Bloomberg News: Republican Platform Won’t Protect Mortgage Tax Deduction

[TomClash]

Source: Bloomberg News/Business Week

Republican platform drafters refused to put their party on record for preserving the mortgage- interest deduction, giving Mitt Romney more flexibility to promote his plan to lower tax rates paid by corporations and the wealthiest Americans without increasing the federal debt.

The platform panel, meeting in Tampa, Florida, in advance of the Aug. 27 Republican National Convention, defeated a proposed mortgage deduction amendment by a show of hands as it moved toward today’s scheduled completion of the draft statement of positions the party will offer voters in the November election.

The document, which was also amended to include a call for Federal Reserve audits, will be submitted next week for approval by the full convention.

The mortgage interest vote was a shift in Republican policy from four years ago, when the party platform said that “because affordable housing is in the national interest, any simplified tax system should continue to encourage homeownership, recognizing the tremendous social value that the home mortgage interest deduction has had for decades.”

Read more: http://www.businessweek.com/news/2012-08-20/republican-platform-won-t-protect-mortgage-tax-deduction

---

That's a tax increase on every middle class homeowner with a mortgage, so Mitt can lower his taxes.

[lapfog_1]

1. If Social Security is the third rail in politics

the home owner deduction is the "fourth rail". Go ahead, propose this Mittens... see what happens when all those white middle class males realize that their major tax deduction is gone and that you are paying not 13% but 1% or maybe 2%.

[dkf]

2. The mortgage interest deduction mostly benefits higher incomes

In 2009, only one-fourth of taxpayers in 2009 claimed the mortgage interest deduction. And this has been a relatively stable historical trend, with between 21 and 26 percent of taxpayers claiming the MID each year since 1991. Of those few who do benefit from the MID, most are households in the top income brackets and younger individuals with large mortgages 
who have not paid off much of their loans. Families where the head of household is between 25 and 35 years-old with incomes over $250,000 have, on average, a $7,711 deduction from mortgage interest, compared to a similar household with earnings between $40,000 and $75,000 a year, and taking an average $571 deduction. Meanwhile, low-income families, seniors, and Americans without mortgages gain virtually nothing from the program.

http://reason.com/archives/2011/08/05/the-myth-of-the-middle-class

[Nostradammit]

3. "Mortgage Interest Deduction a Middle Class Pillar "

http://www.nahb.org/news_details.aspx?newsID=13651

October 6, 2011 - Eliminating or curtailing the mortgage interest deduction would have a disproportionate impact on younger, middle-class families, who would see their ability to become home owners significantly diminished, with sober implications for their longer term financial prospects, the National Association of Home Builders (NAHB) told Congress today.

"How housing is treated in any future tax reform will shape the economy going forward," Robert Dietz, an economist and assistant vice president for NAHB, testified during a Senate Finance Committee hearing on tax reform options to provide incentives for homeownership.

Most Americans consider homeownership to be their single best long-term investment and a primary source of wealth and financial security. According to the 2007 Federal Reserve Survey of Consumer Finances, the median net worth of a home owner is $234,600, compared to $5,100 for renters.

"We believe that any policy change that makes it harder to buy a home, or delays the purchase of the home until an older age, will have a significant long-term impact on household wealth accumulation and the make-up of the middle class as a whole," said Dietz.

[KILL THE WISE ONE]

8. Why would the republicans want you to own - then you would not rent from them -

[TomClash]

5. Most households who take the deduction earn $50,000 to $200,000

http://www.nahb.org/fileUpload_details.aspx?ContentID=151915

"The data and estimates in this paper demonstrate that the benefits of these deductions are collected primarily by middle-class taxpayers, with incomes between $50,000 and $200,000. Moreover, greater benefits are earned by larger households and families, such as those with children. The data also show that as a share of household income, larger benefits are collected by families with less than $200,000 income, meaning that these tax rules make the tax system more progressive."

But the point is what the extra cash will be used for. It will not be used for health care, reducing the deficit or to create jobs. It goes to decrease cap gains and income taxes on the wealthy.

