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View Diary: Verizon pays a negative federal income tax rate, then pursues more tax breaks (41 comments)

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  •  Well... (0+ / 0-)

    ...sometimes other parties do it (allegedly) on your behalf.

    For example, one of the greatest boondoggles in taxation in America survives in part because of vested interests (the real estate industry)  lobbying on the consumers' "behalf" to subsidize home "ownership" via two giant tax loopholes.

    First is the deduction for interest on a mortgage. This is a lingering remnant of the deduction for all consumer interest since the early 1900's but stripped down to the special case of only mortgage interest in 1986.

    Second is the exemption of capital gains on the sale of one's residence up to $500,000 per couple. Ironically that's over twice the median house price in the US so giant gains can be completely exempt from taxation forever. This gaping loophole was introduced in 1997 (replacing a much more reasonable "one time deduction" for gains for older folks and the ability to carry gains and basis tax-free across qualifying home sales).

    Most people seem to support these loopholes (esp. the mortgage interest deduction) because they thought they benefited from them. They are actually wrong in many cases because these loopholes helped drive housing prices up making it harder for first time buyers to afford to "buy" a house and also encouraged over-leveraging. These loopholes also contributed to the housing bubble which certainly hasn't helped most people much.

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