End of the Mortgage Deduction - WTF?!

[LadyBastiat]

From LewRockwell Blog:


Beltway Reasoning
Posted by Lew Rockwell on August 16, 2011 11:34 AM

Writes Justin Raimondo:

Reasonoid (and Ron Paul-hater) Shikla Dalmia lauds Rick Perry for limiting mortgage loans to 80 percent of the home price, and praises co-Reasonoid Anthony Randazzo for advocating the end of the mortgage deduction: this is Kochian "libertarianism" — pro-price controls and in favor of tax hikes.

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Emphasis is mine. These people obviously hail from Jupiter or some other far away galaxy. With the housing sector already in "death throes" this single action would be the final nail in the housing coffin. Are these people not aware that the mortgage deduction is a major contributor for increasing home sales??!!! If anything they ought to be looking for a way to extend this deduction to renters somehow without lessening in anyway the deduction for property owners (apt. communities). Obviously I advocate an end to the IRS and the personal income tax, but until that happens, ways need to be found for people to have money left to spend.

I can guarantee you very few Republicans or Democrats would ever agree on this being an intelligent move. (I'm speaking of average citizens and homeowners).

If they want people to spend money to get this economy out of its slump they need to wake up and let people keep more of their money!!!

[DamianTV]

Jupiter isnt a Galaxy, its a Planet!


If they want people to spend money to get this economy out of its slump they need to wake up and let people keep more of their money!!!

No no no! You have obviously failed your Keynesian Economics Class, and the proper authorities are now on their way to escort you to your Rothbardian Reindoctrination Center!

/sarcasm

If we didnt have a Federal Reserve, we wouldnt have an Income Tax. If we had no Income Tax, there would be no Tax Writeoff for Mortgages to begin with. However, getting rid of the Tax Writeoff for Mortgages and leaving the Income Tax, Inflation, and Federal Reserve Bank is Financial Suicide!

[KramerDSP]

100% agree.

[VBRonPaulFan]

Yup, they've pitched this around for quite a while. There are far reaching tax implications associated with the mortgage interest deduction. This is generally the deduction that allows people to itemize. Coming along with being able to itemize, you are able to deduct numerous other expenses to increase your deduction on your 1040 that you generally would not be able to take... including charitable donations, medical expenses over an AGI floor, personal property taxes, state/local income or sales taxes, casualty/theft losses, etc. Wiping out the mortgage interest deduction would essentially remove 90% of the population from being able to itemize and claim these things... as well as slamming them with a vastly greater tax bill.

It would wipe out any tax incentive whatsoever to buy a home on credit. If they did this, honestly, I would probably sell my house because there is no point in living with a mortgage over my head when I could rent something for 1/3 of the cost and not have to worry about maintenance. This is one of those shitty things they've put in the tax code to influence social behaviors and push people to live the American Dream. Unfortunately, since people are stretched so thin as it is... removing this would decimate the people just getting by who own homes at the end of the year. I probably wouldn't be able to scrounge up an extra $3k or more for a tax bill at the end of the year.

In the long run, it would be a good thing because less people would be influenced into buying a home on a large loan and be much more inclined to save up a good chunk of dough before buying a house (this would certainly influence a lot of people to sell, you'd probably see housing prices trend down for the next 10 years if they did this). In the short run, it would be a pretty huge hit. Especially to the middle class.

[Acala]

The mortgage deduction is a bank subsidy. Give money to the banks, pay less taxes. As long as the banks control the government the mortgage deduction isn't going anywhere.

[oyarde]

It is the only way the avg American taxpayer gets anything back . Now they will get to keep it all and waste it and deprive the economy of that money . Want a job ? Look to the govt .there will be no others.

[kahless]

Not having the mortgage interest deduction is the tipping point for many that will make them unable to either pay their property taxes or maintain their mortgage payment. It will create more foreclosures and force landlords to increase rents on the poor. This will in turn make more people seek and lobby for government assistance.

This is exactly what the one party system and the Obama administration wants. More people reliant on government.

[oyarde]

I have one place I will want a good lightening strike to burn it down .

[swiftfoxmark2]

If people lose their homes because the mortgage interest deduction is removed from the tax code, then they couldn't afford their homes to begin with.

[erowe1]

I agree with getting rid of the deduction, as long as they replace it with an across the board cut in taxes of equal size or greater.

I'm not smart enough to know what it would do to the housing sector. But that shouldn't be any of the government's concern anyway. If the housing industry is supposed to crash, they should let it.

