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The GOP keeps talking about reducing or capping deductions a.k.a. loopholes as a way of raising revenue.  But no one is talking about the POLICIES behind some of those very important deductions.  We want to create policies that encourage behaviors in society and the marketplace that benefit us all.  Yet no one is talking about that or highlighting it.  The Democrats need to get into this.  

1.  Mortgage Interest deductions
2.  College Loan Interest deductions
3.  Charitable giving deductions

These are all items that we need because they encourage outcomes we want in society.  More below the fold.

Mortgage interest deductions help folks afford their homes.  Homes provide a place for a family unit to live, have a long term vested interest in community, maybe raise children, etc.  So there's a policy behind that mortgage interest tax deduction; the policy to encourage and support home ownership and anchor communities with this pillar in our society.

College Loan Interest deductions offer students a break from the skyrocketing cost of college.  We want to encourage folks to go to college and grad school.  We need educated, well trained people to get the jobs that keep business and innovation thriving.  So there's a policy behind this deduction.  

Charity.  We want to encourage charitable giving.  The benefits are many.  Hardly a reason to go into this, but charities provide food, shelter, medicine, medical research, etc.  We want to encourage giving as we can.

Personally, I think that we should keep these deductions as they are and not cap them.  They're good policies and good deductions.  But these are the pieces of the debate I'm not hearing about in the media.  

Also, if you remove or reduce deductions, the net effect is that people who had these deductions will pay more in taxes.  So if that's the end result, why not just raise rates.  That's a much more even-handed fair approach because it would impact everyone in a socio-economic bracket, but leave the deductions where they are because we want to continue to support home-ownership, college educations and charities, etc.  

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Comment Preferences

  •  The mortgage-interest deduction ... (1+ / 0-)
    Recommended by:

    is a policy of dubious merit on its own. Why is home ownership so great? It reduces the flexibility of our workforce to relocate in times of economic transition. And there's a fair case to be made that it drives up the price of homes, since people can afford more because they can deduct the interest.

    But to remove the deduction now would definitely be bad policy because our housing market has been hugely depressed and is just starting to recover. This would be an adverse shock. Also, it's factored into the financial plans of a large number of households that are perhaps already struggling to make ends meet.

    "The smartest man in the room is not always right." -Richard Holbrooke

    by Demi Moaned on Mon Nov 26, 2012 at 01:09:47 PM PST

  •  Over the cliff means (0+ / 0-)

    the student loan interest deduction reverts and starts phasing out.

  •  I completely disagree. (1+ / 0-)
    Recommended by:
    Demi Moaned

    Putting a cap on these deductions would in no way harm the worthwhile goals that the deductions encourage. Do billionaires need a mortgage deduction? Are most non-profits really charities? How much of the cost of interest on college loans should be deductible? Why not have the government make low interest loans instead?

    "Remember, Republican economic policies quadrupled the debt before I took office and doubled it after I left. We simply can't afford to double-down on trickle-down." Bill Clinton

    by irate on Mon Nov 26, 2012 at 01:27:17 PM PST

    •  This is the debate I'm talking about (0+ / 0-)

      I'm a middle class homeowner, making just over $150,000 in household income per year.  I depend upon the mortgage interest deduction I get to make ends meet.  Thousands upon thousands like me "take" their deduction monthly by fine tuning their witholding from their paycheck.  I couldn't afford my home and feed my family of 4 without it.  But I agree - Millionaires and Billionaires don't need this deduction...

      Are all non-profits really charities... that's a matter of debate.  No one's having that debate.

      College education...
      It's about Policy.  Every action has a reaction.  No one seems to be talking about the direct impacts between raising rates and reducing deductions.    

      •  A cap is what we're talking about, (0+ / 0-)

        perhaps, no deductions for amounts over some figure, if you are making less than $250,000 the amount would not effect you. What I resent is that guys buying mansions, billionaires like Trump and Romney can deduct all their interest

        "Remember, Republican economic policies quadrupled the debt before I took office and doubled it after I left. We simply can't afford to double-down on trickle-down." Bill Clinton

        by irate on Mon Nov 26, 2012 at 02:58:54 PM PST

        [ Parent ]

  •  Most countries don't have mortgage interest (0+ / 0-)

    deduction and their homeownership rates are not that different from US. These deductions simply inflate housing prices. I agree about charity but the proposals I've heard about make an exception for charitable contributions.

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