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This should be hammered by Obama tonight. Romney now wants to limit deductions to 17,000...

While Bloomberg thinks this is good...its not...

I don't know how many of you have homes under water. Mine is drowning.

But for those who played by the rules and continued in their homes when the crisis hit, the sole benefit one got was the tax deduction.

If you limit that deduction now, you are going to cause a new round of home foreclosures. The middle class will again take another hit, just for a rich tax cut.

The Tax Policy Center' s analysis already showed you needed to remove all deductions for Romney's plan to be revenue-neutral. So this new item not only hurts middle-class home owners but still increases the deficit.

Not to mention the charitable deduction....charities also take a hit.

If this idea does not get blown to bits tonight I will be disappointed....

1:07 PM PT: Update:  Obama for America Responds...

After months of failing to explain how he could make his $5 trillion tax plan add up, Governor Romney has finally admitted that middle-class tax breaks are on the table. He said that he might cap deductions at $17,000—meaning he would limit the charitable, home mortgage, health care and other deductions to that amount. It’s a new idea—but, just like the many other ways Romney has described his tax plan, it would raise taxes for millions of middle-class families.

Here’s the problem: Many families deduct much more than $17,000 now. In fact, health premiums alone cost $15,745 this year, according to the Kaiser Family Foundation. So if a family started there, Romney’s plan would instantly wipe out nearly all other deductions—including mortgages, charitable contributions, and state and local taxes.

The result would be higher taxes for many families. Consider these two examples:

•$3,000 tax increase on a family of four making $125,000: This family has an employer health plan worth $16,000, pays $2,333 a month in mortgage interest, and contributes $3,000 a year to charity and pay $6,000 a year in state and local taxes. Despite benefiting from lower tax rates under the Romney plan, nearly all of their deductions outside health insurance would be wiped out—leaving the family with a $3,000 tax increase.

•$400 tax increase for a family of three with an income of $85,000: The family has an employer health plan worth $16,000, makes monthly mortgage interest payments of $1,250, contributes $5,000 to charity, and pays $6,000 in state and local taxes. They lose all but $1,000 of their deductions, resulting in a $400 tax increase even after Romney’s lower tax rates are included.

These examples are hypothetical, but hardly uncommon. Millions of middle-class families claim tens of thousands of dollars in tax deductions and would face higher taxes under Romney’s plan. And of course, any attempt to limit that impact would simply mean that Romney would be farther away from paying for his tax cuts.

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Comment Preferences

  •  My daughter's house is underwater by (7+ / 0-)

    approx 50%. Payments are high and the only thing saving them is the interest deduction. Without that they'd no doubt be in foreclosure.

    Whose bread I eat, his song I sing.

    by Hanging Up My Tusks on Wed Oct 03, 2012 at 11:26:15 AM PDT

  •  It also kinda sorta totally kills the idea (10+ / 0-)

    that the middle class wouldn't get hurt by his tax plan, doesn't it?

    Let us all have the strength to see the humanity in our enemies, and the courage to let them see the humanity in ourselves.

    by Nowhere Man on Wed Oct 03, 2012 at 11:27:40 AM PDT

  •  Didn't he propose... (18+ / 0-)

    $17,000 in TOTAL deductions?  That includes interest, property tax, charity, state, local, etc.

    Why is Mitt Rmoney so happy that an American embassy was attacked? Why does he hate America?

    by RichM on Wed Oct 03, 2012 at 11:29:42 AM PDT

  •  I don't have a problem phasing it out (3+ / 0-)
    Recommended by:
    penguins4peace, FG, PeteZerria

    for high amounts, though 17k might be too low. Any phasing out would have to be over a long period of time to avoid causing serious problems.

    I do think it's political idiocy on Romney's part, though. It would be a big tax hike on upperclass homeowners. I assume some of those people are his supporters...

    •  Deductions are deductions for a reason (3+ / 0-)
      Recommended by:
      cosette, Cassandra Waites, a2nite

      Consider: Home-owner with 17k in mortgage interest; no tax on income spent on the deductible category.

      Renter with 17k in medical bills; no tax on deductible amount.

      Home-owner with 17k in mortgage interest and $17k in medical bills; his deductions are 17k and he'll pay tax on his mortgage interest.

      That's not FAIR!

      This 'cap' is a non-starter. Don't even consider it.

      If we don't pay tax on medical bills then nobody should pay tax on income that went to medical bills.

      Change deductions if some category of expense is now deductible and shouldn't be, but treat everyone the same!

      Am I right, or am I right? - The Singing Detective

      by Clem Yeobright on Wed Oct 03, 2012 at 11:48:18 AM PDT

      [ Parent ]

      •  Addendum: A cap WITHIN a category is OK (1+ / 0-)
        Recommended by:

        Yes, there should be a maximum amount of mortgage interest that can be deducted - and there is.

