BTW - SPOTI = Smartest people on the Internet
http://www.democraticunderground.com/10021308844The tale starts out as a disucssion around the mortgage interest deduction...
WCGreen (42,755 posts)
One of the reasons there is talk about getting rid of the mortgage interest deduction is
Last edited Sun Sep 9, 2012, 07:59 PM USA/ET - Edit history (1)
because of four years of mortgage interest schedules, through purchase and refinancing, into rates of 5.5% or less.
At that point, most of the people are not paying enough interest to get over the taxable income levels established by the standard deductions, especially for those who have been paying down on their mortgage for ten or more years.
I know many people are still going to benefit from that program so the best way to remove gently the effect of the mortgage interest deduction is to phase it in over the next five years or so.
This will also keep pressure on the mortgage lenders to keep rates low because of the perception that you can write off almost all of your initial payments, which are mostly interest at the beginning of your mortgage commitment, to help you afford a home.
I am not saying I agree or disagree but I am bringing this all up as someone who has prepared thousands of tax returns over the 25 years. As a matter of fact, with more people not needing to itemize, that just makes it easier for people to prepare their own taxes and not rely on a paid preparer.
This information, I think, is critical when measuring the effect of a large change in the tax structure our government has constructed over the last 50 or 60 years.
Lets compare and contrast valuation and cash flow:
cthulu2016 (4,339 posts)
5. The problem is more valuation than cash flow
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eliminating the deduction decreases the value of all property, including property that has no mortgage.
The deduction represents future value that is intrinsic to all property.
And since interest rates rise and fall, the current low-rates do not negate that intrinsic value.
If you buy a house today at 4% you will still be likelier to be able to sell it down the road even if rates are 20% (like in 1980) because the intrinsic federal subsidy of the value expands along with the size of the interest component of a loan. So the market value of that property will increase more, in an inflationary period, than a comparably priced diamond or other physical investment.
Personally, I think if someone wants to cut taxes to help the economy I would return to all interest being deductible. I am not comfortable with the special status of property, but anything that can be done to reduce effective borrowing costs would be non-point as stimulus
Maybe a typo for "on-point as stimulus"????
ohheckyeah (4,616 posts)
6. I know a lot of people,
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including myself, who might not be able to afford their houses if the mortgage interest deduction is taken away.
When people buy a home it is with the knowledge that interest can be deducted. I'm getting sick of them changing the damn rules mid-stream all the damn time.
I am pretty sure that "Them" would be you...
The nugget of truth wrapped in unseen irony appears:
Igel (16,880 posts)
14. It's the problem with uncertainty.
You make present decisions based upon a prediction of what's likely. The more likely the prediction, the easier the decision.
As soon as you start changing things mid-stream it has the look and feel of being a retroactive change. It's certainly a change to the preconditions for your decision.
If a prediction seems assured and fails to happen, we feel cheated.
If it's hard to make a prediction, we might make a guess and decide based on the guess or we simple dither.
Right now I don't know:
if I'll have a job a year from now (because of state budget cuts)
what federal taxes will be--will i get $3k back or pay $2k?
what health insurance will be like (it changed mid-year last year because of the ACA)
what tax deductions will be
whether my house will be worth $10k less, $20k more, or the same
etc.
It makes for a lot of uncertainty. My best course of action is to pay down debt and then save what I can, hoping that inflation doesn't take off. That, repeated by 100 million other households, is a recipe for short-term economic stagnation.
Mr. Igel is going to be in trouble shortly when the DUmmies actually figure out what he/she/it said and then apply it to the actions of the current administration...
ALERT, ALERT, ALERT!!!!
brush (225 posts)
13. Wait a minute
Last edited Sun Sep 9, 2012, 09:08 PM USA/ET - Edit history (1)
Wait a minute. This is not clear. It sounds like WCGreeen, a tax preparer, is recommending, despite saying he doesn't agree or disagree, that we get rid of the mortgage deduction thus making tax prep so simple no one needs to hire him to do their taxes. He's recommending putting himself out of business? I'm not buying that. It sounds too Romneyish (one of the loopholes him and Ryan are proposing to close to pay for their 5 trillion tax cut for the rich). Nope, not buying it. If middle class homeowners lose that deduction they won't be middle class for long. But I guess that's the point as far as Romney, Ryan and the repugs are concerned. Try that ploy somewhere else, WCGreen.
Newb goes against 42K poster - return fire incoming!!!
WCGreen (42,755 posts)
16. You got me...
I am a secret republican who has laid in wait for ten years just so I could, after predicting the future, disguise my deep right wing approach to everything except, of course the tax deduction for home mortgage interest....
Get serious, will you....
SheilaT sounds like she has her stuff together...
SheilaT (10,528 posts)
15. I have never understood people who
somehow desperately need the interest rate deduction to make a house payment. When I went to buy this place three years ago, I wanted a payment that was no more than the rent I'd been paying. In the end I wound up with a payment less than my previous rent.
My tax preparer told me after I bought this place that I'd be able to deduct the interest payment for about the first five years, and after that, it wouldn't be enough to let me itemize. Meanwhile, I have a house payment I can afford.
I wonder just how many tax payers are actually using the interest rate deduction? And I remember reading something back in the 1970's suggesting that it be phased out, that it had already outlived its usefulness, and in fact was a huge factor in the inflation of housing prices.
