Deducing And Deducting The Mortgage Interest Deduction (January 24, 2011)
. . .
L “Decades ago, Congress made a very prudent and sage decision to eliminate the individual tax deduction for interest paid by taxpayers on consumer debt. An economy driven by unrestrained consumption did not need any additional government subsidy to drive it.”
M “No need to spray gasoline on a fire.”
L “Taxes fuel decisions. The deduction for mortgage interest remained but only for a residence not to support the acquisition of personal property. The real estate industry secured and protected that deduction. And you know what happened?”
M “Humans did what humans do. Acted like humans.”
L “They acted humanly rather than humanely. Citizens and consumers found a way to circumvent the law. They could not deduct the interest paid to consume goods and services, but they could deduct the interest paid to consume their chateau even if they actually used the funds to consume goods and services. They simply used their chateau as an ATM (automatic teller machine) to pay for the consumption of consumer goods and then deducted all of the interest on their taxes. How many really knew what they were doing. And yet, Americans of every creed and color, every region and religion circumvented the spirit if not the letter of the law.”
M “The dilemma is that the mortgage interest deduction may be one of the last tax deductions available to the middle class, if the middle class can afford to buy homes.”
L “Everyone would be better off without the deduction and most other deductions, exemptions and credits. However, if Congress eliminated the mortgage interest deduction, the amount of the standard deduction may need to rise for a few years and then fall to zero during the transition to avoid jarring economic dislocations.”
M “It’s not going to be easy.”
. . .
Bumper stickers of the week:
We have met the enemy, and boy oh boy is he ever you and me. Mr. Pogo.
If one minute of cautionary commentary had been ventured last year for every month of coverage of the assault on Gifford and others, events may have developed differently.
If we as a society diverted one percent of the funds spent on the TSA (Transportation Security Administration) airport monitoring to FAA (Federal Aviation Administration) airline maintenance monitoring, the skies would be 100 times safer.