Posted on 11/19/2011 3:30:19 AM PST by Kaslin
There are three "keystone deductions" in the IRS code that matter more than all others to Americans who itemize deductions.
They are keystone deductions because they help the middle and upper middle class and they promote extraordinarily important social policies which have long been at the center of the traditional values held by most Americans.
The first is the deduction for contributions to qualified charities, such as hospitals, high schools and colleges, charities serving everyone from children to the homless to the old and infirm, and of course churches of every denomination.
The second keystone deduction allows homeowners with mortgages to deduct the interest on that mortgage from their income before calculating the ta they owe. This deduction encourages people to buy houses and is in fact a key component of the value of every house in America. The deduction is a valuable part of every home. If it is ended or limited, the value of every house in America falls, even if that home has no mortgage on it. The same downward pressure on home values occurs even if the deduction is only limited for some houses or some owners --say second houses or homes costing more than $500,000. The housing market doesn't distinguish between who owns what, but cares mostly about what buyers are willing to pay, and a lower or eliminated deduction means fewer buyers which means falling house values.
The third deduction allows taxpayers to deduct from their income before calculating their federal tax all the state and local taxes they paid in the previous year. Americans in high tax states, already staggering along under punitive tax regimes, would be smashed by any limit on this deduction. Some would call such a move a last straw, and leave the already reeling states like California, but most would simply be trapped where their jobs and (suddenly less valuable) homes are, paying higher and higher taxes.
Thus a Pennsylvania family of six with two kids in college, with a mortgage that has been refinanced to help pay tuition, but which still makes a tithe to their church is looking at a triple whammy tax hike if these deductions go away or are limited. So would millions of other Americans.
Which is why reaction ranged from shock to anger when two Republicans on the so-called Supercommittee proposed attacking those very deductions this week. Pennsylvania's Senator Pat Toomey and Texas Congressman Jeb Hensarling, both credentialed conservatives, stunned their center-right supporters and Republicans across the country by proposing a plan to raise hundreds of millions of dollars of new revenues financed by the assault on these keystone deductions.
The AP's Stephen Ohlemacher described the Toomey-Hensarling ta hikes this way:
A GOP plan to raise taxes by $290 billion over the next decade would limit deductions for mortgage interest, charitable donations and state and local taxes as part of a deficit-reduction deal. Some workers could also see their employer-provided health benefits taxed for the first time, though aides cautioned that the plan is still fluid....
The top income tax rate would fall from 35 percent to 28 percent, and the bottom rate would drop from 10 percent to 8 percent. The rates in between would be reduced as well. A GOP congressional aide said the plan is designed to raise taxes on households in the top two tax brackets. That would affect individuals making more than $174,400 and married couples making more than $212,300.
The plan has already split the Congressional GOP, but its dire consequences are just beginning to be felt across the country. I have spent much of this week's radio shows talking to experts and callers about the Toomey-Hensarling tax hikes, and while an occasional supporter will speak in favor of all or part of its provisions --former Utah Governor Jon Huntsman for example-- the vast majority assailed the plan as bad policy, horrible politics and, crucially, a breach of faith with voters who sent the GOP back to Congress in November 2010 with a mandate to cut spending, not raise taxes and in the process of raising taxes, changes many of the crucial rules by which the country has operated for decades.
On my show Rick Santorum called the proposed package another "Read my lips" moment, harkening back to the promise which the first President Bush made and then disastrously broke in a "big deal" with Democrats 20 years ago.
Callers were fuming. One retired sheriff living in Calfiornia berated me for leading him to contribute to Pat Toomey's 2010 Senate campaign. Many others simply stated they would lose their house to which they were barely hanging on if the deduction was lost. A wise accountant friend laughed at the idea that slashing the charitable deduction wouldn't dramatically impact high income giver's giving. And when contributions fell, so would the services delivered by those groups and employment within the vast not-for-profit sector.
Where could such a horrific idea have come from? Why, from three economists of course, all from the National Bureau, and beloved by the purists at the Wall Street Journal and the Club for Growth.
Good for them. Let them put their plan before the GOP Convention and have it adopted as a platform.
Let them ask Speaker Boehner to amend, republish and then campaign on a revised Pledge to America, because the 2010 version said nothing about these radical measures.
That is the biggest problem with the plan: The new Congress was sent to D.C. to represent the cut spending/shrink government movement in the country, and it instead has produced a secret committee that is hurtling towards a massive tax hike --authored by Republicans!
Some Republicans argue it is either this or the automatic "sequestration" built into last summer's debt ceiling deal which would hammer defense spending with an unimaginable $600 billion in more cuts on top of the hundreds of billions already unwisely slashed from DoD's funding.
But the sequestration doesn't take effect until 2013, and there is an election between now and then which could empower a new president, with a new GOP majority in the Senate working alongside a the GOP majority in the House, to actually reform entitlements and control spending without raising taxes or slashing defense.