        There might be a cap on charitable contributions - and there isn't.

        Medical expenses and state/local taxes are much more 'iffy'.

        But if you can take off your first 17k of state and local taxes then I should be able to do the same.

        The tax code MUST be fair.

        Am I right, or am I right? - The Singing Detective

        by Clem Yeobright on Wed Oct 03, 2012 at 12:00:44 PM PDT

        [ Parent ]

      •  I'm probably dense today (1+ / 0-)
        Recommended by:
        Clem Yeobright

        I don't follow you at all. I'm talking about a cap within the mortgage category (as you seem to agree with below). If Romney is capping the entire amount of all deductions, I agree, that's not good.

        •  The mortgage interest deduction is already capped (3+ / 0-)
          Recommended by:
          squirecam, Cassandra Waites, madhaus

          basically at $1 million of mortgage principal.

          IRS PDF

          Am I right, or am I right? - The Singing Detective

          by Clem Yeobright on Wed Oct 03, 2012 at 01:34:51 PM PDT

          [ Parent ]

          •  that cap is too high (1+ / 0-)
            Recommended by:
            Clem Yeobright

            in my opinion.

            •  Are you in California? New York? (1+ / 0-)
              Recommended by:

              Do you want to limit the state/local taxes deductions for people in those states too?

              Am I right, or am I right? - The Singing Detective

              by Clem Yeobright on Wed Oct 03, 2012 at 01:48:29 PM PDT

              [ Parent ]

              •  I used to live in California (0+ / 0-)

                and even with a good job, I could not afford a one million dollar home.  I was stuck in an apartment with no deduction at all. That's actually why I left.

                So why should someone who can afford that get that deduction? Why should they pay less in taxes than me?

                I also used to live in Canada, a country with high real estate prices and NO deduction. They have done far better than we have in terms of housing and unemployment for the last few years, so I don't believe that the world would end if our deductions were  tempered a little.

                •  incorrect (1+ / 0-)
                  Recommended by:

                  You fail to account for the situation many homeowners are in. As they are underwater, they cant sell, nor can they refinance.

                  So if the tax break goes the home. And ANOTHER recession which will effect you, home owner or not.

                  The MI deduction is the one tax break that the middle class truly gets. Sure, if you have multi-million dollar homes, let the tax break be limited for higher income earners.

                  But Romney is going to hurt middle class homeowners. Those making less than $250k a year...or $200k...or whatever "level" it is this week....

                  The #1 goal now is to elect Obama. Goal #2 is....First finish Goal #1.

                  by squirecam on Wed Oct 03, 2012 at 02:11:53 PM PDT

                  [ Parent ]

                  •  I didn't suggest it be done all at once. (0+ / 0-)

                    Read my earlier comments. A lower cap would have to be phased in slowly, and I'm not advocating getting rid of it altogether.

                    I've been underwater for about three years, though it appears I'm back in the black due to a 20% increase in values in my area this year. So I very well know what "situation" many homeowners are in.

                •  You fail to understand (1+ / 0-)
                  Recommended by:

                  This is about tax breaks for upper middle income people, those who make well over the family median. These people are the ones who matter when it comes to tax breaks. Your vote and mine, and those who make significantly less than us? Not so important. It is okay to make us feel excluded.

                  Coming up next: why people earning $250K per year are "middle class".

  •  Yeah. Pretty much any homeowner (5+ / 0-)

    with a mortgage is going to come out behind on current deductions, especially if you figure in property tax on top of that.

    Now the 20% across the board tax cut MIGHT make up for it for some.  But for many, it will not.

  •  Avg price of home in Arlington VA >600K (7+ / 0-)

    if fully funded by mortgage, betw interest & taxes one will even at today's low rates be paying around 2800/month.

    2800 x 12 =  33,600

    Cut that in half if you want, and it is still 16,800

    leaving 200 to cover state income taxes, charitable giving, and anything else you can think of.

    And do not expect the wealthy to accept this.  Actually, things like museums and educational institutions will scream bloody murder because the wealthy will give far less because without the charitable deduction as leverage it will cost too much.

    A far better idea is to cap the amount of home mortgage interest one can claim

    and not to allow it on 2nd or suceeding homes for any mortgage executed 6 months after the law is enacted - you'd have to hold harmless those who already had mortgages contracted under the tax laws then in operation

    "We didn't set out to save the world; we set out to wonder how other people are doing and to reflect on how our actions affect other people's hearts." - Pema Chodron

    by teacherken on Wed Oct 03, 2012 at 11:38:24 AM PDT

    •  I am sure that Mitt has already figured out... (1+ / 0-)
      Recommended by:

      ... some way of protecting his "base" from any adverse effects of his Bucket-o-matic tax plan.  Maybe if one donates 10% of one's income to charity it's all deductible, maybe you get a means tested bigger bucket if your income is solely based on earned interest, who knows.  But Mitt will make sure that he and his buddies are well taken care of and received that tax decrease they so deserve.

