I have read recently that in an effort to increase government revenue the Obama Administration is considering eliminating the mortgage interest tax deduction. I can only imagine what a quagmire government cash flows must be in from funding such colossal projects as the 2008 banking crisis, the ongoing and escalating expense of the Afghanistan war, Haiti relief efforts and now the Gulf oil spill. Trying to understand the myriad of government economics would take a brain much larger than mine. Given that there are big brains on government payrolls I am sure there must be better ideas on the plate that nixing the mortgage interest tax deduction. What are they thinking? Hasn't the real estate industry had enough impact? Even the consideration of such drastic measures would deliver a knock out punch to an industry barely hanging on to the ropes.
In an effort to better understand the "Robin Hood" mindset of taxing the rich and giving to the poor, what would elimination of the tax credit render the average American? If you had a $200,000 mortgage and were claiming $10,000 a year in mortgage interest deduction you would now pay taxes on $10,000 of income that was shielded by the deduction. If you were in the 25% income tax bracket you would have to pay $2,500 additional in taxes per year ($208 per month). In a down economy with national unemployment just under 10% how is that going to stimulate consumer confidence? Talk about a regressive tax. This would kill the economy, unfairly burden the homeowner and hurt everyone employed by or associated with the housing sector.
Might I suggest a more progressive attack. If you want to go after the rich (I mean the really rich) start by taxing capital gains more aggressively. Then go for the ultra rich by taxing drug and oil companies. How about manufactures who produce products that damage our water, air and soil like tobacco, plastics and pesticides. How about a tax on the fast food industry that create products that produce high blood pressure, cholesterol and diabetes. Leave the homeowner alone. Yes, Robin Hood would be very proud of all that.