[erowe1]

..

[oyarde]

That eliminates tax refunds for people who actually pay taxes further crushing the economy

[oyarde]

If people lose their homes because the mortgage interest deduction is removed from the tax code, then they couldn't afford their homes to begin with.

Oh , I can afford it , have one I will no longer want though without it . If it burns down though , I will come out at least 40 k to the good :)

[Brian4Liberty]

The mortgage deduction is a bank subsidy. Give money to the banks, pay less taxes. As long as the banks control the government the mortgage deduction isn't going anywhere.

Agree.

The mortgage deduction is a government market manipulation. It plays the same role as the Federal Reserve with artificially low interest rates. It encourages malinvestment, for the benefit of crony corporatists.

Removing it at this point might be bad for the housing market in the short term, but it is as necessary as reigning in the Federal Reserve. Attempting to keep the bubble inflated will just prolong the agony and delay a recovery.

[oyarde]

I agree with getting rid of the deduction, as long as they replace it with an across the board cut in taxes of equal size or greater.

I'm not smart enough to know what it would do to the housing sector. But that shouldn't be any of the government's concern anyway. If the housing industry is supposed to crash, they should let it.

A housing sector that was going to be years in recovery , that would then never recover . Anyone work home construction ? Time to find a new line of work ...

[Brian4Liberty]

Heard an interesting fact yesterday on a finance show: 40% of American homeowners have no mortgage.

That is a surprising low number. No doubt the bankers will push the givernment to interfere in the market even more so that they can increase their (mortgage) customer base.

[Acala]

Heard an interesting fact yesterday on a finance show: 40% of American homeowners have no mortgage.

That is a surprising low number. No doubt the bankers will push the givernment to interfere in the market even more so that they can increase their (mortgage) customer base.

Interesting. In most places, government can use property tax to extract money from people who own their homes. The county where I live just raised property tax rates to account for lost revenue due to dropping property values. Nice.

[SimpleName]

I don't like this discrimination against renters. I realize the property owner may have already got the deduction, but mortgage deductions are obvious discriminatory devices against renting. I'm sure the banks love it. That said, taking away this deduction for people who already hold mortgages would be criminal. New mortgages, alright. Current mortgages, criminal.

[Krugerrand]

I agree with getting rid of the deduction, as long as they replace it with an across the board cut in taxes of equal size or greater.

I'm not smart enough to know what it would do to the housing sector. But that shouldn't be any of the government's concern anyway. If the housing industry is supposed to crash, they should let it.

I agree completely. This forum jumps up and down about how the housing bubble was a bad thing, yet the mortgage deduction is a part of what causes that bubble.

Think about it ... if taking it away will hurt the prices of houses ... that means the prices of houses are inflated by the deduction.

And for those complaining about how it would hurt the poor ... are you forgetting that if the prices of housing collapses, then more poorer people can afford to buy them? And, if the prices of housing collapses, then the price of rent collapses with it. That was discussed to considerable length in one of Schiff's books - don't expect rent to pay the mortgage on investment properties.

I don't like deductions. It's a tool for the government to control people's behaviors.

[Brian4Liberty]

It would have to be phased out over a long period. 10-20 years.

[sailingaway]

I don't like this discrimination against renters. I realize the property owner may have already got the deduction, but mortgage deductions are obvious discriminatory devices against renting. I'm sure the banks love it. That said, taking away this deduction for people who already hold mortgages would be criminal. New mortgages, alright. Current mortgages, criminal.

It isn't discriminatory, the landlord/owner of the apartments absolutely gets the deduction and it SHOULD be reflected in the price/rent.

You could say it should go to the renter, but then the price for the landlord would be higher and the rent would be higher to begin with.

The problem is that it would devalue homes across the country to take it away now, granted it should never have been created. I agree with others that unwinding it will take some lengthy period.

[akforme]

I usually use this as something negative because the biggest tax break the middle class can get is going into 30 years of debt with a wall street bank or giving them their retirement money. I wish the government bribed people with their own money to use the industry I'm in.

[Krugerrand]

It isn't discriminatory, the landlord/owner of the apartments absolutely gets the deduction and it SHOULD be reflected in the price/rent.


The problem is that it would devalue homes across the country to take it away now, granted it should never have been created. I agree with others that unwinding it will take some lengthy period.

I broke these into two parts. Please reconsider what you are saying. On one hand you suggest the deduction should be reflected in the rent. On the other hand you suggest that the deduction inflates the price of the house.