      I haven't been here long enough to be considered a Kossack, does that mean that I'm just a sack?

      by Hey338Too on Wed Oct 03, 2012 at 11:50:13 AM PDT

      [ Parent ]

    •  i might agree with this in theory, (6+ / 0-)

      but an enormous number of small farmers and start ups are carrying personal mortgages on our farms, as the alternative was commercial ag mortgages at 9+ percent... what everyone is proposing thus far would be another death knell for local agriculture, and we are barely hanging on as is....

      "I took a walk around the world, To ease my troubled mind. I left my body laying somewhere In the sands of time" Kryptonite 3 doors Down

      by farmerchuck on Wed Oct 03, 2012 at 11:58:24 AM PDT

      [ Parent ]

    •  Red state, blue state (3+ / 0-)

      As a general rule, red states have cheap homes, blue states often have expensive ones.  Northern Virginia and Maryland are like Eastern Massachsuetts, New York, coastal California, etc., where crappy little houses are over $500k and middle-class families are often house-poor and tied to that deduction.  On the other hand, in Dallas, Indianapolis, Omaha, Tulsa, or Birmingham, you can get quite a nice house for $200k and a real luxury spread for say $350k.  So $17k of deductions might work there.

      His plan, then, is to harm the high-cost blue states.  A similar problem exists with medical insurance, to which alas Obamacare applies a "Cadillac tax" to what is really a very basic plan in these states.  My high-deductible family plan is over $25k/year!  And that's through a business group; the Romneycare exchange (MA Health Connector) rates are even higher.

      Such is the problem with setting constants in the law when the country is a variable.

  •  Mitt is introducing a 110% tax bracket! (6+ / 0-)

    Think about it.

    He's not eliminating any deductions, just capping their aggregate application.

    Take this year's 1040 and Mitt's new 1040.

    Fill them both out with one year's numbers. The only things that change will be net taxable income and tax due.

    Consider a family that has 60 or 70% of its income deductible: e.g., 15k in home mortgage interest, 8k in state and local taxes, and maybe 50k in medical expenses. It happens! And Mitt regards all of these as legitimate deductions ...  but up to 17k only.

    There will be families for whom the tax due - even at the new lower rate - on the 'new' 1040 will exceed the taxable income from the 'old' 1040. It will happen! Old rate * 30% of income can well be less than new rate * 53%. and their tax due can exceed taxable income: a >100% tax rate!

    I expect PBO will point this out tonight.

    Deductions are deductions because we've decided these categories of expense should be excluded from tax calculations. A 'cap' makes no sense.

    Am I right, or am I right? - The Singing Detective

    by Clem Yeobright on Wed Oct 03, 2012 at 11:39:40 AM PDT

  •  Would cost me over $12,000 / year (6+ / 0-)

    in extra taxes. We are in an expensive community, but barely hanging on...we're not rich and would lose the house if this tax plan goes through...areas like this (high home value/high local taxes) would be devastated...Mitt really does want to turn the whole country into Utah. Watch the economy tank....and all those country club republicans suddenly find themselves living in areas where no one can pay the mortgages....

    To conservatives, liberals are stupid. To Liberals, conservatives are insane. So..."Bipartisanship" is what happens when a lunatic and a moron find common ground.

    by PBJ Diddy on Wed Oct 03, 2012 at 11:41:50 AM PDT

  •  Not just home owners (4+ / 0-)

    and charities will take a hit -- how about those who have medical expenses not covered by insurance?

    My mother-in-law recently spent a couple of months in a sub-acute nursing facility after a hospitalization; because she was in the hospital less than 3 days before being transferred, Medicare would not cover any portion of her facility stay, so she had to pay out of pocket at approx. $20K/month. Fortunately she could afford it because she's still got the proceeds from her house sale plus investments my late father-in-law set up. But those deductions come in handy when it comes time to settle up with the IRS; this year she got a little over $1K in refund, which her CPA applied to next year's tax bill. (Unlike Mitt Romney, her investment income isn't in the Caymans.) In addition, thanks to HIPAA, most of the expenses for her care in assisted living are also deductible.

    This proposal is going to screw a lot of people, middle class, seniors, the disabled, you name it.

    "If we ever needed to vote we sure do need to vote now" -- Rev. William Barber, NAACP

    by Cali Scribe on Wed Oct 03, 2012 at 11:43:25 AM PDT

    •  Happened to me (3+ / 0-)

      I used 401k money to pay for a bypass (long story, but in summary my insurance had maxed out); that money was a 75% of my income for the year but I didn't have a tax obligation on it anyway.

