Does Obama's budget plan call for elimination of Property Tax deduction?

[Vince_nj1]

I am being told that Obama's budget is calling for the elimination of property tax deduction. Has anyone else heard this?

 

[jason78]

I have heard this as well but who knows what the final changes will look like. I suspect he will be trying to eliminate more than just the property tax deductions. The bottom line is-To keep spending at the rate he is now and continuing to pay debts, he will have no choice but to raise taxes and he is not going to be able to get all he needs from the so-called "rich" that have an income of over 250K. This will end up coming out of everyone's pocket. (well not everyone, just the 50% actually paying taxes)

This will affect all actual taxpayers, but remember, it is NOT an increase in income taxes, just more CHANGE.

 

[Woody]

Guys, this 50% ain't paying taxes thing is a diversion. The subject does deserve huge attention but not of the type it's getting. Your displeasure with how things are going has been redirected from Washington to the lower 50% of income earners.

 

[jason78]

Guys, this 50% ain't paying taxes thing is a diversion. The subject does deserve huge attention but not of the type it's getting. Your displeasure with how things are going has been redirected from Washington to the lower 50% of income earners.

Not me. I am still displeased with Washington. I am also displeased with some of the 50% that do not pay income taxes but more displeased with the liberal government policies that reward them for being irresponsible. This includes the ones that get a welfare handout from the IRS on top of a 100% refund of what little they paid in. There are certainly people who truly need be on welfare. Welfare should NEVER be given in cash form. Sure, free food, free healthcare, free housing, free cell phone- fine, there are people who need to have those things. The reason for that need is debatable in many cases but I won't get in to that right now.

The liberals would say these cash welfare payouts by the IRS are "needed by poor people for essential needs". Well I work in a town where probably half the people are on some kind of welfare and many of them are no doubt receiving these payments and I can tell you the WalMart is a boomin when these payouts start flying in. So unless a 42 inch LCD TV is an essential need, that justification is a load of crap. 60 days and it's all blown and they are broke again then they are off making more babies so they can get more next year.

When cash is taken out of my pocket and handed, as cash, to someone who "is entitled to it" by being irresponsible and having kids thay cannot support is just plain wrong and has got to stop.

 

[CROSE]

That was the plan purposed by the Debt Reduction Commission. I posted the highlights. Entire article is here

"Among the tax deductions to go is the mortgage interest deduction, which allows homeowners to deduct their interest payments on their mortgage from their taxable income. The proposal is to turn it into a tax credit with a cap on eligible mortgages at $500,000 and eliminating tax benefits for home equity loans and second homes. By converting the mortgage interest deduction to a tax nonrefundable 12% tax credit, everyone would be able to take advantage of this savings (you dont have to itemize as you would to receive your deduction)."

 

[Vince_nj1]

Not me. I am still displeased with Washington. I am also displeased with some of the 50% that do not pay income taxes but more displeased with the liberal government policies that reward them for being irresponsible. This includes the ones that get a welfare handout from the IRS on top of a 100% refund of what little they paid in. There are certainly people who truly need be on welfare. Welfare should NEVER be given in cash form. Sure, free food, free healthcare, free housing, free cell phone- fine, there are people who need to have those things. The reason for that need is debatable in many cases but I won't get in to that right now.

The liberals would say these cash welfare payouts by the IRS are "needed by poor people for essential needs". Well I work in a town where probably half the people are on some kind of welfare and many of them are no doubt receiving these payments and I can tell you the WalMart is a boomin when these payouts start flying in. So unless a 42 inch LCD TV is an essential need, that justification is a load of crap. 60 days and it's all blown and they are broke again then they are off making more babies so they can get more next year.

When cash is taken out of my pocket and handed, as cash, to someone who "is entitled to it" by being irresponsible and having kids thay cannot support is just plain wrong and has got to stop.

Lets not forget what we spend on schools to educate them and then police to arrest them when they rob us.

 

[Woody]

I'll ask you to wonder who all might be in this 50% of tax returns that are <33,000 AGI. Don't consider just your specific area, don't consider just 'them' who rob us and have to be arrested. Consider all 70,000,000 million tax returns that are in the lower 50%. Who are these people?

 

[CROSE]

I'll ask you to wonder who all might be in this 50% of tax returns that are <33,000 AGI. Don't consider just your specific area, don't consider just 'them' who rob us and have to be arrested. Consider all 69,000,000 million tax returns that are in the lower 50%. Who are these people?

Both my kids. They both work (my daughter actually has 2 jobs) both live on their own, both go to school.

 

[comsnark]

Btw: I don't think mortgage and property tax deductions are features of any of the flat tax proposals I have seen.