It can't do both.

The money either is factored into the price and it goes to the previous owner/mortgage owner ... or it goes to the renter. Do you need a second guess as to who gets it?

EDIT - Of course, the deduction belongs to the owner ... .but still, it should not exist.

[Deborah K]

Sounds like a good way to set up a feudal society.

[Johncjackson]

Wow, so many people here supporting social engineering through taxes. Maybe you missed the housing boom and bust, too? Is the support of the mortgage deduction due to bad personal financial decisions ( were you sold an overpriced home because you bought into the idea of overpaying on interest for a tax deduction?)? This feels like George W. Bush forum.

[angelatc]

Sounds like a good way to set up a feudal society.

I've been saying that since the bubble started popping. The wealthy will snatch up the land and houses, while the rest of us will be reduced to migrant worker status.

But the home interest mortgage deduction is indeed a subsidy. Defending it while belittling entitlements is hypocritical.

[Anti Federalist]

Wow, so many people here supporting social engineering through taxes. Maybe you missed the housing boom and bust, too? Is the support of the mortgage deduction due to bad personal financial decisions ( were you sold an overpriced home because you bought into the idea of overpaying on interest for a tax deduction?)? This feels like George W. Bush forum.

We're arguing against raising taxes that would kill an already severely ill industry.

[Anti Federalist]

I've been saying that since the bubble started popping. The wealthy will snatch up the land and houses, while the rest of us will be reduced to migrant worker status.

Truth.

+rep

[Deborah K]

I've been saying that since the bubble started popping. The wealthy will snatch up the land and houses, while the rest of us will be reduced to migrant worker status.

And if the wealthy don't do it, the government will.



But the home interest mortgage deduction is indeed a subsidy. Defending it while belittling entitlements is hypocritical


How so? I think a better analogy is like what Ron does for his district with earmarks....he disagrees with them in principle and votes against them, but he knows they'll pass anyway, so he adds earmarks for his district so that they can get some of their hard earned money back.

[Bosco Warden]

I thought Justin Raimondo was from the antiwar site, I dont get this.

[akforme]

We're arguing against raising taxes that would kill an already severely ill industry.

I'm probably against this move, but the reality is, it's one of the big problems with taxes, that it's used to promote one industry over another.

Housing is ill because of things like this that inflated the demand.

[RCA]

Why do some of you not get the simplest of issues? Removing a tax deduction for anybody for anything, is a tax INCREASE. I could care less about the "who" or the "what".

[foofighter20x]

The purpose of the mortgage deduction is not so much to encourage home-ownership as to prevent double taxation.

You get taxed on income. You then use that taxed income to pay the mortgage interest and principal. The bank has to claim that interest as income, and pay income tax on it. Voila. Double taxation.

However, if you get to deduct the money that goes toward interest, then that means you are not liable for the taxes on those interest dollars, and only the bank pays taxes on them.

You'd think they'd do it for credit cards, too, but typical credit card purchases are not for items deemed necessities, such as a place to live.

[HOLLYWOOD]

It would have to be phased out over a long period. 10-20 years.Probably 29 years from year of implementation, but we know the swindle is on... bit by bit, chipping away at it all. Time for a Carlin rebroadcast


http://www.youtube.com/watch?v=EmtjhdC5cI8

[Anti Federalist]

Sounds like a good way to set up a feudal society.

More truth.

[Acala]

I say eliminate the deduction by eliminating the personal income tax! Some guy I heard about who is running for President wants to do that.

[Brian4Liberty]

Wow, so many people here supporting social engineering through taxes. Maybe you missed the housing boom and bust, too? Is the support of the mortgage deduction due to bad personal financial decisions ( were you sold an overpriced home because you bought into the idea of overpaying on interest for a tax deduction?)?

This is a perfect example of how hard it is to remove government favors and giveaways...

[Anti Federalist]

The purpose of the mortgage deduction is not so much to encourage home-ownership as to prevent double taxation.

You get taxed on income. You then use that taxed income to pay the mortgage interest and principal. The bank has to claim that interest as income, and pay income tax on it. Voila. Double taxation.

You'd think they'd do it for credit cards, too, but typical credit card purchases are not for items deemed necessities, such as a place to live.

Was just going to post that, thanks.

[Brian4Liberty]

I say eliminate the deduction by eliminating the personal income tax! Some guy I heard about who is running for President wants to do that.

+1776!

It's like this idea has been lost somewhere...

