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1 jvic  Thu, Nov 17, 2011 2:51:08pm

1. Let me get this straight.

During these difficult times, Joe Homeowner is trying to hang on to his place despite being underemployed or drawing down his retirement funds. When the housing industry is nowhere near recovery, the GOP wants to increase Joe’s taxes by withdrawing a deduction that both Democrats and “Ownership Society” Republicans created to encourage Joe to buy a home.

Unless the AP fundamentally misrepresents their position, they are not proposing to grandfather Joe’s deduction in.

2. As a libertarian conservative, I regret my 2008 vote for Obama and have no intention of voting for him again, but, for the first time, I just momentarily wavered.

2 ThePopulist  Thu, Nov 17, 2011 3:23:28pm

I am paying a mortgage. I can live with this going away as long as the rich see a tax hike.

3 funky chicken  Thu, Nov 17, 2011 3:30:49pm

re: #2 ThePopulist

I am paying a mortgage. I can live with this going away as long as the rich see a tax hike.

But the rich are going to see a tax cut. That’s the whole point of Toomey’s plan—further squeeze the middle class to hand yet another tax cut to the “job creators” who have created so many jobs over the past 10 years that we have a major unemployment crisis.

4 funky chicken  Thu, Nov 17, 2011 3:33:33pm
The top income tax rate would fall from 35 percent to 28 percent, and the bottom rate would drop from 10 percent to 8 percent. The rates between would be reduced as well.

That’s a HUGE tax cut for the wealthy.

5 KingKenrod  Thu, Nov 17, 2011 4:27:18pm

This isn’t necessarily protecting the rich. You have to take some time and look at the details.

The tax cut is in return for limiting itemized deductions to 2% AGI. The reason why there is a 20% reduction in tax rates across the board is because otherwise this would be such a huge tax hike. According to this article, someone making $500,000 a year would pay $40,000 more in taxes if you limit deductions without the rate cut. That’s raising the effective rate about 10%, which is huge (tax discussions usually only talk about raising marginal rates).

If that person making $500,000 receives a rate cut from 35% to 28%, that’s a $35,000 savings (even assuming they pay the top rate on all their income, which never happens). So that person would still pay $5000 more (an effective 1% hike) under this plan. And that net percentage would grow as you make more income, assuming that wealthy person usually had substantial itemized deductions.

But this plan is a disaster for charitable giving. In fact, you can look at it as a plan to shift charitable giving into tax revenue.

6 Obdicut  Thu, Nov 17, 2011 4:37:30pm

re: #5 KingKenrod

The author of that piece is one of the guys that advised AGI to do the CDOs that caused the economy to melt down. And he doesn’t regret it.

7 lawhawk  Thu, Nov 17, 2011 5:36:55pm

At a time when you’ve got conservatives saying that charities should be picking up more and more of the burden for some services, they’re proposing cutting a deduction that encourages charitable giving across the board.

That makes no sense.

I can understand a phasing out of the mortgage interest deduction (and I take advantage of that on my own home, plus the state tax deduction) but to go cold turkey would be a disaster in the making. Not only would it throw the housing market into flux, but people who were marginally making their payments as a result of the extra amount, would find themselves on a razor’s edge of being able to pay - or incapable of paying for unforeseen expenses that would otherwise be covered by the refund generated by the use of the mortgage deductions (and which many other homeowners use to renovate and maintain their homes- myself included).

I can’t see how they’d get the same revenues dropping the rate to 28% (as compared to 39.6% (which is where the rate goes in January 2013 if no action is taken). That’s the revenue line that needs to be compared against.

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