I'm confused about Mitt Romney's tax policy

[IGotWorms 4,060]

So I thought a big part of Mitt Romney's economic plan was to cut taxes for the rich, on the assumption that this would spur investment and grow the economy. Basically the ol' trickle-down theory.

 

Well now Mitt Romney is saying that he wants to keep the progressive tax system in place. In his 60 minutes interview he says that he will NOT cut taxes for rich people.

 

But he then goes on to say that his plan is to cut taxes 20% across the board. So if you pay 35%, that'll go down to 28%, and so on and so forth.

 

So now I am super-confused. His plan is to spur economic growth by cutting taxes for those with the most money, but he's not going to cut taxes for rich people. He's going to cut taxes 20% across-the-board, but somehow this is going to preserve the progessivity of the tax code.

 

Am I missing something, or if you cut everyone's taxes by 20% doesn't that mean that the rich are getting a HUGE tax cut, since they make so much more money? I don't see how this keeps the progessivity of the tax code in place at all.

 

My link:

 

Mitt Romney admits he’ll need to raise taxes on the middle class

Ezra Klein

 

On “60 Minutes” last night, Mitt Romney said it again. “I want to keep the current progressivity in the code. There should be no tax reduction for high income people.”

 

You’ve heard Romney say this — or some variant of it –dozens of times before. What’s changed since then is that Romney has admitted that his tax cuts, if they’re not going to add to the deficit, will have to increase taxes on people he defines as middle income and cut them on people he defines as high income.

 

Before we get to that admission, a quick refresher. Romney’s tax plan proposes to cut tax rates by 20 percent. That would cost trillions of dollars, and mean a particularly big tax cut for the rich.

 

But Romney promises his tax cut won’t cost anything, won’t raise taxes on the middle class, won’t cut taxes on the rich, and won’t end the tax breaks for savings and investment.

 

The Tax Policy Center, the gold standard in nonpartisan tax wonkery, looked at the tax cut and these promises and declared the proposal “not mathematically possible.” Since Romney doesn’t want to touch tax breaks for savings and investment like the capital gains cut — a position he reiterated last night on “60 Minutes” — there just isn’t enough money in the remaining tax breaks for people making over $250,000 to pay for their tax cuts.

 

For awhile, the Romney campaign had no answer to this. They just said they didn’t believe the Tax Policy Center — called it biased, even though it’s run by one of George W. Bush’s top economists.

 

Then, slowly, right-leaning economists and outlets began releasing their own studies showing that, if you made some really, really questionable assumptions, you could kinda sorta make Romney’s math look like it might add up. And so you might have heard Romney say this to David Gregory on “Meet the Press”:

 

"The good news is that five different economic studies, including one at Harvard and Princeton and AEI and a couple at The Wall Street Journal all show that if we bring down our top rates and actually go across the board, bring down rates for everyone in America, but also limit deductions and exemptions for people at the high end, while you can keep the progressivity in the code, you could remain revenue neutral and you create an enormous incentive for growth in the economy."

 

 

Anyway, this is an honest question. I'm hoping someone can make sense of Romney's plan for me so I understand it better.

[BunnysBastatrds 2,511]

So I thought a big part of Mitt Romney's economic plan was to cut taxes for the rich, on the assumption that this would spur investment and grow the economy. Basically the ol' trickle-down theory.

 

Well now Mitt Romney is saying that he wants to keep the progressive tax system in place. In his 60 minutes interview he says that he will NOT cut taxes for rich people.

 

But he then goes on to say that his plan is to cut taxes 20% across the board. So if you pay 35%, that'll go down to 28%, and so on and so forth.

 

So now I am super-confused. His plan is to spur economic growth by cutting taxes for those with the most money, but he's not going to cut taxes for rich people. He's going to cut taxes 20% across-the-board, but somehow this is going to preserve the progessivity of the tax code.

 

Am I missing something, or if you cut everyone's taxes by 20% doesn't that mean that the rich are getting a HUGE tax cut, since they make so much more money? I don't see how this keeps the progessivity of the tax code in place at all.

 

My link:

 

 

 

 

Anyway, this is an honest question. I'm hoping someone can make sense of Romney's plan for me so I understand it better.

 

:first:Obama's is clearer?

[IGotWorms 4,060]

:first:Obama's is clearer?

