Sunday, April 4, 2010

The Lobbyist in Your Living Room

When I was doing my taxes last month, it occurred to me how obviously unfair the "mortgage interest tax deduction" is, and it got me wondering what's behind it all.

Consider this:

Two families with identical income & assets each decide to buy a home.  One family chooses to mortgage a $300,000 home that fits into their budget.  The other family makes a less responsible decision and mortgages a new and larger home for $500,000.   Based on that alone, the responsible family pays significantly more income tax than the other family, simply because they don't get as much of a mortgage interest deduction  Even worse, the tax deduction for the less responsible family directly reduces our national tax revenue, which then forces our constantly over-budget federal government to borrow money from foreign lenders and add it to our national debt.   Why is this not obvious? 

Looking deeper into the issue, I learned that economists clearly agree that the mortgage interest deduction doesn't even do what it's intended to do, which is to help more people be able to buy their own homes.  

So why hasn't something so obvious been changed to be more beneficial to lower and middle income families?  Because the National Association of Realtors and other housing related lobbies have worked hard to encourage our elected officials to leave it untouched.

Regardless of their good intentions, career politicians are either oblivious to problems like these, or simply powerless to do anything about them.  We need citizen legislators who can make common sense decisions without worrying about opinion polls and campaign contributions.  This year, change how you decide to use your vote.  Tune out the expensive campaign ads and look for ordinary citizens who can symbolically change the future of our government.  Anything less will just get you more of the same.

Andy Woerner
Candidate for the U.S. Senate - Hawaii

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  1. Tax code has always been used, in part, to promote social agendas and the economy. I bought a more expensive replacement HVAC unit because of the tax break on "green" units. While it complicates code, it also stimulates economic and social this case both. So what is your solution? Are you going to take away the mortgage deduction? That person with the $300k loan, at 6%, has interest of $18k a year. If they are in a 25% marginal tax bracket you will increase their tax by $4500 a year! They will have $4500 less in discretionary spending and will put the economy in a tailspin down!

  2. The point of the article wasn't to focus on this individual problem, but rather to draw attention to the kinds of problems that are both obvious and commonplace in government.
    But since you asked, I would protect existing homeowners by exempting them from changes to the tax deduction, but would amend the tax code going forward to include a cap that ensures that the deduction is focused on encouraging increased home ownership among lower income families, rather than primarily increasing the level of luxury in homes for upper middle income and wealthier Americans.

    Andy Woerner

  3. Well said Mr. Woerner! I fall under the responsible homebuyer who bought within my means and budget based on my asset\debt ratio. Single family home, no extras needed.