Did that huge $100 billion-errr I mean $32 billion spending cut really only reduce $300 million in spending?

 

[jason78]

Btw: I don't think mortgage and property tax deductions are features of any of the flat tax proposals I have seen.

Correct, but isn't that the whole point of flat tax? Everyone pays the same tax rate on consumption and we don't have to worry about what is or is not a deduction. Then we don't have the pay the IRS hundreds of millions a year to operate as a huge inefficient elephant or worry about the billions that are lost from tax cheaters either hiding income or lying on tax returns to pay less tax. I would argue that pay would probably increase too if the employers did not have to match what you pay in taxes.

The 4 groups I see flat tax not working out well for-

IRS Employees
Tax Cheats
Accountanting firms like H&R Block, etc.
Politicians (depending on the election year)

 

[comsnark]

Absolutely!!!

Of course, most people conflate "elimination of deductions" with "flat tax".

I believe in eliminating ALL deductions, ALL credits, ALL exemptions, and having tax rates with a few progressive tiers.
Tax code should not be used as a social program to encourage behaviors with deductions.

The ONLY exception I would consider would be the home mortgage deduction for primary homes. Preferably with a 20 year phase out provision. ( i.e. deduct 100% for 2011, 95% of 2012, 90% for 2013. . . .). The reason I advocate this one is because it tends to be a huge deduction for most people, and very much baked into the economy.

 

[comsnark]

I would argue that pay would probably increase too if the employers did not have to match what you pay in taxes.

You can argue that.
I would dispute it.

The company *I* work for would let you keep your gross income, but they ABSOLUTELY would keep their portion of the taxes they pay the government.

You see, they set salaries based upon *competitive* forces.

The only reason they didn't cut my salary 15% two years ago was because I would have quit on the spot -> but they did eliminate raises because none of our competitors was giving raises either. The only reason I got a raise last year was because I (politely, using many foo-foo team building words in a positive atmosphere) began talking about future career opportunities.

Now I will say that if the company doesn't have to pay taxes on my behalf, my cost to the company does indeed go down; so outsourcing my high-tech job to China or India becomes less attractive.

 

[jason78]

Absolutely!!!

Of course, most people conflate "elimination of deductions" with "flat tax".

I believe in eliminating ALL deductions, ALL credits, ALL exemptions, and having tax rates with a few progressive tiers.
Tax code should not be used as a social program to encourage behaviors with deductions.

The ONLY exception I would consider would be the home mortgage deduction for primary homes. Preferably with a 20 year phase out provision. ( i.e. deduct 100% for 2011, 95% of 2012, 90% for 2013. . . .). The reason I advocate this one is because it tends to be a huge deduction for most people, and very much baked into the economy.

Well, I can't believe I am saying this but I think I can agree with you. About the only thing I would not agree on is tiers. I believe that a family with a $500,000 a year income will be consuming a heck of a lot more than a family making $50,000 a year hence they will already be in a different "tier" just by default. Initially, I was thinking low income families should have a deduction on essential needs food but truly, as many people as there are on food stamp programs right now, chances are the state is probably paying for those familys' food anyway.

I would love to be able to do a college savings account for my kids without having all the hassle and restrictions of a 529 plan and heck be able to save my own money tax free without having to put it in some dedicated plan like my 401K.

It would be really nice to not be taxed on the same dollar when I make it, when I spend it, when I own it, and when I die and leave it to my family.

 

[jason78]

You can argue that.
I would dispute it.

The company *I* work for would let you keep your gross income, but they ABSOLUTELY would keep their portion of the taxes they pay the government.

You see, they set salaries based upon *competitive* forces.

The only reason they didn't cut my salary 15% two years ago was because I would have quit on the spot -> but they did eliminate raises because none of our competitors was giving raises either. The only reason I got a raise last year was because I (politely, using many foo-foo team building words in a positive atmosphere) began talking about future career opportunities.

Now I will say that if the company doesn't have to pay taxes on my behalf, my cost to the company does indeed go down; so outsourcing my high-tech job to China or India becomes less attractive.

I agree somewhat to your disagreement. Does that make sense?

I was pretty vague in my statement. Do I think all companies would give across the board raises if a flat ever came in to play, no. Some would but the majority would not. What I meant and should have explained is that without the added expense of the employer side taxes, they will likely be more loose with the purse strings when raise and bonus time comes; or at least more so than many companies are right now.

 

[Woody]

Generally speaking...The government is currently collecting X in taxes and in fact they want X+. To think that changing the method of collecting X tax might somehow result in a net income gain to the worker is naive. Remember, they are trying to find trillions to cover the spending they're doing and their main source is us. They are not baking any new pies folks, but they sure do like their pie, and their looking at your slice again...just one more bite, please.