 

Well regarding tax policy, I think we all know that Obama wants to raise taxes on the wealthy. So I do think it's clearer in the sense that you know exactly what Obama intends to do. But regardless, I'm not trying to argue who's plan is clearer (or better), I'm just trying to understand exactly what Romney's plan is.

[penultimatestraw 473]

So I thought a big part of Mitt Romney's economic plan was to cut taxes for the rich, on the assumption that this would spur investment and grow the economy. Basically the ol' trickle-down theory.

 

Well now Mitt Romney is saying that he wants to keep the progressive tax system in place. In his 60 minutes interview he says that he will NOT cut taxes for rich people.

 

But he then goes on to say that his plan is to cut taxes 20% across the board. So if you pay 35%, that'll go down to 28%, and so on and so forth.

 

So now I am super-confused. His plan is to spur economic growth by cutting taxes for those with the most money, but he's not going to cut taxes for rich people. He's going to cut taxes 20% across-the-board, but somehow this is going to preserve the progessivity of the tax code.

 

Am I missing something, or if you cut everyone's taxes by 20% doesn't that mean that the rich are getting a HUGE tax cut, since they make so much more money? I don't see how this keeps the progessivity of the tax code in place at all.

 

My link:

 

 

 

 

Anyway, this is an honest question. I'm hoping someone can make sense of Romney's plan for me so I understand it better.

Can't he cut the rates for the tax brackets by 20%, while eliminating some current deductions/credits/loopholes, and keep tax proceeds relatively unchanged? If the deductions he eliminates/reduces are used more often by the rich, then their tax payments could actually increase. The tax remains progressive because the starting brackets increase with increasing income, even if they are 20% lower than before.

[IGotWorms 4,060]

Can't he cut the rates for the tax brackets by 20%, while eliminating some current deductions/credits/loopholes, and keep tax proceeds relatively unchanged? If the deductions he eliminates/reduces are used more often by the rich, then their tax payments could actually increase. The tax remains progressive because the starting brackets increase with increasing income, even if they are 20% lower than before.

 

As to the first part of your post, that makes some sense. I guess it's hard to see what loopholes that inordinately favor the rich could be removed, since Romney has said that the capital gains loophole and so forth will remain to encourage investing, but I do think you're point makes sense.

 

As to the second part, maybe I'm not conceiving of this correctly, but if you cut everyone's taxes the same percentage amount, aren't you making the code less progressive? Wouldn't you instead cut the top income bracket by a lower percentage than the lower income brackets?

 

Put another way, isn't Romney's plan for a 20% reduction across the board somewhat akin to a flat tax?

[penultimatestraw 473]

As to the first part of your post, that makes some sense. I guess it's hard to see what loopholes that inordinately favor the rich could be removed, since Romney has said that the capital gains loophole and so forth will remain to encourage investing, but I do think you're point makes sense.

 

As to the second part, maybe I'm not conceiving of this correctly, but if you cut everyone's taxes the same percentage amount, aren't you making the code less progressive? Wouldn't you instead cut the top income bracket by a lower percentage than the lower income brackets?

 

Put another way, isn't Romney's plan for a 20% reduction across the board somewhat akin to a flat tax?

It's a flat reduction in the current rates, but the discounted brackets will remain as progressive as pre-cut.

 

Imagine three tax brackets, 10, 20 and 30%. The new brackets would be 8, 16, and 24%. So the rich guy still pays a greater % of his income than the other two, right? The relationship is exactly the same as pre-Romney, though in absolute terms the rich guy will save more $, because his tax payment is much greater from the start. Only if Romney made everyone pay 20%, regardless on income, would it be akin to a flat tax.

[The Moz 71]

So I thought a big part of Mitt Romney's economic plan was to cut taxes for the rich, on the assumption that this would spur investment and grow the economy. Basically the ol' trickle-down theory.

 

Well now Mitt Romney is saying that he wants to keep the progressive tax system in place. In his 60 minutes interview he says that he will NOT cut taxes for rich people.

 

But he then goes on to say that his plan is to cut taxes 20% across the board. So if you pay 35%, that'll go down to 28%, and so on and so forth.

 

So now I am super-confused. His plan is to spur economic growth by cutting taxes for those with the most money, but he's not going to cut taxes for rich people. He's going to cut taxes 20% across-the-board, but somehow this is going to preserve the progessivity of the tax code.