[dkf]

9. I see several positive impacts if we get rid of it...

According to the Treasury Department, the budget for 2012 projects that the mortgage interest deduction will cost the budget around $100 billion. But Eric Toder, co-director of the Urban-Brookings Tax Policy Center in Washington, estimates that elimination of the deduction would only generate $70 billion to $80 billion, because some people would pay off their mortgages early if the law is changed.

There is no dispute that the deduction benefits higher-income earners more than lower- and middle-income Americans. If you're in the 35% tax bracket, you get $35 of savings for every $100 of mortgage interest you pay, but if you're in the 15% tax bracket, you only get $15. So it's hard to claim that the deduction is targeted at people who are on the fence on the question of buying a home vs. renting

Toder says he doubts that elimination of the deduction would divert potential homeowners into becoming renters. "I think what it would probably do is reduce the amount of money you would spend on a house," he says.

http://m.aol.com/dailyfinance/default/articleStory.do?category=main&url=http://www.dailyfinance.com/2011/04/20/eliminate-mortgage-interest-tax-deduction/&icid=dsk_df_news

[TomClash]

38. THE POINT IS WHAT THEY WILL DO WITH THE EXTRA REVENUE

[dkf]

41. But it encourages the wrong behavior...

People buy more house than they can afford and delay paying down their mortgage because they get the tax break.

If credit card debt were deductible we would probably see more of that also.

[Kolesar]

11. $50k to $200k is above the median income in the US, so it is biased to the rich by nature

...and by design!

[Bernardo de La Paz]

14. 50k to 200k is well off, not rich. We want working people to get up into that bracket. nt

[amandabeech]

47. Generally, you are talking two income families.

It is not unusual, especially in higher wage areas, for a couple to make $50,000 together, married or not.

[mathematic]

31. What awful propaganda.

Yeah, the National Association of Home Builders thinks that the tax deduction is a good thing. No surprise there.

The study uses a tax model (not actual tax return data), uses 2008 data, and assumes a tax code that is not in effect. Specifically, it assumes the 90s style limitations on itemized deductions are in place. They are not and have not been for over a decade. That limits the benefit 6 million of the wealthiest taxpayers get from the deduction. According to the study, that's 20% of the population that claims the deduction.

Even with that, the study shows that about 75% of the benefit goes to households making more than $100k per year. That's the top 20% of income earners. "Middle class" indeed. This 20% of households overall are 48% of the households that claim the deduction. So these upper income households claim the tax deduction at about 2.5 times the rate that the bottom 80% claim the deduction (and as other pointed out practically no benefit goes to households with less than the median income). Finally, households making more than $200k per year ("the 4%" or so) account for 11% of the returns claiming the deduction and 32% of the benefit.

No, this is not a middle class tax break. It's an upper class tax break with a good PR campaign.

[TomClash]

39. It is so much better to take tax policy from Reason Magazine

An army of Ayn Rand wannabes lead by a guy who thinks he's cool because he wears a leather jacket.

[quaker bill]

15. I have not found it useful

since I refinanced to 4 percent and the standard deduction was increased. I no longer pay enough mortgage interest to beat the standard deduction.

The home I purchased was only cost only about half of the funding I was pre-qualified for. When I first purchased, the note was around 7 percent and I used the mortgage interest deduction every year. However, I haven't used it in many years since I refinanced to the lower rate. With rates as low as they are, many homeowners who aren't underwater can refinance to a rate that makes this deduction irrelevant. The deduction is probably still useful for those well underwater on their notes, but they likely have bigger issues.

[dkf]

20. Yes...if you buy sensibly you don't benefit much.

Moreover it discourages you from paying it off faster because you lose your deduction.

[quaker bill]

46. The increased standard deduction has supplanted it for me

But I have used the energy efficiency tax credit and the college expense credits to considerable benefit, and have been able to claim both to the max. I cut my energy use in half at the same time. The saving in utilities alone will pay off the investment in less than 5 years, so the tax credit was a bonus that made a larger investment possible.

[dkf]

48. The energy credits are where it should have been focused.

What a win win situation...a way to create a viable industry and help it create economy of scale while reducing imports and making us less dependent on fossil fuels.

If only Obama had said SOLAR and WIND instead of Healthcare...I think he would be running away with this.