 

[MonacoMike]

I would argue that pay would probably increase too if the employers did not have to match what you pay in taxes.)

You can argue that.
I would dispute it.

The company *I* work for would let you keep your gross income, but they ABSOLUTELY would keep their portion of the taxes they pay the government.

You see, they set salaries based upon *competitive* forces.

Com, I’m with Jason on this but for clarity I would like to stipulate that we are talking about employment tax not corporate income tax.

If an employer has an employee they pay a matching tax as part of the total expense of that employee. An employer only cares about total cost of an employee not the individual expenses of said employee. Thus if the employment tax was rescinded the total cost of the employee would go down but productivity would remain the same and the competition you note above would cause the employers to compete for the productive use of the employees. Any company that did not pass the reduced cost on to the employees would lose them to competitors. Not saying they won’t try, just it won’t work if the employee is productive at the cost paid.

 

[MonacoMike]

I think this is an interesting addition to the discussion: “The Rich Aren’t Getting Richer, Actual super-wealthy households saw their income decline.” In the tax discussions it is often forgotten that most of the poor are not “poor” in ten years and the “rich” are not at that income level in ten years as well. If you do these things you will not be poor 1. Finish school, 2. Don't go to jail, 3. If you get married, stay married. 4 Don't have kids outside of marriage, etc. Many of the so called rich are just people at their peak earnings years or like some on our forum that have sold businesses, neither are in the permanent “rich” category.

Some discussion material,

http://www.msnbc.msn.com/id/42364656/ns/health-kids_and_parenting/from/toolbar

http://www.nationalreview.com/articles/264296/rich-aren-t-getting-richer-kevin-d-williamson

 

[Woody]

You've just rescinded half the income to the SS and Medicare social programs. On top of that you're divying up that money amongst the employees. Question, who is picking up that 7.65% now that the employer isn't doing it?

 

[comsnark]

No. . . I am clear that we are talking about the employment tax.

I think you guys are making the same arguments they made when passing "free trade". I remember the argument. "If it costs $10 to make a sweater in the US, and $5 to make a sweater in Mexico; the customer will see a savings." Yeah. . .right. Capitalism doesn't work that way. Before free trade, the sweater cost $30 in the store. After free trade, that sweater still cost $30. And after the clothing company moved production to Vietnam (because labor costs in China were too high); the sweater now costs $35. And the material is crappier.

Unless legally REQUIRED to increase employee gross income to by the amount of the tax. . . you KNOW that management will call the employer side of the tax an overhead expense, not compensation, and not pass on the money. You know that many right of center commentators will make this argument. Afterall. . .the company agreed to pay you "X". As long as the top line on your paycheck says "X"; they have fulfilled that obligation. You will receive "X" minus the state mandated reductions. If the state mandated reductions go down. . .good for you! But I see no reason for the company to give you 1.06*X

Now. . . this is where competition comes in. I bet there will be some companies "pass the savings" on to the employee, and some will not. I am willing to bet that even if some companies in my industry will "pass the savings", mine will not. And won't do anything until they start to see employee attrition. To be honest, a mere 6% differential won't make most people in my profession change jobs (not without other serious factors).

Besides. . .how would it work if they pass the savings to the employee? That is straight forward in 2010 for employess who gross less than $106,800. It's a straight 6.2% raise. What about those who make more? Let's say you make $213,600. Would you give that person a 6.2% raise? That would be silly. How about a 3.1% raise? That would be silly. What's the right way for 2011? The $106,800 number moves. . . . Want more still more confusion? How about if you make $90,000 - but normally get a $20,000 bonus?

Seriously. . .if social security went away (along with the payroll tax) the cleanest way would be to declare win-win. The employee no longer gets the payroll tax deducted. . the company no longer pays the overhead. If that makes the company more profitable. . . and they increase bonuses. . great. (I would be ok with this).

BTW: Just to nip another counterargument -> the people making these decisions are making more than $250K in my company. I bet increased bonuses due to reduced overhead will make a bigger impact to their income than the employer side of the payroll tax (what. . $6621?)

 

[comsnark]

You've just rescinded half the income to the SS and Medicare social programs. On top of that you're divying up that money amongst the employees. Question, who is picking up that 7.65% now that the employer isn't doing it?

Woody; we have gotten onto a sidebar when we talked about "Tax simplification". Presumably, the employee and the employer are no longer paying payroll taxes to SS and medicare because those programs no longer exist. We can debate the merits of those programs in another thread.

Personally. . I think that is a stretch. I strongly suspect that if those programs magically go away; then someway. . .somehow. . .the taxes will remain.