 

Am I missing something, or if you cut everyone's taxes by 20% doesn't that mean that the rich are getting a HUGE tax cut, since they make so much more money? I don't see how this keeps the progessivity of the tax code in place at all.

 

My link:

 

 

 

 

Anyway, this is an honest question. I'm hoping someone can make sense of Romney's plan for me so I understand it better.

]\

 

 

 

 

you cut everyone's by 20% your helping everyone -- your helping the rich more okay but your still helping everyone. -- like that Bar analogy 10 people go to the bar 3 people only have 10 bucks they get charged a dollar a beer 3 people got 20 they get charged 2 3 people have 50 bucks they get charged 5 bucks 1 person has a thousand he gets charged 100 bucks a beer -- Bartender says okay everyone gets 50% off beers rest of the night -- so 3 got a .50cent cut 3 a dollar cut , 3 a 2.50 dollar cut and 1 a 50 dolar cut. People find out what people pay and get pissed - hey this guy is saving 50 bucks while I am saving 50 cents WTF? does that make sense to get mad over that?

[The Moz 71]

 

Put another way, isn't Romney's plan for a 20% reduction across the board somewhat akin to a flat tax?

 

 

no

nice spin though

[cribdog 0]

It's a flat reduction in the current rates, but the discounted brackets will remain as progressive as pre-cut.

 

Imagine three tax brackets, 10, 20 and 30%. The new brackets would be 8, 16, and 24%. So the rich guy still pays a greater % of his income than the other two, right? The relationship is exactly the same as pre-Romney, though in absolute terms the rich guy will save more $, because his tax payment is much greater from the start. Only if Romney made everyone pay 20%, regardless on income, would it be akin to a flat tax.

 

So, using your numbers, the guy at 10% gets a 2% tax cut and the guy at 30% gets a 6% tax cut? That sounds like a bigger cut for the wealthy.

[Recliner Pilot 61]

So, you started thus thread to announce to the bored you are so fukking stupid you have no idea what a flat tax is.

 

I'm shocked, shocked I tell ya.

[Mungwater 597]

So, you started thus thread to announce to the bored you are so fukking stupid you have no idea what a flat tax is.

 

I'm shocked, shocked I tell ya.

 

So you can't explain it either?

[Recliner Pilot 61]

So you can't explain it either?

Explain what?

 

That a flat tax would be everyone paying the same percentage of their income in taxes?

 

That cutting the same percentage from everyone's marginal rate isn't a flat tax?

 

That Romneys plan calls for across the bored cuts on marginal rates offset by simplifying the tax code by eliminated loopholes, thereby increasing revenue to the treasury? That exacy what the Reagan tax cuts did.

 

What else do you need cleared up?

[KSB2424 3,148]

It's a flat reduction in the current rates, but the discounted brackets will remain as progressive as pre-cut.

 

Imagine three tax brackets, 10, 20 and 30%. The new brackets would be 8, 16, and 24%. So the rich guy still pays a greater % of his income than the other two, right? The relationship is exactly the same as pre-Romney, though in absolute terms the rich guy will save more $, because his tax payment is much greater from the start. Only if Romney made everyone pay 20%, regardless on income, would it be akin to a flat tax.

After it happens though you'd get guys like IGW and NewbieJr who will come out and say: "Romney lowered the rich by 6% and the poor by only 2%. Mitt Romney favors the RICH!@#! He hates poor people!@#!"

 

And the rest of of us who understand simple math will go

[Mungwater 597]

Explain what?

 

That a flat tax would be everyone paying the same percentage of their income in taxes?

 

That cutting the same percentage from everyone's marginal rate isn't a flat tax?

 

That Romneys plan calls for across the bored cuts on marginal rates offset by simplifying the tax code by eliminated loopholes, thereby increasing revenue to the treasury? That exacy what the Reagan tax cuts did.

 

What else do you need cleared up?

 

My point was wormsy was just asking a question do you come in with the name calling. Might explain why most think you're a dousche around here,

[Recliner Pilot 61]

My point was wormsy was just asking a question do you come in with the name calling. Might explain why most think you're a dousche around here,

I didn't call him a name. I said he was fukking stupid.

 

But it's good to know that if I had called him a name the proper response us to call me a dousche.

