Posted by Delta_CA on 10/13/05 4:35pm
Msg #70335

Check This Out

Builders vow to save home loan tax break

By Sue Kirchhoff and Kathy Chu, USA TODAYThu Oct 13, 6:34 AM ET

Home builders vowed Wednesday to fight any attempt to eliminate tax preferences for homeownership. But several economists said a federal commission's plan to trim mortgage interest deductibility was needed to address broad market distortions.

The debate springs from Tuesday's decision by a special panel, appointed by President Bush, to recommend reducing tax breaks for home mortgage interest and employer-provided health care, while increasing deductions for charitable contributions.

The mortgage proposal is drawing the most attention. Homeowners can now deduct interest on mortgages up to $1 million. The panel likely will suggest a threshold of around $300,000 when it makes a final report on broad tax code changes Nov. 1. The mortgage and health care trims are intended to help pay for repeal of the alternative minimum tax, which will affect 20 million taxpayers next year.

"When this report is issued and the debate then begins ... the National Association of Home Builders is going to do its damnedest to protect the preferred treatment of housing in the tax code," says Jerry Howard, NAHB executive vice president.

Howard and Linda Goold, tax counsel for the National Association of Realtors, say overhauling the tax code would be a long slog. But in the short term, Goold worries the panel's proposal will "send a lot of chills" through the market and cause people to hold off on buying or selling a home. If the proposal becomes law, home values might be affected.

"We know that when the tax benefits of real estate are changed, at the higher end of the market, values go down," Goold says.

The effects could be uneven. Nationally, the median home price is $220,000, but is higher in the West, at $322,000, and in the Northeast, at $254,000.

In a recent report, the non-partisan Congressional Budget Office said capping the deduction at $500,000 could increase tax revenue by nearly $50 billion from 2006 to 2015.

Home lending and prices could decline at the top end of the market, though the impact would depend partly on the speed of the change.

The CBO and other economists point out that the money owners invest in their homes brings a tax-free return, unlike most other investments. In addition to the mortgage deduction, owners get a capital gains break on profit of up to $500,000 on the sale of a residence for a married couple filing jointly (or $250,000 for a single owner) that meets certain requirements.

Mark Zandi, chief economist at Economy.com, argues the nation has been putting too much money into housing - about 35% of net private investment since 1980, according to the CBO - instead of other economic sectors. Consumers have cashed out trillions of dollars in home equity during the five-year boom market.

"There are strong arguments to be made that we're overinvesting in housing and that households increasingly are too reliant on their homes as a source of cash," Zandi says. "That's in part a result of tax policy."

With more limited tax breaks, consumers might not cash out as much home equity, eventually boosting personal savings from current low levels.

William Gale, senior fellow at the Brookings Institution, says the value of the tax deduction has diminished in past decades as tax and mortgage rates have fallen: "The notion that any diminution in the value of the mortgage (deduction) is a catastrophe for America's homeowners is just completely off base."

Reply by Anonymous on 10/13/05 4:50pm
Msg #70340

If he would stop taking care of his buddies and the war where we don't belong. We would have had money in a treasury and he would have to stop looking for ways to line the the pocket of his buds, oh I mean treasury.

Reply by Anonymous on 10/13/05 6:06pm
Msg #70368

then we could all be dead also because of terrorist attacks

Reply by Anonymous on 10/13/05 6:28pm
Msg #70374

He has made a free Terrorist state out of Iraq. How do you know your enemy if you can't even speak the language?

Reply by DLarson_FL on 10/13/05 8:09pm
Msg #70390

Re: Check This Out - Published in WSJ

Bush Tax Panel Targets Mortgages

By ROBERT GUY MATTHEWS
Staff Reporter of THE WALL STREET JOURNAL
October 12, 2005; Page B2

President Bush's tax-overhaul commission is close to recommending
limits on popular tax breaks on home mortgages and employer-provided
health insurance.

That plan, however, is likely to meet strong opposition from
taxpayers and lawmakers. Americans already are worried about
escalating health-care costs, and homeowners regard mortgage tax
breaks as sacrosanct.

QUESTION OF THE DAY


1
Vote:2 Should the home-mortgage tax deduction be reduced for high-
cost homes?While details are still being worked out, the bipartisan
panel is leaning toward lowering the cap for mortgage deductions to
about $300,000, disallowing deductions for interest payments to the
extent the mortgage exceeds that amount. That would put the
deduction more closely in line with the Federal Housing
Administration's maximum insurance on loans. Currently, the
deduction cap is $1 million. The median price for a home in August
was about $220,000, according to the National Association of
Realtors.

Panel members said at a meeting yesterday that scaling back the
deductions for mortgages and employer health-insurance costs would
better distribute tax breaks across all income levels, since both
disproportionately benefit upper-income earners.

The nine-member panel, due to make its recommendations by Nov. 1, is
expected to reject any move to adopt a value-added tax, or VAT, or a
national retail sales tax -- innovations commission members said are
too complicated to put into practice.

At its meeting yesterday, the panel said it doesn't want to stop
people from buying houses, but it would like to slow the rise in the
cost of housing that has priced some lower-income earners out of the
market. In theory, capping the mortgage deduction would remove an
incentive to buy ever larger houses.

The panel will discuss how to ease the transition, possibly
grandfathering in people who already have purchased houses with the
expectation that they would receive their mortgage deductions over
the course of their home loan. Another option being discussed is to
gradually institute the cap over, for example, a 10-year period, so
as not to shock the housing market.

"It would curb the speculative appreciation that is occurring around
the market," said Bruce Katz, director of the metropolitan policy
program for the Brookings Institution.

If the commission moves toward recommending a ceiling on employer-
provided health insurance, it could affect only the most generous
health plans. Panel member Timothy J. Muris, a professor at George
Mason School of Law and former head of the Federal Trade Commission,
suggested that the ceiling should be around $11,000 for family
coverage -- about the average amount provided by the federal
government to its employees. A tax would be applied on the amount
over the agreed ceiling.

According to a September survey by the Kaiser Family Foundation, the
annual premium for covering a family was about $10,800.

For fiscal 2005, which ended Sept. 30, the Office of Management and
Budget estimated that the exclusion of contributions for medical-
insurance premiums and medical care from employee income cost the
Treasury $112 billion in foregone tax collection. That is the single
largest tax break in the federal budget, according to the Tax Policy
Center, a joint venture of the Urban Institute and Brookings.

Write to Robert Guy Matthews at [e-mail address]

Reply by Anonymous on 10/13/05 9:34pm
Msg #70402

WON'T Happen over night

Any change would like be phased in over several years and even then face a battle.

Reply by newlysmomva on 10/14/05 8:05am
Msg #70446

Re: WON'T Happen over night

I have not problem with a $500,000.00 cap. I think it would be fair. I also agree that if George W. Weasel was not wasting money in Iraq and lining his and his buddys pockets, we would be better off. Iraq was not about terrorism, it was a personal vendetta. He likes to keep people scared so he can manipulate the system...same thing Hitler did in Germany before WWII.