401k and Mortgage deduction are on the table

[Huckleberry]

[quote=SK in CV][quote=SD Realtor]Your entire premise appears to be based on a belief that we will return to the way things were. I don’t think that is true at all. Your argument about a return to 2004 levels to me is not solid. I think it is safe to say that the 2004 economy was robust but for the wrong reasons, (see a housing boom fueled by unrealistic pricing and artificially low rates). This is not about any republican candidate at all. It is about the current level of spending and the lack of economic growth, not about increased revenues.[/quote]

No, my premise is drops. And how a few drops can go a long ways.[/quote]

Excellent points SDR. The 2004 economy was smoke and mirrors consumer debt/lending driven, not a solid industrial driven economy.

Drops may make some difference but not enough to get us out of the new hole that has been dug, especially if/when interest rates rise…

[(former)FormerSanDiegan]

[quote=AN][quote=FormerSanDiegan]The rent you pay will track the rent you charge… so the amount you pay will remain fixed. At some point.in the future the interest and other costs will.be less than the standard deduction and you might actually come out ahead.[/quote]
I don’t think it always work out that way. If you have a good tenant, you definitely don’t want to raise their rent while they’re in there, at least while rent are rising slowly. It’ll cost you more to clean up and find another tenant and lost rent during the time in between. While on the other end, you’re at the mercy of your landlord. If you have a landlord who want to raise your rent, you have no choice but to obey, or you can move and still pay market rent. If your landlord doesn’t do proper repairs and you end up moving, you’d have to pay market rent as well.[/quote]

Seems like it could just as easily work out the other way. I could be the model tenant whose rent never gets raised.

On average, over long periods of time the rents will track.

[no_such_reality]

[quote=flu][quote=squat250]I kinda doubt it too. But it should be taken off the table and placed on the couch where it can get lOst under a cushion.[/quote]

Well I think a lot of this is MSM speculating on what one or two crazy politicians might think….Who knows, they might start taxing money that isn’t spent from a savings account for all we can think of..[/quote]

We want to remove the mortgage deduction.
We want to remove the 401K deduction.
We want to raise income tax.
We want to raise sales tax.

Okay, now be reasonable and compromise with us.

They’re playing the game of asking for a ton of things and then whining about compromise not getting them half of them.

[SK in CV]

[quote=no_such_reality]
We want to remove the mortgage deduction.
We want to remove the 401K deduction.
We want to raise income tax.
We want to raise sales tax.

Okay, now be reasonable and compromise with us.

They’re playing the game of asking for a ton of things and then whining about compromise not getting them half of them.[/quote]

Except….no one is asking for all these things. In fact, at the federal level, no one has asked for any of these things for the vast majority of taxpayers.

[all]

[quote=FormerSanDiegan][quote=enron_by_the_sea][quote=flu]
It doesn’t quite work that way enron…When you rent out a house to someone else, you can deduct the mortgage as an expense but you also have to report the rental income.

However, if you rent someone else’s house, you can’t deduct your rental cost (unless your poor..And in that case, you probably can’t qualify to buy a home)…

So I’m not sure how this would be beneficial for you…Seems like a lot of paperwork to report a $0 gain.[/quote]

Oops. That is probably why this does not work. Nevermind.[/quote]

Don’t give up so easily.
I think it can work

If your goals of owning are:
1. To lock in monthly housing costs long term
2. To participate in future capital appreciation of property
this strategy works.
The rent you pay will track the rent you charge… so the amount you pay will remain fixed. At some point.in the future the interest and other costs will.be less than the standard deduction and you might actually come out ahead.[/quote]

This would apply if you just stay in your house on fixed 30y loan, no?

[CA renter]

[quote=SD Realtor]No I don’t think it is a narrative at all. Given the cost to service our debt if we even see a modest rise in the interest rates we are in big trouble. I agree with you about war spending. We may or may not see an economy to 2004 growth levels but I doubt we will see sub 5% employment levels. Seems to me we are also seeing substantial increases in general welfare spending, food stamps, etc. While reduction in defense spending is needed, the resulting rise in unemployed white collars will not be consumed by the private sector.

So, I guess while your post makes sense about a few drops here and there, physical evidence especially over the past 4 years are absolutely contrary to it. I guess we will see how things go this year.

So yes to me it is a spending issue and that is not just narrative. It was under Bush and it has been perpetuated by Obama.[/quote]

Seems to me that the Bush tax cuts and war spending is what largely got us into trouble. If we had kept revenues/taxes at their previous rates (maybe even raised rates in order to make up for the additional costs associated with the wars), we would not have had such large deficits. Without such large deficits, we wouldn’t have had to borrow so much money. Without having to borrow so much money, we wouldn’t have such a large debt service burden.