      Watch Mitt explain - when he's called on it - how I should have stiffed the hospital for a year so I could split the payments into two tax years.

      Mitt is so used to finagling his taxes he just assumes anyone can re-categorize expenses and get the benefits.

      Am I right, or am I right? - The Singing Detective

      by Clem Yeobright on Wed Oct 03, 2012 at 11:54:25 AM PDT

      [ Parent ]

  •  Those who couldn't re-negotiate rate reductions... (4+ / 0-)

    because their place is underwater are going to get crushed by this. Their interest rates are several points higher than rates available today and thus they will hit that $17k limit faster than most.

    I agree that we have to eventually wind this mortgage deduction down (slowly, and from the top), but the last thing you want to do is to put a grinding halt to the housing market which is finally showing signs of life.

    Just another craven vulture move from a guy who only knows how to suck money out of middle class lifeblood.

  •  Debates must terrify Romney (5+ / 0-)

    Remembering all those surgically designed talking points, and delivering them in a way that doesn't obviously contradict something he said earlier, while walking a tightrope between right-wing dogma and plausible sanity is more than even an AI simulator could reasonably bear.

    Toto, I've a feeling we're not in Kansas anymore

    by Minerva on Wed Oct 03, 2012 at 11:58:08 AM PDT

  •  Just for the record, tax laws are (0+ / 0-)

    written by Congress. While Republican congress critters like to pretend they are just rubber stamps so as to evade any liability for drafting or not passing stupid laws, the fact remains that legislating is their job and it's what we pay them for.
    The executive's job is to run the various agencies.  Since he once was a state executive, there's an assumption that Willard knows that.  However, when he opines that what he wants government to be doing is "encouraging" or cheerleading private enterprise, it seems fair to conclude that managing is not his forte. The guy who always eats first probably can't even manage a household.  Never mind that he doesn't know how many horses are to be fed. Willard is every poobah's ideal. Not chief executive material.

    We organize governments to provide benefits and prevent abuse.

    by hannah on Wed Oct 03, 2012 at 11:59:31 AM PDT

  •  Home mortgage deductions (1+ / 0-)
    Recommended by:

    I actually do not think the deduction has served the nation well, and I'm a homeowner who has received the deduction since around 1985. It artificially inflates demand and was one of the drivers of the entire housing bubble that began in the 1970s. Houses cost much more than they are worth.

    That said, here we are in mid-recovery from the Great Recession with a bunch of people who currently depend on that deduction in some way, including home owners, home builders, and people or institutions holding mortgages. Any kind of drastic change would be terrible given the way times are today.

    What I favor is a gradual reduction in the home mortgage deduction, to be brought down to zero some time in the mid-to-late 2020's. Connected to that would be some sort of tax penalty for fast turn-around, so that your tax bill for the past five years or so would be re-calculated with a much lower deduction for mortgage interest payments, as a function of how soon you sold your house after taking out the mortgage. Also, the reduction in the deduction would only apply to new mortgages. Old mortgages would have their interest deduction amortized linearly from the day the law takes effect to the end of their mortgage, and would receive a deduction based either on the that rate or the rate that would be in effect for a new loan, whichever is higher.

    One of the effects of this change would be to lower the value of people's homes to some extent, because it would increase the net mortgage payment (since less or no tax deduction would apply). This would both increase and decrease tax revenues: property taxes (regressive) would decrease, but income taxes (progressive) would increase. If it is done gradually enough, it shouldn't have much impact either on families or on the home construction industry. There will be a net negative impact on home ownership rates.

    The idea of allowing loan interest deductions on income tax was a very bad one. It was a gift to the finance industry, and the mortgage interest deduction created a completely unnecessary and harmful “industry” in which people buy their homes as “investments” rather than as their home. This is harmful because many social policies and laws create exceptions for homes (as they should), and these exceptions have been abused by these “home investors”; in turn, this has created pressure that has distorted our entire economy.

    Just my 2¢.

  •  The charitable deductions are most stunning to me. (2+ / 0-)
    Recommended by:
    Gooserock, Cassandra Waites

    How can churches support that?

    I work for a church, and we get a lot of donations at the end of the year. Yes, part of that is Christmas, but ... realistically part of that is the deduction deadline for contributions.

    I think people would still be generous, perhaps, but less so without the deductions.

    by Magenta on Wed Oct 03, 2012 at 12:10:59 PM PDT

  •  bad idea (0+ / 0-)

    Its just going to hurt the middle class. Obama has got to make that point tonight.

    The #1 goal now is to elect Obama. Goal #2 is....First finish Goal #1.

    by squirecam on Wed Oct 03, 2012 at 12:26:50 PM PDT

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