[foofighter20x]

I've been saying that since the bubble started popping. The wealthy will snatch up the land and houses, while the rest of us will be reduced to migrant worker status.

But the home interest mortgage deduction is indeed a subsidy. Defending it while belittling entitlements is hypocritical.

You're kidding, right? A mobile workforce that can pull up stake and go to where better pay is offered is an employer's worst nightmare. They want their employees locked in place with a mortgage that makes leaving unattractive or inconvenient. Only then can they put more downward pressure on wages.

It would only be a feudal society if you rented from your land owner and were not allowed to leave without the landlord's permission.

[Anti Federalist]

+1776!

It's like this idea has been lost somewhere...

Couldn't agree more.

In the meantime, don't increase the bloodsucking.

[Anti Federalist]

You're kidding, right? A mobile workforce that can pull up stake and go to where better pay is offered is an employer's worst nightmare. They want their employees locked in place with a mortgage that makes leaving unattractive or inconvenient. Only then can they put more downward pressure on wages.

It would only be a feudal society if you rented from your land owner and were not allowed to leave without the landlord's permission.

Company scrip, company store, company housing...

[foofighter20x]

i say eliminate the deduction by eliminating the personal income tax! Some guy i heard about who is running for president wants to do that.

i love it!

[flightlesskiwi]

I say eliminate the deduction by eliminating the personal income tax! Some guy I heard about who is running for President wants to do that.

^this. absolutely this!

and i don't think that the bankers and/or real estate special interest lobby groups will let this (doing away with the mortgage interest deduction) happen any time soon. maybe i'm naive, though...

[foofighter20x]

Company scrip, company store, company housing...

Right. And one usually owed the company a huge debt that had to be worked off... Not the case these days for most people.

[Brian4Liberty]

It's a bit suspicious that the only time that the "double taxation" argument is actually acted upon by the government is when it benefits the most powerful corporatists on Wall St.

Mundanes need not apply.

[libertyjam]

The purpose of the mortgage deduction is not so much to encourage home-ownership as to prevent double taxation.

You get taxed on income. You then use that taxed income to pay the mortgage interest and principal. The bank has to claim that interest as income, and pay income tax on it. Voila. Double taxation.

However, if you get to deduct the money that goes toward interest, then that means you are not liable for the taxes on those interest dollars, and only the bank pays taxes on them.

You'd think they'd do it for credit cards, too, but typical credit card purchases are not for items deemed necessities, such as a place to live.

It used to be available for credit interest as well, but that was yanked away actually under Reagan mid 80's

[Anti Federalist]

Right. And one usually owed the company a huge debt that had to be worked off... Not the case these days for most people.

???

The only thing that's changed is "the company" is not quite as monolithic as it once was.

But it has much firmer grasp:

http://www.dailycasserole.com/wp-content/uploads/2010/05/Household-debt-1952-2009.jpg

[foofighter20x]

???

I think we aren't talking about the same scope. Households may have high consumer debt, but they don't owe it to the company they work for.

That's what I was saying.

[heavenlyboy34]

+1776!

It's like this idea has been lost somewhere...

Down the memory hole, like so many other important things. :(

[yatez112]

While I understand the desire to have lower taxes for those that qualify, from an economic and personal view, I do not like the government playing around with the tax code to change consumer behavior any more than I would with the State trying to influence moral behavior.

So I am surprised at how many are in favor, especially with the parallels from gov't intervention that helped fuel the housing bubble. Not saying they are equal, no, but it's intervention nonetheless.

From my view, it benefits the banks and "home-owners". As someone mentioned then, why don't we just let people write off credit card interest? Or why not car loan interest?

Maybe it doesn't effect that much, but subsidizing is not good, especially subsidizing debt.

Obviously, my alternative would be to flatten the code and reduce for everyone.

Would people feel the same if the gov't gave subsidies to only the most politically connected? I would have to think that Bastiat would consider that an example of plundering?

Could the same argument be made for tax brackets if you're married or have kids?

[sailingaway]

A tax cut is not a subsidy or you are saying the govt owns all the money you DON'T pay in tax and 'subsidizes you' by letting you keep any.

Rent is cut by the mortgage deduction the landlord gets, why should you get the benefit of that only if you rent and not if you own? That skews things right there.

The tax code shouldn't influence the market but it does and people made major purchases based on that. It needs to be reformed in a manner that takes into account expectations and values encouraged by the bad policy to begin with.

[flightlesskiwi]

???