You’re right about interest rates having the potential to blow us out of the water. I just think that in the absence of the Bush tax cuts and wars, we would be in a much better place today. It’s not always about “spending,” but about making sure that revenues match (or exceed) spending. It really is that simple.

[livinincali]

[quote=CA renter]

Seems to me that the Bush tax cuts and war spending is what largely got us into trouble. If we had kept revenues/taxes at their previous rates (maybe even raised rates in order to make up for the additional costs associated with the wars), we would not have had such large deficits. Without such large deficits, we wouldn’t have had to borrow so much money. Without having to borrow so much money, we wouldn’t have such a large debt service burden.

You’re right about interest rates having the potential to blow us out of the water. I just think that in the absence of the Bush tax cuts and wars, we would be in a much better place today. It’s not always about “spending,” but about making sure that revenues match (or exceed) spending. It really is that simple.[/quote]

Let’s look at the data and see. Straight from the IRS web site http://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-Rates-and-Tax-Shares. In 2000 which was before the bush tax cuts and the best year for tax collections in terms of total percentage collected vs total income you have income of 6.423 trillion and total taxes of $980 billion for a 15.2% rate. In 2010 which is the most recent data you have 8.039 trillion and $949 billion in taxes for a 11.8% rate. If we use the 15.2% against the 8.039 trillion number we get $1.22 trillion so a increase of roughly $300 billion in taxes.

What was our deficit last year again? Oh that’s right 1.3 trillion Looks like tax increase are only going to solve about 25% of our problem we still need to cut $1 trillion. Cut military you say which I completely agree with in half $900 to $450 billion and I still have another $550 billion to cut from medicare, medicaid, welfare or social security.

When you look at total wages and total spending you quickly realize it’s a spending problem not a revenue problem. I can agree to increasing revenue but you need to cut probably $3-4 dollars in spending for every new dollar of revenue to realistically balance the budget and that means government services like medicare have to be reduced in cost. How you make that reduction is debatable, but it must and will happen.

[Coronita]

But there’s the rub… As long as it’s not your money, who cares if there is a spending problem…Someone else is paying for it.

Raising taxes is just an euphemism for “enabling more spending on borrowed money than can possibly be paid back”… It’s a spending problem. It’s always a spending problem…Americans in general have a spending problem..All the way from the federal to state to local to individual levels…And the mere suggestion of cutting things out of the budgets and settling for less is heresy…

Get use to it… I’d say CA spending problems are gonna get much much worse…..

[livinincali]

[quote=flu]
Get use to it… I’d say CA spending problems are gonna get much much worse…..[/quote]

I’m used too it and for that reason I don’t think I’ll ever buy any property in this state. The freedom to get up and leave is more valuable than the potential protection from inflation. Obviously one could leave and rent property out but how long does it take for the out of state landlord tax debate to begin, or rent control, or some other typical CA nonsense about taking stuff away from those evil rich people that invested in CA property.

[ocrenter]

[quote=CA renter]

Seems to me that the Bush tax cuts and war spending is what largely got us into trouble. If we had kept revenues/taxes at their previous rates (maybe even raised rates in order to make up for the additional costs associated with the wars), we would not have had such large deficits. Without such large deficits, we wouldn’t have had to borrow so much money. Without having to borrow so much money, we wouldn’t have such a large debt service burden.

You’re right about interest rates having the potential to blow us out of the water. I just think that in the absence of the Bush tax cuts and wars, we would be in a much better place today. It’s not always about “spending,” but about making sure that revenues match (or exceed) spending. It really is that simple.[/quote]

While I do agree “Bush” started it. I do think that part of the argument has been settled by the election.

Bottom line is it IS spending and it IS revenue.

I think the end product will be along the line of a compromised 37% top rate, some restrictions on amount of mortgage deduction, and loss of tax exemption on some of the 401k contributions coupled with hopefully some overall reduction in entitlement and defense spending.

personally I don’t think going over the cliff is that big of a deal for the long term. we will of course get a lot of short term effects.

[Coronita]

[quote=livinincali][quote=flu]
Get use to it… I’d say CA spending problems are gonna get much much worse…..[/quote]

I’m used too it and for that reason I don’t think I’ll ever buy any property in this state. The freedom to get up and leave is more valuable than the potential protection from inflation. Obviously one could leave and rent property out but how long does it take for the out of state landlord tax debate to begin, or rent control, or some other typical CA nonsense about taking stuff away from those evil rich people that invested in CA property.[/quote]

If you don’t plan to stay in CA, then I would agree with you. This state is definitely going down the wrong direction….