[IGotWorms 4,060]

no

nice spin though

 

Not spin, I'm trying to understand. Bear with me here:

 

If your tax rate is 35%, you get 7 points shaved off and you're now at 28%.

 

If your tax rate is 20%, you get 4 points shaved off and you're now at 16%.

 

So the wealthier guy got a 7% reduction while the less wealthy got only a 4% reduction.

 

How is that NOT a tax cut for the wealthy? And how does that not impact the progressivity of the tax code?

 

Basically I'm getting at exactly what KSB said. Only KSB didn't explain how this line of thinking would be wrong, so I'm still in the dark. I'll freely admit that math is not my strong suit.

[drobeski 3,061]

Not spin, I'm trying to understand. Bear with me here:

 

If your tax rate is 35%, you get 7 points shaved off and you're now at 28%.

 

If your tax rate is 20%, you get 4 points shaved off and you're now at 16%.

 

So the wealthier guy got a 7% reduction while the less wealthy got only a 4% reduction.

 

How is that NOT a tax cut for the wealthy? And how does that not impact the progressivity of the tax code?

 

Basically I'm getting at exactly what KSB said. Only KSB didn't explain how this line of thinking would be wrong, so I'm still in the dark. I'll freely admit that math is not my strong suit.

[KSB2424 3,148]

Maybe this will help:

 

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

 

The first four men (the poorest) would pay nothing.

The fifth would pay $1.

The sixth would pay $3.

The seventh would pay $7.

The eighth would pay $12.

The ninth would pay $18.

The tenth man (the richest) would pay $59.

 

So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the

arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your beer by $20.

 

Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes.

So, the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair

share?'

 

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so The fifth man, like the first four, now paid nothing (100% savings).

The sixth would now pay $2 instead of $3 (33% savings).

The seventh now paid $5 instead of $7 (28% savings).

The eighth now paid $9 instead of $12 (25% savings).

The ninth now paid $14 instead of $18 (22% savings).

The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before.

And, the first four continued to drink for free.

But once outside the restaurant, the men began to compare their savings.

'I only got a dollar out of the $20,' declared the sixth man.

He pointed to the tenth man, 'but he got $10!'

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a Dollar, too.

It's unfair that he got ten times more than I!'

'That's true!' shouted the seventh man.

'Why should he get $10 back when I got only two?

The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison.

'We didn't get anything at all. The system exploits the poor!'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat

down and had beers without him.

But when it came time to pay the bill, they discovered something important.

They didn't have enough money between all of them for even half of the bill!

 

And that, boys and girls, journalists, and college professors, this is how our tax system works.

The people who pay the highest taxes get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up anymore.

In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

[IGotWorms 4,060]

That wasn't very helpful. In fact I think that was just some chain email. I think I'm gonna have to take to Google to figure this out on my own.

[drobeski 3,061]

That wasn't very helpful. In fact I think that was just some chain email. I think I'm gonna have to take to Google to figure this out on my own.

[KSB2424 3,148]

That wasn't very helpful. In fact I think that was just some chain email. I think I'm gonna have to take to Google to figure this out on my own.

Really?

 

Let's take the 10%, 20%, and 30% tax bracket example. When lowered by 20% then it changes to 8%, 16%, and 24%.

 

The highets tax bracket is still exactly 3 times higher. Nothing changed in the 'progression' of the progressive tax code. Since we have a progressive tax system (which benefits those in lower brackets) then any tax break will always affect the higher brackets more because they pay a higher percentage...since it is a progressive tax system...which benefits the poor.

 

Thats the best I can do.

[IGotWorms 4,060]

Really?

 

Let's take the 10%, 20%, and 30% tax bracket example. When lowered by 20% then it changes to 8%, 16%, and 24%.

 

The highets tax bracket is still exactly 3 times higher. Nothing changed in the 'progression' of the progressive tax code. Since we have a progressive tax system (which benefits those in lower brackets) then any tax break will always affect the higher brackets more because they pay a higher percentage...since it is a progressive tax system...which benefits the poor.

 

Thats the best I can do.

 

Okay, that makes sense.

 

I gotta admit though, I still don't see how this tax cut doesn't favor the rich. Sure the proportion of percentages paid stays the same, but the rich are getting a higher percentage of tax cuts so it seems like they're disproportionately advantaged. And maybe that's fine, but it doesn't jive with Romney's statement.