The only thing that's changed is "the company" is not quite as monolithic as it once was.

But it has much firmer grasp:

http://www.dailycasserole.com/wp-content/uploads/2010/05/Household-debt-1952-2009.jpg


I think we aren't talking about the same scope. Households may have high consumer debt, but they don't owe it to the company they work for.

That's what I was saying.

i dunno... i'm with AF on this one. at this point, the indebted outweigh the savers. and the indebted work to pay off their debt. yeah, i don't work for capital one, but since ____ % of my paycheck goes to pay the debt i owe them, i do. at least on a deep hypothetical-philosophical level, anyway.

[flightlesskiwi]

A tax cut is not a subsidy or you are saying the govt owns all the money you DON'T pay in tax and 'subsidizes you' by letting you keep any.

Rent is cut by the mortgage deduction the landlord gets, why should you get the benefit of that only if you rent and not if you own? That skews things right there.

The tax code shouldn't influence the market but it does and people made major purchases based on that. It needs to be reformed in a manner that takes into account expectations and values encouraged by the bad policy to begin with.

it always leaves a bad taste in my mouth to say that the mortgage interest tax deduction is a "subsidy" for the exact reason sailing points out. it's like people believe that the fruits of their labor belong to the government, and the dear benevolent government blesses them with subsidies and deductions that "allow" them to keep more of their own wealth.

again, it's a tax game that makes the government look like it is some benevolent force. and we all know that's just not true.

but like i said before, i really can't see this ending anytime soon. the bankers and real estate agents would have a fit.

but who knows. if it does abruptly end without any policy reform it will just be one more card on the deck that is stacked against us.

[jmdrake]

They aren't thinking about eliminating the mortgage deduction because all of a sudden they've been free marketeers. They want to cut or eliminate the mortgage deduction to increase revenue. If it was about being free market they would cut or eliminate Fannie Mae and Freddie Mac.

[yatez112]

A tax cut is not a subsidy or you are saying the govt owns all the money you DON'T pay in tax and 'subsidizes you' by letting you keep any.

Rent is cut by the mortgage deduction the landlord gets, why should you get the benefit of that only if you rent and not if you own? That skews things right there.

The tax code shouldn't influence the market but it does and people made major purchases based on that. It needs to be reformed in a manner that takes into account expectations and values encouraged by the bad policy to begin with.


it always leaves a bad taste in my mouth to say that the mortgage interest tax deduction is a "subsidy" for the exact reason sailing points out. it's like people believe that the fruits of their labor belong to the government, and the dear benevolent government blesses them with subsidies and deductions that "allow" them to keep more of their own wealth.

again, it's a tax game that makes the government look like it is some benevolent force. and we all know that's just not true.

but like i said before, i really can't see this ending anytime soon. the bankers and real estate agents would have a fit.

but who knows. if it does abruptly end without any policy reform it will just be one more card on the deck that is stacked against up.

I agree with you all in that no, it's not the State's money (our income).

And while it's not a direct subsidy, it is an alleviation of taxes that you would otherwise pay. So I guess where I find myself conflicted is the tax credits that seems to be offered by the government is not uniform. It would be lowering of taxes if the State said anyone registered as a Republican or Democrat gets a tax credit, but is that "fair"? Libertarian or Independent registered voters would have to pay more taxes than the others, all else equal. Sure it's technically a credit and not a subsidy, but neither way do I think the State should play any role in affecting voter registration.

[puppetmaster]

getting some of the money back I am forced to pay is not a bad thing. My money is my money, why should anyone be saying that I should not get it back after it has been extorted from me? I would support anyone who has found a way to get their extorted money back. getting rid of this will only grow the beast bigger and further increase the rents for renters. have you seen rent go up in your area? wait, you can always get sec 8 if you want it. It will consolidate land to the uber-rich and the gov. Is that what we want here?

This housing credit did not create the bubble, The fed and then loan practices did

[flightlesskiwi]

getting some of the money back I am forced to pay is not a bad thing. My money is my money, why should anyone be saying that I should not get it back after it has been extorted from me? I would support anyone who has found a way to get their extorted money back. getting rid of this will only grow the beast bigger and further increase the rents for renters. have you seen rent go up in your area? wait, you can always get sec 8 if you want it. It will consolidate land to the uber-rich and the gov. Is that what we want here?

