[quote=SK in CV]
Interest income has been taxable for almost 100 years. (income tax started in 1913.) Interest paid was also deductible since the beginning of income tax in the US. But 100 years ago, almost no one other than farmers had mortgages on homes. There were no credit cards or HELOCS or car loans. It wasn’t until the mid-30’s that the number home mortgages exceeded farm mortgages.
But that doesn’t negate the fact that the mortgage interest deduction is a subsidy (or in the current lingo, a tax expenditure.) As is the deduction for church contributions, retirement plan contributions, and medical insurance. The tax code continues to evolve, In the last 100 years it’s undergone 2 major overhauls (in 1954 and again in 1986), with top tax rates ranging from the 7% at the beginning, to a high of 94% during WWII. The argument that once a deduction is codified, then any elimination of that deduction becomes a “confiscation” is absurd, unless you consider the first dollar of income tax paid as confiscation. If that’s the case, the largest confiscation of all time ocurred during the mid-80’s. It’s not a term I ever remember hearing either before or after tax reform passed under Ronald Reagan.
[/quote]
I am under impression that you saw my remark as political, while it was a mechanical one. I don’t think the decision to start taxing something that was not taxed before should be framed as ending a giveaway (and interest, unlike retirement plan, is not a post-1913 concept). If you are going to take more of my money go ahead, but please don’t make it sound like you are simply stopping a generous gift you used to give me (not you in particular, of course 🙂 ). That’s all.
[quote=SK in CV]
…unless you consider the first dollar of income tax paid as confiscation. If that’s the case, the largest confiscation of all time ocurred during the mid-80’s. It’s not a term I ever remember hearing either before or after tax reform passed under Ronald Reagan. [/quote]
True, confiscation assumes no compensation and in this case I’m being compensated through services. However, I do not want some of those services and if the government can call the money not yet taken ‘tax expenditure’ I can call the process of collection under a threat of seizure and imprisonment ‘confiscation’. At least I did not say expropriation.
I was not here during Reagan’s years. I was a teenager with things more important than the U.S. tax code on my mind. I’m sure RR like any other president was a smart person and had many qualities but I heard nothing good about him.
On topic, ending mortgage rate subsidy and $500K exemption for sale of primary residence sound like good ideas to me, but I expect every solution to come with a loophole designed by those who participate in and influence the decision making process.