[parrot 789]

Worms, the wealthier get a bigger tax break because you're taking a flat percentage of progressively larger numbers. But the system stays progressive because you can do this ad infinitum and those who started at a higher point will never catch those who started at a lower point.

 

take two numbers and halve them repeatedly: 100:50, 50:25, 25:12.5, 12.5:6.25, 6.25:3.125... etc. Even though you're constantly decreasing the larger number by twice what you're decreasing the lower, the 2:1 ratio never changes.

[IGotWorms 4,060]

Worms, the wealthier get a bigger tax break because you're taking a flat percentage of progressively larger numbers. But the system stays progressive because you can do this ad infinitum and those who started at a higher point will never catch those who started at a lower point.

 

take two numbers and halve them repeatedly: 100:50, 50:25, 25:12.5, 12.5:6.25, 6.25:3.125... etc. Even though you're constantly decreasing the larger number by twice what you're decreasing the lower, the 2:1 ratio never changes.

 

I get that, but the reduction disproportionately favors the person at the top. Although everyone gets their taxes halved, that action is much, much more meaningful for people at the top of the scale than the bottom.

[MDC 7,590]

The bigger confusion with Mitt Romney's tax policy is why, if the budget deficit is as big a deal as the GOP seems to think it is, you'd be cutting taxes in the first place?

[Mungwater 597]

I get that, but the reduction disproportionately favors the person at the top. Although everyone gets their taxes halved, that action is much, much more meaningful for people at the top of the scale than the bottom.

 

Those people pay much more too, It's all relative to what you bring in

[KSB2424 3,148]

The bigger confusion with Mitt Romney's tax policy is why, if the budget deficit is as big a deal as the GOP seems to think it is, you'd be cutting taxes in the first place?

The same idea why Obama thinks, with a huge budhet deficit, you'd think to put a trillion dollars into a Stimulus package.

 

Economic stimulus comes from not only spending money on gov't projects to create jobs, it can come from tax reduction so comanies, individuals have more income to 'spend'. Same idea, just a different vehicle.

 

I actually like about half of Obama's Stimulus package to help the economy. A portion of it was money injected into infrastructure and some was indeed tax breaks. Those two things I feel you get the most bang for your buck. Cost/Benefit if you will.

 

What was ridiculous was all those stupid pet projects for energy, pork items, and all that money that was wasted away.

[MDC 7,590]

The same idea why Obama thinks, with a huge budhet deficit, you'd think to put a trillion dollars into a Stimulus package.

 

I get that, but Obummer obviously hasn't been making the budget deficit a priority. The GOP has a debt clock up at their convention, then their candidate puts forth policies that would cut revenue. It makes no sesne.

 

Economic stimulus comes from not only spending money on gov't projects to create jobs, it can come from tax reduction so comanies, individuals have more income to 'spend'. Same idea, just a different vehicle.

 

About a third of the last round of stimulus was tax cuts and it doesn't seem to have had much of an affect. I think the feds have pretty much done whatever they can do to get the economy going now and at this point we just need to wait out the slump. Further tax cuts, spending, lowered interest rates, etc. aren't going to do anything.

[parrot 789]

I get that, but the reduction disproportionately favors the person at the top.

 

No, it proportionately favors the person at the top.

[IGotWorms 4,060]

Those people pay much more too, It's all relative to what you bring in

 

Okay, let me put this a different way, because I think this is important.

 

Romney says "I'm going to cut everyone's taxes 20%". Sounds great, right? Sounds fair too, doesn't it?

 

So the amount of money the government brings in is cut. The top earners get their taxes cut 7%, the middle earners get them cut 4%, and so on.

 

The point is: DOESN'T THIS LEAVE EVERYONE BUT THE RICH PAYING A GREATER SHARE OF THE OVERALL TAX BURDEN? Yes everyone got a 20% reduction. So the middle bracket is paying less taxes, which I suppose is nice. But when you add it all up, doesn't their share of the overall proportion of the total tax revenues taken in actually increase?

 

And if so, how does that maintain the "progressivity" of the tax code? It makes it less progressive, right?

[IGotWorms 4,060]

The bigger confusion with Mitt Romney's tax policy is why, if the budget deficit is as big a deal as the GOP seems to think it is, you'd be cutting taxes in the first place?