[daybranch]

33. reasonableness

The mortgage interest deduction should be progressively smaller according to income just like the regular income tax was supposed to be (before they kept adding deductions and loopholes to benefit the rich). Ownership of homes is a valid way to help families but our system of allowing this interest deductions to high income individuals to buy and sell homes and benefit the realty industry is not what was intended for the public interest. Ownership of a home is a way of building an amount of security for one's family but like every other idea it must have reasonable constraints. I would favor strongly an upper limit on the amount of the interest that can be deducted and also force loan equity to start tobe increased from payment one on 30 year loans.
The mortgage interest deduction has been a tool of the real estate industry and the banks to encourage young people to spend more than they reasonably need to and then find themselves in hot water because they are not building equity. Currently banks do not allow any equity to be generated on thirty year loans which they hawk to young people, extolling the virtues of the maximum tax deduction and the great investment opportunity of the biggest and most expensive homes. This really works for the protection of maximum earnings, and minimum risk to the banks as they shift all the risk to the young. Mortgage interest deductions can be a trap for the young and banks inadequately inform the young of the pitfalls on a 30 year loan. So we democratsneed to work very hard for a reasonable mortgage interest deduction , rather than another unneeeded perk for the rich.

As far as republicans unwullingness to include a mortgage interest deuction in their platform, do not be fooled. They support this tool to provide increased profits for banks and realtors more than we democrats do. It is only a subterfuge to put forward a supposed closing of a tax loophole to convince the ignorants among us that there is some leeway in Ryan/Romney budget. Realtors are one of their biggest supporters. So do not swallow this crap.

[blackspade]

44. I am most definately not in the 100k+ club

But my family gets a great benefit from the MID.
I'll be plenty pissed to see it go away as it will cut into our ability to afford health care, food, and other essentials.

[kimbutgar]

45. I make a lot less and my mortgage deduction helps lower my overall taxes.

Considering this is coming from reason which is libertarian and only believes in tax cuts for the rich I highly suspect this post.

[tomm2thumbs]

4. the filthy GOP rich inherited their houses free and clear - they don't care about helping homeowners

they are trust fund babies without a care in the world, except how to keep doubling their free income to purchase another island, boat or business OUTSIDE of the United States. I sometimes think they come here twice a year.... once, to vote Republican and a second time to sign falsified tax documents saying they are residents while they collect their slumlord rents on inherited property.

Lowest forms of life.

[daybranch]

35. Do not be fooled

The republicans are just introducing a red herring to make Ryan/Romney budget more plausible interms of numbers. They are the primary beneficiaries of the mortgage tax deductons through their ownership of banks, big investments in real estate, and contributions from the real estate industry.
We do need upper limits on this interest deduction whether set it by house value, or by income level of the purchaser/purchasers. At the same time we can work to limit risk to new young and less wealthy homeowners who bear disproportionate risk today.
So do not buy this crap. It is only to give them so supposed leeway in budget projections, it just ain't reality.

[dkf]

42. Even Mark Zuckerberg has a mortgage.

The rich love tax breaks. They will borrow money when they don't need to so they can reduce taxes.

[cstanleytech]

6. Wellll............... Mitt does need those lower taxes more than us.

After all car elevators arent cheap to maintain not to mention since hes rich he is a job creator!!!
True, its largely jobs in other nations but its still job creation.

[dipsydoodle]

7. We lost that in the UK donkeys years ago

I'm surprised you've still got it in the USA. Its an issue which encourages remortgaging to higher amounts and may have contributed to the mortgage debacle your side.

Some details of the UK here :

Mortgage interest relief at source, or MIRAS, was a scheme introduced in the United Kingdom by Chancellor of the Exchequer Roy Jenkins in 1969 [1] in a bid to encourage home ownership; it allowed borrowers tax relief for interest payments on their mortgage.

