* Washington Sets Its Sights On Mortgage Deduction
Thursday, June 17th, 2010Last week The Hill posted an article [Ax May Fall On Tax Break For Mortgages] reporting that lawmakers in Washington were looking at scrapping the Federal tax deduction for home mortgage interest. as you might expect, this comes in the guise of deficit reduction. Last year, President Obama proposed cutting the deduction rate for itemized expenses [which includes the mortgage interest deduction and the charitable deduction] for families with incomes above $250,000
What I find interesting about this is the change in terminology. Instead of being a deduction, mortgage interest is now being called a “tax entitlement.” “Entitlement” makes it sound like something that can’t be touched, but puts a negative connotation on it at the same time.
So, where do things go from here? Some of my observations/predictions
- The Federal government is spending like the proverbial drunken sailor. Because of that, it will be desperate of any source of income over the next decade
- The mortgage interest deduction is a fairly large pot of money. The White House estimates it’s proposal would increase government revenues by $208Billion over the next ten years. This combination makes change almost inevitable.
- Despite that inevitability, you won’t see Congress take action prior to the elections in November. THat would be a scary vote to make right before an election. Instead, wait for it in December when lame duck Congressmen can vote for it and people won’t notice ’cause it’s Christmas.
- This might start with people who make over $250,000, but it won’t stay there long. Tax law is one of the places that defines “slippery slope.”
I would encourage every homeowner to keep an eye on this issue and contact their Congressmen if and when this comes up for debate. After all, it’s a difference of several thousand dollars in most taxpayers’ taxable income.
[Since we talked about terminology before, it's also worth noting in the second paragraph of the Hill article, it calls an increase in your tax liability a "savings." That is an attitude in the Government we need to address -- that all money belongs to the Government, but they allow you to keep some of it.]