 

That's a separate issue, although I think it warrants debating as well. To answer your question: Romney says the tax cuts will be revenue neutral by closing loopholes. But he does not explain what loopholes will be closed. And he's explicitly said that some loopholes favoring the rich will be kept in place, because those loopholes spur development. So it kinda sorta seems like the loopholes he's targeting are things like the mortgage-interest deduction. But we don't know for sure because he hasn't said.'

 

It also begs another question: if so many loopholes are closed that the overall number of dollars brought in by taxes is the same, then why cut taxes at all?

[DankNuggs 305]

This thread is why politics is a clownshow....

 

If he clips the mortgage deduction he is dead to me... I had presumed the loopholes had to do with income sheltering, which disproportionately affects the wealthy...

[DankNuggs 305]

That's a separate issue, although I think it warrants debating as well. To answer your question: Romney says the tax cuts will be revenue neutral by closing loopholes. But he does not explain what loopholes will be closed. And he's explicitly said that some loopholes favoring the rich will be kept in place, because those loopholes spur development. So it kinda sorta seems like the loopholes he's targeting are things like the mortgage-interest deduction. But we don't know for sure because he hasn't said.'

 

It also begs another question: if so many loopholes are closed that the overall number of dollars brought in by taxes is the same, then why cut taxes at all?

because closing cayman island loopholes while lowering the entire tier of taxes will help more people than the status quo...

[DankNuggs 305]

And he's explicitly said that some loopholes favoring the rich will be kept in place, because those loopholes spur development.

I think you are talking about capital gains rates vs ordinary income, and there is very good reason why a disparity between the two should exist.

[parrot 789]

 

If he clips the mortgage deduction he is dead to me...

 

Why?

[Mike Honcho 5,332]

Bar stool economics appeals to people who don't think very critically.

 

http://www.youtube.com/watch?v=20XAS3ORhEg

[DankNuggs 305]

Why?

Because I own a home and the majority of my tax return is MITD. Not to mention that it would also have a ripple effect on the entire housing market.

[KSB2424 3,148]

Why?

In the perfect world there shouldn't be a mortgage deduction on your taxes. However, IMO, if we are going to start to look at ALL these loopholes and deductions and tax credits and etc. Then something like the mortgage tax deduction, which effects millions of working homeowners, should be low on the list.

 

If we get to it down that list then fine by me, but lets start at the top of the list first. There are hundreds of tax credit/deductions where people take advantage of and all but lie about on their taxes. The landscape owner taking his family to Disney, cutting one yard in Florida while he is there, and deducting the whole trip as a business expese type crap. Lets start with stuff like that first before we get to items that are pretty cut and dry and effect honest working Americans.

[parrot 789]

And he's explicitly said that some loopholes favoring the rich will be kept in place, because those loopholes spur development. So it kinda sorta seems like the loopholes he's targeting are things like the mortgage-interest deduction. But we don't know for sure because he hasn't said.'

 

What makes you think the HMID doesn't favor the wealthy? Some 75% of HMID credits go to the top 20% of wage earners.

[parrot 789]

In the perfect world there shouldn't be a mortgage deduction on your taxes. However, IMO, if we are going to start to look at ALL these loopholes and deductions and tax credits and etc. Then something like the mortgage tax deduction, which effects millions of working homeowners, should be low on the list.

 

If we get to it down that list then fine by me, but lets start at the top of the list first.

This is one of the biggest tax credits we have - $100 billion - 12 figures. Why would it not be pretty high on the list of things to look at?

 

Per the bolded; the problem there is that it simultaneously doesn't affect millions of other working homeowners, for no better reason than they don't spend enough on a house, or they don't choose to carry enough debt on that house, and/or they pay their debt down. A federal tax policy that incentives people to carry debt and rewards them more the more debt they carry is one of the dumbest things imaginable. And it sure as fock shouldn't allow you to write off interest on other expenditures simply because you're willing to secure them with your house. It makes it financially beneficial over the short run for people to leverage as much as possible the biggest and most vital asset most will even have. It's really an idiotic policy. This should have become clear in light of the housing bubble collapse, but it didn't, simply because so many people perceive that it helps them.

 

If you want to use tax policy to encourage home ownership, fine. But it should be in the form of a uniform credit and have no relation to how much debt you carry.

 

Yes, this is one of my pet tax peeves.