Bush's tax cuts for the wealthy expire in about 3 months:

Rich people. Those earning $250,000 in net income.

The rich 2% of the population.


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sinkingfeeling Donating Member (1000+ posts) Send PM | Profile | Ignore Fri Sep-17-10 01:09 PM
Response to Original message
4. And Snopes says 'Mostly false".
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