If the GOP that is already inside the Beltway embraces tax hikes, especially this ruinous trio of deeply damaging hikes, the message will be clear to many millions of voters: You cannot trust Republicans who promise to cut spending and keep a lid on taxes.
Not even for one year.
Why is their no talk about reducing the “Green Credits”, not the guaranteed loans to the Bundlers which are bad in their own right but tax deductions and credits for solar panels.
For example, a solar company calculators for installations in Albany NY shows for a $44,055 installation the Federal Government will provide tax credits of $13,216, and New York state $12,250 in Energy Grants and $5,000 in state income tax credits. Total government (taxpayer) funded offsets $30,466!!!
It is “Green” which is sucking the air out of the room! One can only imagine what kind of Federal tax credits are being provided to the Corporation for going “Green”.
Should have noted that the example provided applied to residential installation in Albany, NY. Sorry.
If the pubbies win the Senate, increase the House count and get the obummer out and then don't fix the problem, it will be time to "go to the mats".
Actions will speak for me, and it won't be on the internet.
The Democrat - Republican game at election time is a farce thrown like scraps to the dogs, by the Ruling Elite. It makes no difference which party wins. They’re all good-ol-boy “Progressives” - statists out to control the people, fleece the sheep and milk the family cow.
We should start with Cutting Baseline By 10% and Permanently eliminating 8% automatic Increase annually!
I think a ten-year drawdown of mortgage interest deductions, and a three-year in state interest, is a good idea, when coupled with an effort to zero-sum the net revenue changes by reducing tax rates.
a non progressive
my candidate is not currently in the race
The Republican House ight have the power to do all this, but you are forgetting that we do not have the majority in the Senate. So until we do, there is no chance. Now kwitcherbitchin
I rarely agree with you but this one time you are correct.
If an individual ends up paying more revenue on the same amount of income, regardless of the rate charged, it is a tax increase.
It happened with the Reagan "tax cuts" in the 80s and it was a tax shift and increase to people with higher incomes, but since most tax payers were not in that group, it lowered their individual payments but it spurred the economy, created 20 million jobs and really increased the number of people that were in the "tax pool" and off of unemployment payments.
I went from no revenue payments to the feds for over 10 years with multiple 6 figure income to paying "my fair share" after the tax rates were reduced but the "exemptions and loop holes" were eliminated.
People can argue about the term "fair" {that's an opinion that depends on what you earn} but regardless of the lower % rate of tax, my tax payments to the feds increased and that wasn't an opinion, it was a fact.
The thing I've never been able to understand, is why the demonRATs, that love to spend, don't want lower rates, which provide more revenue, and they could spend even more.
Intellectually, they have to know that it's true, even if philosophically they oppose the concept of lower rates.
I just don't get that paradox.
Any third party and third party candidate that doesn't have any chance
It takes more than the House to close those agencies. The Senate has to pass it (impossble) and the president must sign the legislation (never will do it). So, what would be needed is a willing senate and a willing president. Only Nov. 2012 can make that happen.
What makes you think he is a RINO? Do you even know what a RINO is?
I am tired of people throwing the word RINO out without knowing what a RINO is. And I don't mean the Republican In Name Only part.
A RINO is someone that votes mostly with the rats. You don't know how Hewitt votes, so you can not call him a RINO
They spend anyway. They want power and control more than more tax revenue. They want more government dependency and the leftist dream of controlling redistribution of wealth.
It would "kill" them by encouraging their populations to migrate to the red states, where they would try to "blue-ify" them.
A more general observation: The home mortgage interest deduction is poor economics, as it artificially inflates home prices; but once you've had it for a couple of generations, you can't take it away without the consequences noted in the article. People have made decisions with a major part of their life's savings based on that deduction--if you take it away, you are destroying those savings. Moreover, it would be nice if the government would make up its mind--if it wants to minimize the banking/GNMA/FNMA/FHA disaster, it shouldn't do things which will place further downward pressure on real estate values!
When one faces a Obama/Pelosi/Reid Death Panel, anyone wonder if their political affiliation will have any bearing on whether or not they get medical care? Anyone out there think it was designed that way?
What the hell does that mean? They are both in Congress...Accredited Grifters might be a more appropriate soubriquet. :)
Nonsense. The Senate and the President can't spend money unless appropriated by the House. Let the House zero out the appropriations for Education, Commerce, Energy, and several other useless departments, then sit there on that position while the Senate and the President huff and puff veto until they're blue in the face. Refuse to budge. SHUT. IT. DOWN.
Sure the media will unleash an unholy assault. They'll do that whatever conservatives do. We have to fight to win.
” When one faces a Obama/Pelosi/Reid Death Panel, anyone wonder if their political affiliation will have any bearing on whether or not they get medical care? Anyone out there think it was designed that way? “
Exactly !
If you don’t understand that hacks like Hewitt are RINOs by now, your ignorance is willful, and there is nothing anyone can say or do that will help you. See ya.
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