In the 1983 Budget Geoffrey Howe raised the tax allowance from £25,000 to £30,000; unmarried couples with joint mortgages could pool their allowances to £60,000 and this remained unchanged until in the 1988 Budget, when Chancellor of the Exchequer Nigel Lawson ended the option to pool allowances (a provision that had been known as Multiple Mortgage Tax Relief) from August 1988, a decision he later publicly expressed regret at not having implemented with effect from the time of the budget, as it is generally accepted that the rush to beat the deadline from the time of the Budget up until it was ended fueled a sharp increase in house prices.[2]

MIRAS was completely abolished in April 2000 by then Chancellor of the Exchequer (now retired Prime Minister) Gordon Brown who argued it had become a middle class perk.

http://en.wikipedia.org/wiki/Mortgage_interest_relief_at_source

The ref to "the rush to beat the deadline" caused an unprecedented increase in house prices here due to supply and demand.

[rfranklin]

16. I don't recall ever hearing a home buyer factoring in the tax deduction...

I have never heard a real estate agent talking about it, nor a mortgage broker. I doubt it was a factor in many decisions to remortgage. What was a real influence was the rising prices of homes and cheap interest rates. The thought was, "I'll get it back when I sell the house." In that sense it was free money. Then the meltdown hit and suddenly people realized that no, they were not going to get it back when they sold the house. The easy money that was fueling the economy stopped flowing and presto, a big recession.

[dipsydoodle]

21. The background is

the released funds then being used to purchase something else which would otherwise be non tax deductible - a car for example.

I'm not familiar with your tax set up over there. Is all interest on any purchase tax deductible and is the tax allowance also applicable to second homes ?

Yes - hey presto !

[Maeve]

36. Actually, I have

When they were trying to get us to buy more house than we felt we could afford. We didn't listen. And our financial advisor assumes we get the deduction--we have to keep reminding him we don't; we aren't his richest clients, obviously
With less than six years left on our mortgage, we haven't gotten any benefit from the deduction in some time, but it did help in the early years.

[Berlum]

10. Repubbies plan to screw America's homeowners, to enrich their own fatcat 1% asses.

How revolting.

[TomClash]

40. Exactly

Thank you for actually getting it.

[Turbineguy]

12. If Democrats got rid of that

the repubs would be screaming "BIGGEST TAX INCREASE EVER!"

[Kolesar]

13. "Median home buyers in one third of US cities don't enjoy any tax savings from the mort. deduction"*

"...because their mortgage interest payments are too low to justify itemizing deductions on their tax returns. This happens because low housing prices beget small mortgages and small mortgage interest payments."

And this was before the banking collapse and collapse in the price of homes which made the median home price way lower everywhere in the US.

* "Spend 'til the End", Kotlikoff and Burns, 2008, page 113

I just read that chapter last night.

The book is a good read. There are a huge number of fallacies in the "common wisdom" of personal finance.
http://www.spend-til-the-end.com/

[Warren Stupidity]

19. So that would mean that in 2/3 of US cities median home buyers enjoy tax savings

from the mortgage deduction. I'm sure you had a point there, but what exactly it is, other than eliminating the mortgage deduction would be a tax increase on the middle class, it isn't clear to me what that point was.

[Kolesar]

24. "The real beneficiaries of the mortgage interest deduction are, in fact, the rich, ..."

"...particularly the McMansion improvers who load an equity line of credit on top of a hefty home mortgage to install the Viking range, Sub-Zero refrigerator, and a quantity of marble counter tops that would cause Michelangelo to weep." Kotlikoff and Burns, page 134

Most of those 2/3 who who speak for come out ahead for a scant few hundred dollars and are only able to use the deduction for a few years until the "personal deduction" becomes larger than their combined deductions. The "personal deduction" is indexed for inflation and becomes larger every year. The interest portion of their itemized deductions gets smaller every year. Before long, the mortgage interest deduction becomes useless.
---
BTW, any authors who quote Elizabeth Warren is alright with me.

[Warren Stupidity]

25. You just changed your argument.

You presented a fact in 1/3 of cities median homes did not qualify for mortgage deductions as the deduction did not exceed the standard deduction. That fact leaves the vast majority of cities with medians homes that will exceed the standard deduction. As an argument that there is no benefit to the mortgage deduction for most home owners, that argument fails. So of course you moved on to a different talking point.

It is of course blue state metro-region families that largely benefit from the deduction. Your next talking point is to argue that these families aren't actually middle class. On the other hand, under the republican proposals to lower taxes for the actual rich and subsidize that by, among other equally fucked up things, eliminating the mortgage deduction (which they call base broadening) the rich will get a huge tax cut and the rest of us will he screwed. Thanks for helping out.

