[Rhodes22-list] Taxes - Timely Article

[Bill Effros]

Brad,

What's your problem with the home interest deduction?  This is "social 
engineering" that benefits you.  The housing industry has kept this 
country going after the stock market collapsed.  Who do you think is 
pouring money back into second houses--poor people?  Don't you think 
they will all sell off their second homes if you take the interest 
deduction away from them?

Oh, and by the way, I don't have a dog in this hunt.  My real estate is 
owned corporately.  While there is a cap on individual mortgage 
deductions, there is no cap on corporate deductions, and, of course, no 
one is talking about removing the corporate deduction...only the 
personal deduction.

If they took away the personal mortgage deduction the construction 
industry you and your brother are in would collapse.  There would be a 
lot more equipment and workers than there are jobs.

Why are you for this?

Bill Effros

Brad Haslett wrote:
> Here's an article from today's WaPo that dovetails neatly with our recent
> discussion.  Care to make a bet about the home interest deduction?  No 
> one
> in the Congress has the guts to take on that sacred cow!
>
> Brad
>
> -----------
>
> *The $800 Billion Tax Loophole
> *
>
> By Maya MacGuineas
> Special to washingtonpost.com's Think Tank Town
> Thursday, January 18, 2007; 12:00 AM
>
> Democrats are in a bind when it comes to their domestic economic agenda.
> They have promised a number of new and costly initiatives such as 
> fixing the
> Alternative Minimum Tax, providing middle-class tax relief, and 
> increasing
> spending on homeland security and education. But they have also made a
> commitment to fiscal responsibility. So how can they deliver on their
> promises without opening themselves up to the old "tax and spend" label?
> Reforming tax entitlements -- a large, mostly under-the-radar part of the
> federal budget -- might just give them a way out of their predicament.
>
> As a result of the 1986 bipartisan tax reforms, the tax base was 
> broadened
> and the tax code was greatly simplified. But these reforms have been
> gradually undone as Congress has created scores of new tax breaks and
> loopholes. Want to preserve historic buildings, encourage alternative 
> energy
> sources, help working families, or give certain industries a boost 
> without
> appearing to increase spending? Voil? -- a new targeted tax break is 
> born.
>
> Most tax expenditures are really spending programs designed to look 
> like tax
> cuts. Picture them as vouchers for healthcare, mortgage payments, 
> daycare,
> transportation -- name the tax break. Dressing these programs up as 
> tax cuts
> makes them a much easier sell for politicians who fear the "big spender"
> label. But call them what you will, they drain the money from the 
> Treasury
> and extend the scope of government. All told, this portion of the budget
> represents $800 billion in lost government revenues annually.
>
> Not only do these tax breaks mask the true size of the government, 
> they are
> a terrible way to make policy. They regularly pay people and 
> businesses to
> do what they would do anyway, making them both poorly targeted and
> unnecessarily expensive. They are also extremely regressive. A particular
> tax exemption might be worth 35 cents on the dollar to a wealthy 
> individual
> and only 10 cents to someone on the other end of the income scale who 
> faces
> a lower tax rate. It would be hard to justify a housing policy that does
> more to subsidize the rich than the poor, yet that is exactly what the 
> $80
> billion a year home mortgage interest deduction does.
>
> Moreover, tax expenditures do not get nearly the level of scrutiny they
> should. (If they did, would we really have a government program that
> subsidizes millionaires who buy vacation homes?) New government programs
> should only be created following vigorous debate over whether a proposed
> policy is important enough to warrant government intervention, and if 
> it is,
> whether it will be effective. Discussions about new tax programs however,
> tend to focus almost exclusively on the cost. Billions of dollars of
> targeted tax cuts have been passed in the past few years with little 
> or no
> discussion about the worthiness of their goals. And unlike spending
> programs, which are subject to congressional review, tax expenditure
> programs are pretty much on automatic pilot.
>
> Reforming this area of the budget would not only be a critical step in
> improving the tax code (and probably the closest thing we will see to
> fundamental tax reform in the next two years) it could also generate 
> tens --
> if not hundreds -- of billions of dollars in savings.
>
> The first step should be capping a number of existing tax breaks. Capping
> two of the largest breaks -- the home mortgage interest deduction and the
> exclusion for employer-provided healthcare, would easily provide over $50
> billion a year in savings. Both of these changes would reduce the large
> subsidies that go to the highest earners while freeing up resources. 
> Getting
> rid of a host of other tax breaks that subsidize certain businesses or
> industries could easily generate another $25 billion. A thorough 
> review of
> the over 150 existing tax expenditures to determine which ones have 
> outlived
> their usefulness would yield still more in savings. As Democrats 
> search for
> ways to offset the costs of their new agenda, reducing the $800 
> billion tax
> loophole would be an excellent place to start.
>
> *Maya MacGuineas is the Director of the Fiscal Policy Program at the New
> America Foundation.*
> __________________________________________________
> Use Rhodes22-list at rhodes22.org, Help? www.rhodes22.org/list
>