As Allan said it before, I don’t understand why being “poor” is the new fad…. Not that there’s anything wrong with it. But then at the same time, same people complain about “rich”….Same people that don’t want to do some of the jobs like in science and technology, and then complain about how work is going to H1-B or overseas….Same people that don’t want to do the day laborer’s job, but then complain about illegal immigrants doing it…

I’ve stopped being patriotic and “buying american” a few months back for this reason… I’ve been enlightened by the double standards.. I’ll take the Made in China $5.99 special, thank you…And when it falls apart, I’ll take the $5.99 special again another 4-5 times, which will still end up being cheaper than the made in u.s. with bloated expenses thing…

[CA renter]

But we did not start with a deficit of $1.3 trillion in 2000. If we had maintained the Clinton-era tax rates (or higher…not to mention staying the heck out of countries we have no business being in), we could have had much smaller annual deficits, and wouldn’t have had to take on all the debt that we’ve burdened ourselves with over the past 10+ years, so would have a much lower debt service burden today…and tomorrow. Again, our debt service burden is unusually low considering the total debt burden (about 6% of expenditures for interest payments alone, IIRC), but that’s only because of the Fed’s interest rate policies. If/when rates go up, it’s going to get ugly.

I would also argue that keeping the tax rates high — especially on cap gains — we could have avoided a lot of the excess speculation that helped fuel our economic crisis. Of course, the Federal Reserve still bears the greatest responsibility for pushing rates to market-distorting lows, but the preferential tax rates for speculation vs. labor is largely behind the greater wealth disparity, and this “surplus wealth” has been traveling the globe, looking for the next bubble to invest in.

If we could have largely avoided the credit bubble, the idiotic “war on terror,” and maintained higher tax rates, we would not be in the position we’re in today.

That’s not to say we shouldn’t cut back on spending, of course. We could cut the heck out of the TSA budget and all spy agency activities that target U.S. citizens, for a start. Next, we should eliminate all funding directed at overturning popular foreign governments. I would personally take a chain saw to the defense budget…way too much abuse going on there.

[CA renter]

[quote=ocrenter]

personally I don’t think going over the cliff is that big of a deal for the long term. we will of course get a lot of short term effects.[/quote]

Agreed. I’ve always believed the best solution to our debt/deficit problems is to go off the “fiscal cliff.”

As you’ve said, we would certainly have some short-medium term effects (and some long-term ones, too), but it needs to be done.

[joec]

We may go off the fiscal cliff to make it easier to get a deal. It’s reported at many places where once we go off the cliff and taxes are going back to 39.6% federal for income and dividends, massive defense cuts, etc…

It’ll be oh so easy to get a deal for the dems since now, everyone would just be voting on a TAX CUT instead. How can a republican vote AGAINST a tax cut?

In the end, we’d probably need to wait till the exact end of year for a short term compromise or just go off the cliff and then see what parts people want to preserve.

I sorta doubt the mortgage deduction will go away since this would probably cause the housing market to collapse and put the country in further contraction/recession. It’s also such a popular deduction that taking it away would probably be more political suicide.

It’s on the table because it’s a large deduction, but I don’t think it will be majorly changed.

[SK in CV]

[quote=joec]We may go off the fiscal cliff to make it easier to get a deal. It’s reported at many places where once we go off the cliff and taxes are going back to 39.6% federal for income and dividends, massive defense cuts, etc…

[/quote]

Let’s add some more accurate perspective to this. Tax rates would not go back to 39.6% for income, including dividends and capital gains. Very few people would be subject to these rates, only the top 2 or 3% of taxpayers. It would only apply for married couples with income in the $300K range and up, and single filers with income around $250K and up. Capital gains would still have preferential treatment. Instead of a max tax rate of 15%, the rate could be as high as 20%. Still better than ordinary income.

Similar changes like these have historically had lead to no significant changes in the economy. The more drastic changes, as far as the economy is concerned, are the higher taxes on lower income levels. These would be taxpayer’s whose marginal income losses (unlike those at higher income levesl) lead directly to reductions in consumer spending.

It isn’t a cliff because these changes wouldn’t happen overnight. But combined with the draconian cuts to federal spending, would cause the US to follow Eurupe into a similar austerity driven second recession. There is no good that can come of it. It is not short term pain in exchange for long term stability. There is no long term stability at the end of the rainbow. Just more short term pain, until the path is reversed.

[Author]

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