[Kolesar]

27. No I didn't

And you got this part exactly backwards:

On the other hand, under the republican proposals to lower taxes for the actual rich and subsidize that by, among other equally fucked up things, eliminating the mortgage deduction (which they call base broadening) the rich will get a huge tax cut and the rest of us will he screwed.

The "rich" will pay more federal taxes if the mortgage deduction is eliminated.
--
If half of Americans have no federal income tax bill, there can be no advantage of *any* tax deduction, including the mortgage interest deduction. Maybe you can be happy getting a few hundred dollars for a few years, but the homes in the Hamptons have multimillion dollar mortgages. Interest on a million dollar mortgage would be ~$40,000. They get to deduct that and save ~$12,000 in taxes per million dollars of mortgage value. My biggest mortgage interest deduction was about $5600 at a time when the personal deduction was ~$4000. The mortgage interest deduction is totally skewed to the upper class.

[Warren Stupidity]

43. yes actually your did.

You started out with this claim:

"Median home buyers in one third of US cities don't enjoy any tax savings from the mort. deduction."

You then, after I noted that your fact results in 2/3 enjoying this tax savings, changed to this:
The real beneficiaries of the mortgage interest deduction are, in fact, the rich, ..."

"...particularly the McMansion improvers who load an equity line of credit on top of a hefty home mortgage to install the Viking range, Sub-Zero refrigerator, and a quantity of marble counter tops that would cause Michelangelo to weep."

Which is an unsubstantiated bullshit claim that those enjoying tax relief via the mortgage deduction are mcmansion owners and are piling on equity loans because of the tax deduction, all of which is rightwing think tank talking point bullshit and a complete avoidance maneuver on your part, switching talking points as soon as you are challenged.

[Warren Stupidity]

17. Coupons instead of Medicare. Tax cuts for billionaires paid for by tax hikes for us.

Blaming raped women for getting pregnant. Hiding their tax returns because they would end the race if released. The sad part is that these whackadoodle nutjobs are still in the race.

[shawn703]

18. We used to be able to deduct interest from credit cards and car loans

Until Reagan took that away. He also raised the bottom rate from 11% to 15% and lowered the top rate from 50% to 28%. They packaged it as a "tax cut", though most of the benefits went to the wealthy while the poor and middle class got the short end of the stick.

As long as Republicans say they are cutting taxes (which they will say when they take away the mortgage deduction), people will think they are getting the better end of the bargain. After all that's what they will hear on the "news".

[magical thyme]

22. It's a WIN/WIN!!!!!!

They can put the last of those "irresponsible" homeowners who "bought more house than they can afford" into bankruptcy and into the street!

And then they can snap up those foreclosed on homes for pennies on the dollar and rent them back to the suckers!!!!!!

FUCK YEAH!!!!!!!!! YOU GO JERKS!!!!!!!!

[CBHagman]

23. "Without increasing the federal debt."

I haven't read the article yet, but since Romney's talking about maintaining and even increasing defense spending, one assumes all of this will be accompanied by very deep cuts in virtually all other programs.

[steve2470]

26. This is an incredibly stupid move on their part

Every voter with a mortgage can understand this one, and almost no one wants to lose that deduction.

You keep it up Republicans, you're doing it right !

[nanabugg]

28. It still baffles me how most working people can vote for the GOP (greedy-on-purpose) at any time.

Is racism and ignorance really that rampant in this nation?

[atreides1]

29. Is racism and ignorance really that rampant in this nation?

Why yes, yes it is...did you miss the posters of Obama with the bone through his nose and dressed as an tribal witch doctor?

And you can throw in religious fanaticism, but I guess that would come under ignorance...wouldn't it?

[nanabugg]

30. Touche. nt

[jsr]

32. Mitt just loves the middle class

[Panasonic]

34. What's the name of the airline

that's next to Mitt Romency.. I can make out ECTAIR - DIRECTAIR?

or something like that?

[jsr]

37. Direct Air

They're now in Chapter 7 liquidation.