This housing credit did not create the bubble, The fed and then loan practices did

this is pretty much how i think. i've heard it spewed over and over again that the mortgage interest tax deduction is a subsidy by the people who are trying to convince me that my wealth belongs to them (people in government) and they merely allow me to keep a portion of it for my benefit, it's hard not to rage against that machine.

joe plumber, i can guarantee you, doesn't think of the deduction as a subsidy. the whole system is broken, and doing away with this (as jmdrake pointed out) in order to raise tax revenue is a dirtier "trick" than when the deduction was put into place, imo.

it's kind of like all the old folks with social security... get people reliant on the system, realize the system is broke and then change the rules as we all slide downhill? i'd be 100% willing to give up this "subsidy" if the .gov was actually making spending cuts and intent on rehauling the tax code. but that will only come with a Ron Paul presidency.

[foofighter20x]

i dunno... i'm with AF on this one. at this point, the indebted outweigh the savers. and the indebted work to pay off their debt. yeah, i don't work for capital one, but since ____ % of my paycheck goes to pay the debt i owe them, i do. at least on a deep hypothetical-philosophical level, anyway.

And that's a fair opinion, on the deeply hypothetical-philosophical side of things. I'm talking practically, however.

[Anti Federalist]

Tax Credits Are Not Subsidies

by Laurence M. Vance, June 21, 2011

http://www.fff.org/comment/com1106s.asp

Do tax credits — as well as tax deductions, tax loopholes, tax shelters, and tax exemptions — constitute subsidies? Many Republicans and conservatives think so.

Senate Republicans are divided over a proposal to eliminate the Volumetric Ethanol Excise Tax Credit. An amendment to that end (S.Amdt.436) by Senator Tom Coburn (R-OK) to the Economic Development Revitalization Act of 2011 (S.782), a bill to amend and reauthorize the Public Works and Economic Development Act of 1965, was recently defeated with 34 out of 47 Republicans supporting the amendment.

The amendment follows a previous attempt by Coburn to do the same thing with a stand-alone bill, S.520, currently languishing in the Committee on Finance.

Conservative groups like The Club for Growth and Koch Industries supported the amendment while Americans for Tax Reform opposed it.

Coburn’s amendment would have amended the Internal Revenue Code, subtitle A, chapter 1, subchapter A, part IV, subpart D, section 40(h)(2) and subtitle F, chapter 65, subchapter B, sections 6426(b)(6) and 6427(e)(6)(A) to eliminate income tax and excise tax credits on ethanol fuel production.

Two days later, however, Senator Dianne Feinstein (D–CA) introduced basically the same amendment, and it passed by a vote of 73–27. This time 33 out of 47 Republicans supported the amendment. (Saxby Chambliss of George switched his vote.)

Although distilling ethanol is an inefficient energy-intensive process and using ethanol as a fuel is fraught with problems since ethanol is corrosive, more flammable than gasoline, absorbs water, and lowers gas mileage, the veracity of these things is not the issue here.

There are five reasons why Coburn’s amendment is a sham and a complete waste of time.

First, as mentioned above, Coburn proposed an amendment to a Senate bill to amend and reauthorize the Public Works and Economic Development Act of 1965. The Congressional Budget Office estimates that implementing this bill would cost about $1.5 billion through 2016 and an additional $760 million after that year. Yet, because the Economic Development Revitalization Act provides grants and other types of assistance to encourage economic development in distressed areas and redevelop abandoned or underdeveloped property no Republican who claims to follow the Constitution should ever consider voting for this bill no matter how many “good” amendments it contains.

Second, the tax credits for the ethanol industry that Senator Coburn is so concerned about expire at the end of 2011. They can only be continued if Congress specifically authorizes them to do so like it has done for the past several years. Why the big push to eliminate them now if they are going to expire soon anyway? Hasn’t Congress got more important things to do now than tinker with the tax code?

Third, the amount of the tax credits is, according to Senator Coburn, about $3 billion a year. This is insignificant compared to the $10 billion the United States is spending per week fighting in Iraq and Afghanistan. (And yes, U.S. soldiers are still dying in Iraq.) If Republicans want to show us what budget cutters they are, then why don’t they stop funding these senseless foreign wars?

Fourth, where were all the Republican calls to stop “subsidizing” the ethanol industry when they controlled the Congress for over four years during the Bush administration? With a majority in the House and the Senate, and control of the presidency, Republicans could have eliminated every tax credit and subsidy in existence. Could Republican actions now have anything to do with an election looming and an incumbent Democratic president?

