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Mortgage Deduction . . . Crossing the Rubicon

Posted by Larry Doyle on February 27, 2009 1:18 PM |

The mortgage interest deduction has been a cornerstone of American tax and housing policy. In fact, I can’t count the number of times I conversed with my accountant about maintaining mortgage debt based upon the feeling it was the one deduction the government would never touch.  Well, never just pulled into the driveway!

For clarification purposes and at the request of a number of readers, allow me to address this deduction. As proposed in President Obama’s budget, for those households currently paying taxes in the 33% and 35% brackets, the mortgage deduction would now be at a 28% rate. The proposal would not take effect until 2011. 

This Mortgage Deduction Looks Less Sacred. Its effect can and is hotly debated by economists and housing analysts. In my opinion, though, there are a few points not debatable. This initiative is another method of achieving wealth redistribution. It will make housing more expensive at the margin. It will put pressure on housing in general and in upper income areas specifically. Given that there are no initiatives proposed to support those needing Jumbo mortgages, this tax change will only further negatively impact this sector of the market. 

Lastly, is this Obama’s “crossing the Rubicon?” Don’t think for a second that this initiative just developed. How and why did we NEVER hear about this during the campaign? Did he know how negatively it would be received? 

In summary, having “crossed the Rubicon,” how far does he penetrate into the territory? 

We’ll be watching, but knowing how wildly optimistic his growth projections are in his proposed budget, Obama will need more $$$. The mortgage interest deduction just became fair game. 

I need to call my accountant.

LD

  • TeakWoodKite

    Does that model of “never” come with Chrome wheels ?

    Can I have Pelosi drop in a twin overhead earmark and BO

    BO add in the Fred Flinstone all wheel posi-traction?

    He is a used car salesman no? They guys sure appear to be on a mission.

  • Larry Doyle

    It is obvious that the aadministration is going full steam ahead with the social agenda and policies almost without regard for the economic implications.

    They would discount that but the market is discounting them.

    I get the sense that their ire nad frustration built up over the course of the Bush administration that when they got the bully pulpit it was akin to letting a wild dog loose. Perhaps there is no dog wilder than Rahm Emanuel.

    Well, not that we can necessarily change anything now but we can and will “hodl them to account” as much as possible. Democracy deserves no less, but where are the real leaders in Washington upholding their obligations. Many Republicans nd Dems seem to be in the tank with lobbysits, special interests, separate agendas…

    Thanks again for coming to the site. I hope you find it informative.

  • ChooChooMagoo

    Here is my frustration – were is the discussion with the american people? Why are we not allowed a voice in making this decisions. Especially, as you noted, it was never mentioned during the campaign. The american people are the just the wildly careening cart behind the run-away teem of horses that are our government.

    Thanks for the vent.

    • Larry Doyle

      The default response by the adminsitration and Congress is very simply, “well, we won the election so that’s that…”

      We do need to keep pressure on them as much as possible. There is very clearly a rising level of discontent in the country over a lot of these policies. IMO, a lot of people who voted for Obama truly did not know or appreciate the impact of his policies.






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