More from the Congressional Budget Office

Just so you know, aside from removing or lowering the mortgage interest deduction; here are a few more suggestions from the CBO:
1. Get rid of all write offs for local taxes, including property taxes.
2. A 15% cap on the total of your itemized deductions - remember that includes charitable contributions, medical expenses and casualty losses.
3. Revert to the capital gains rules prior to 1987. Instead of taxing long term capital gains at 15% as the current code does now - it would revert to paying taxes on 55% of the gain at the individual person's rate.

All of this will cost the individual more out of pocket for expenses, less charitable contributions, more government expense to cover programs previously funded privately, more distress in the real estate markets, less incentive to buy homes, less vested interest in your neighborhoods and communities and of course.... more taxes.

No More Mortgage Interest Deductions!

Here we go again. Every so often this subject rears it's ugly head in Washington and then whoever brings it up, committee, Congress, President, etc., gets a resounding beating in the press and it goes away. Not so much this time. With the exploding deficit and trillions on loan and trillions more needed for health care and economic stimulus, Congress is pressed to raise revenues. I think we heard something during the election about no increased taxes on the middle class and poor.....but then nothing was ever mentioned about taking our deductions away; which is a backwards way of raising our taxes. Very clever! Anyway, the Congressional Budget Office, in August, delivered its latest revenue raising options to the House and Senate. Because there are only so many ways to raise money (taxes), this old option has come up again. Currently you can deduct mortgage interest up to 1 mill. Thankfully the existing IRS code already penalized the rich so we do not have to run through that drill again. This clever group wants to reduce the limit to $500,000. Wait a minute - isn't that home level part of the middle class that was guaranteed no tax hikes? Fully expecting trouble on the horizon the CBO has a second option. Replace current mortgage interest deductions with a flat 15% tax credit for everybody with mortgage amounts below the limits in the first option. This way your deduction would not be tied to your income, just your mortgage; except for those pesky rich people with over 1 mill dollar mortgages - they still would get nothing. Who would benefit? Government of course, with an estimated $13 billion in revenue and of course the poor who do not itemize. I wonder if they remembered that a tax credit means the government gives money back to people and I wonder if they deducted this amount from the $13 billion - gotta wonder after being off 2 trillion on the last official government estimate - remember? Let's non Ivy league educated, non PHD economists, guess what this will do to the already distressed housing market.

Finally - Recent Home Buyers in Luck!

We all know someone, friend, neighbor, relative, that bought in the height of the market. Sometimes it was us! These poor souls are watching as their homes devalue in line with the market adjustment; sometimes as much as 50%. Long time homeowners nod and sigh as they try to empathize with the plight of their friends and loved ones. Oddly enough, tax time has become the great equalizer. Those who bought late in the game, who's homes have devalued are experiencing the benefits of a reduced assessment and reduced taxes. Those who stayed put and look advantage of the Save Our Homes 3% cap have increased taxes. Why? The SOH initiative allows for the 3% increase regardless of market value. Now the new homeowners can sigh and nod as they listen to their friends and families tales of woe. But really... how much can you complain or expect sympathy when in most cases the grandfathered in SOH folks have been paying artificially low taxes for years and even with the current increase are in most cases, still valued below the market - even in this market. How does this compare with the loss of up to 50% of value?