Monday Reading – Strategic Defaults and Tax Credit Extenstions

On Strategic Default, Legislating a Double-Standard?

This is spiteful, short-sighted and targets individuals who are making business decisions that are strategic, á la Tishman and Morgan Stanley et al.

Why not just make the tax credit permanent? (archived: 2010)

Renewing the first-time home buyer’s credit will help Americans purchase a first home with their own money, instead of having to rely on government-funded or backed programs. The other sections of this legislation were inspired by conversations my staff and I had with constituents who had to purchase new homes because Hurricane Ike destroyed their prior homes. The first-time homebuyer’s tax credit could be of tremendous value to these people, yet the law denies them the credit because they are replacing destroyed homes. My bill not only reinstates that first-time homebuyer’s credit, it also corrects that oversight.

Brian sums it up (no longer available):

Dr. Paul was illustrating the fact that the money isn’t the government’s; it’s the individual taxpayer’s. It’s not a re-election trick. It’s Paul’s way of trying to work within the system to slowly erode the income tax.

As soon as the proposed amendment (archived: 2013) to the H.R. 4213 – the American Jobs and Closing Tax Loopholes Act of 2010 is posted on either GovTrack or OpenCongress, I’ll note it here. Call it meddling or pitching in; it’s semantics – you’re trying to change the rules, and frankly, that’s why the National Association of Realtors – a trade organization – is there.

What if … Congress tried to KISS?

From the Washington Post:

At the outset, HR 4213, the American Jobs and Closing Tax Loopholes Act of 2010, sounds promising. Unemployment rates are hovering around 10 percent nationally, and President Obama has said that jobs are his first priority.

Unfortunately, like so many things in Washington, what you see is not what you get.

HR 4213’s scope is much larger than simply extending federal unemployment benefits. Its intent to “close tax loopholes affecting wealthy individuals and corporations” yields more damage than good, essentially dissuading commercial real estate developers from investing in new projects.

I know this – the biggest job growth created by altering the tax code is for the tax industries. Do tax accountants even need to have a lobby, or do they just let the idiots in Congress do their jobs for them?

Or – Just extend tax credit to the end of 2010, as H.R. 5188 attempts to do (it’s still in committee)

Get the politicians out of the money manipulation business. Please.
(archived: 2014)

What about the home mortgage deduction?

The FairTax has positive effects on residential real estate far beyond this narrow question. Today’s homeowners, if they itemize (and 70 percent do not), pay their interest with post-Social Security/pre-income tax dollars. They then pay their principal with post-SS/post-income tax dollars. Those who do not itemize get no advantages at all. Under the FairTax, all homeowners make their entire house payment with pre-tax dollars.

With the FairTax, mortgage interest rates fall by about 25 percent (about 1.75 points) as bank overhead falls; this is a huge savings for consumers. For example, on a $150,000, thirty-year home mortgage at an interest rate of 7.00 percent, the monthly mortgage payment is $999.12 for principal and interest. On that same mortgage at a 5.25 percent interest rate, the monthly payment is $830.01. Over 30 years, the 1.75-percent decrease in interest rates in this instance results in a $60,879 cost savings to the consumer. Finally, first-time buyers save for that down payment much faster, as savings are not taxed.

Under the FairTax, home ownership is a possibility for many who have never had that option under the income tax system. Lower interest rates, the repeal of the income tax, the repeal of all payroll taxes, and the prebate mean that people have more money to spend and have an increased opportunity to become homeowners.