Fifth, and most significantly, Senate Republicans just voted overwhelming against a similar bill to reduce tax credits for the oil industry. In a 52–48 procedural vote in which only two Republicans — Susan Collins and Olympia Snowe, both of Maine — voted “yes,” the Senate rejected S.940, the Close Big Oil Tax Loopholes Act. This bill would have likewise amended the Internal Revenue Code but to “deny to oil companies with gross receipts in excess of $1 billion in a taxable year and an average daily worldwide production of crude oil of at least 500,000 barrels a year”:


a foreign tax credit if such company is a dual capacity taxpayer, as defined by this Act;
the tax deduction for income attributable to domestic production of oil, natural gas, or primary products thereof;
the tax deduction for intangible drilling and development costs;
the percentage depletion allowance for oil and gas wells; and
the tax deduction for qualified tertiary injectant expenses.

Why do Republicans want to reward the oil industry and punish the ethanol industry? Especially since most Republicans have no philosophical objections to government subsidies in the first place. This is why tens of billions of dollars in direct payments and other subsidies to farmers have survived in Congress for decades. Republicans in Congress are even now trying to dodge farm subsidy cuts. This is especially egregious since farmers receive actual subsidies, not just tax credits.

Tax credits are not subsidies. Tax credits, like tax exemptions, deductions, shelters, and loopholes, allow people to keep more of their money in their pocket and out of the hands of the government. It doesn’t matter what the tax credit is for; the result is the same. Only a statist who thinks that the government has an absolute right to a percentage of all income produced and that tax credits deprive the government of its claim to that percentage could object to individuals or businesses holding on to their own money. Statists on the left and the right both reason that since not every person in society benefits in the same way from all tax credits and deductions that no one should benefit from any of them.

So, if ABC company is granted a tax credit for making widgets that XYZ company doesn’t produce, and if Smith is given a tax deduction for having a swimming pool that Jones doesn’t have, then the solution — in the mind of a statist — is for the tax credit and deduction to be stripped from ABC company and Smith instead of extended in some way to company XYZ and Jones.

The tax code if full of credits and deductions that even those who complain about other credits and deductions would never want to get rid of.

For the current tax year, taxpayers with children are entitled to an exemption of $3,700 for each child. Taxpayers with children who make under a certain level of income are entitled to an exemption of $3,700 for each child plus a child tax credit of $1,000 per child. People without children are entitled to neither. What’s fair about that? Is this not rewarding people with children and punishing people without children?

Furthermore, taxpayers that don’t itemize deductions are entitled to a standard deduction of $5,800 for single individuals and $11,600 for married individuals filing a joint return. But an additional deduction is allowed to any taxpayer who is elderly or blind. Is the government subsidizing old age and blindness?

Ideally, the only reason all tax credits, deductions, exemptions, shelter, and loopholes should be eliminated is that the income tax itself is eliminated. Practically, though, since the federal government is unlikely to eliminate the income tax in its entirety, lovers of liberty and property should work toward increasing the size and scope of every possible tax credit, deduction, exemption, shelter, and loophole and then lobbying for more of them.

Every industry should get the same tax credits and deductions as the ethanol and oil industries. Every individual should likewise.

Buy a new car? Tax credit. Paint your house? Tax deduction. Get another pet? Tax exemption. Join a bowling league? Tax shelter. Water your lawn? Tax loophole.

Every penny of our money that we are able to keep out of the hands of the government is a good thing, whether it results from lower tax rates or an increase in tax credits. The result is the same. But tax credits are not subsidies.

[Anti Federalist]

How About Ending the Child Tax Deduction?

Posted by Laurence Vance on August 17, 2011 08:05 AM

http://www.lewrockwell.com/blog/lewrw/archives/93261.html

Mr. Rockwell referred to a Reasonoid wanting to get rid of the mortgage interest deduction. I've got a better idea, how about ending the child tax deduction? More people take that than the mortgage interest deduction. It must cost the government billions to subsidize families.

I don't, of course, support ending the child tax credit. In fact, I wish it were expanded to a dog, cat, couch, table, oven, bed, dresser tax credit. My point is that if advocates of getting rid of the mortgage interest deduction were consistent, they would call for the elimination of all tax credits and deductions unless they benefited every American equally.

Liberals, conservatives, and yes, libertarians that want to eliminate tax deductions and close loopholes are really saying that they don't want people to keep more of their money in their pocket and out of the hands of the government. Only a statist who thinks that the government has an absolute right to a percentage of all income produced and that tax credits deprive the government of its claim to that percentage could object to individuals or businesses holding on to their own money. See my tax credits are not subsidies article.

[VBRonPaulFan]

There is a simple misunderstanding here by people who say they're the same thing. They're only thinking in end game terms. Their effect on the market either way are virtually the same. It is their implementation that means all the difference in the world. A tax credit is allowing you to keep your money and reducing revenue to the state... helping to slow its growth. A subsidy is the government telling group A they don't deserve as much money as they normally should get to keep, instead they need to direct it at another industry for whatever purpose.

So in essence:
Subsidy = enhancing the state
Tax credit = starving the states growth

pick your side.

[flightlesskiwi]

How About Ending the Child Tax Deduction?

Posted by Laurence Vance on August 17, 2011 08:05 AM

http://www.lewrockwell.com/blog/lewrw/archives/93261.html

Mr. Rockwell referred to a Reasonoid wanting to get rid of the mortgage interest deduction. I've got a better idea, how about ending the child tax deduction? More people take that than the mortgage interest deduction. It must cost the government billions to subsidize families.


i've often thought about when they'd end this. if they do, i won't be able to afford to send my kids to private school. and that would piss me off.

thanks for the articles, AF. again, i'll make my point that by using the word "subsidy" the statists trying to convince us that the state is a wonderful benefactor and that our wealth fully belongs to them. and that they are "subsidizing" our income. i've heard this from too many big government statist lackeys to believe that the deduction is, in fact, a subsidy. if you find a loophole, by all means, go for it!

[yatez112]

AF, I agree with those articles.

However, I suppose the beef I have lies here:

"Every industry should get the same tax credits and deductions as the ethanol and oil industries. Every individual should likewise."

Does everyone get them, though?

Do I get a tax credit for not having children? Or a tax credit for not having interest to pay on a house? Does the coal industry get a tax credit when the solar industry does?

Is it not the State, who we supposedly abhor, who makes these decisions on the credits? I desire the lowest (sure, zero, but that's not going to happen) taxes possible. But I would prefer to make it flatter than all the loopholes, because again, who is making these loopholes and at which industry/lobbying group's profit? There's a reason certain industries get tax credits and some don't--it's political.

Am I mad at people for not having to pay taxes? No, certainly not. But is it wrong to want to make lower flatter taxes that are uniform so that everyone can take advantage of low taxes, and not just those who qualify?

[oyarde]

Interesting. In most places, government can use property tax to extract money from people who own their homes. The county where I live just raised property tax rates to account for lost revenue due to dropping property values. Nice.

Mine have gone up twice in the past four years .

[oyarde]

That deduction allows me to get half of my payroll tax back. I consider that right , fair & good . I figure that the half they keep is my contribution to Article One , Section Eight authorized spending and the half I get to steal back from the asses that stole it from me is the half that is unConstitutional Federal taxing and spending .

[flightlesskiwi]

Mine have gone up twice in the past four years .

mine have gone up every year for the past 3 years and i predict they will go up next year. no kidding.

[oyarde]

mine have gone up every year for the past 3 years and i predict they will go up next year. no kidding.

Yeah , basically , if they need more money for the school system , they just raise the assesment ea. yr. so the percentage is higher , never mind that values have actually dropped by over twenty percent in the past three years.

[Brian4Liberty]

AF, I agree with those articles.

However, I suppose the beef I have lies here:

"Every industry should get the same tax credits and deductions as the ethanol and oil industries. Every individual should likewise."

Does everyone get them, though?

Do I get a tax credit for not having children? Or a tax credit for not having interest to pay on a house? Does the coal industry get a tax credit when the solar industry does?

Is it not the State, who we supposedly abhor, who makes these decisions on the credits? I desire the lowest (sure, zero, but that's not going to happen) taxes possible. But I would prefer to make it flatter than all the loopholes, because again, who is making these loopholes and at which industry/lobbying group's profit? There's a reason certain industries get tax credits and some don't--it's political.

Am I mad at people for not having to pay taxes? No, certainly not. But is it wrong to want to make lower flatter taxes that are uniform so that everyone can take advantage of low taxes, and not just those who qualify?

Agree.

I can not defend the government making decisions on which industries or individuals get preferential treatment.

[oyarde]

I do agree the tax code is crap .

[Brian4Liberty]

How about ending the Payroll Tax break?

Oh yeah, they are already planning to do it...

http://www.ronpaulforums.com/showthread.php?310930-On-Jan.-1-2012-Payroll-Tax-Could-Go-Back-Up-Again