Wednesday, October 19, 2005

It's not clear whether President Bush will actually fight to implement the recommendations of his tax advisory commission, but if he does, there goes the housing boom that's been propping up the economy. As if high energy prices aren't already going to rein in the sale of expensive-to-heat McMansions in long-commute exurbs, now Bush's advisors are recommending this:

At present, all interest payments on mortgage loans smaller than $1 million are deductible. For the new mortgage interest credit, however, both plans would lower the mortgage limit to the maximum that the Federal Housing Administration will insure. That level changes each year and varies depending on housing costs in each county, with a current maximum loan limit of $312,895, in communities where housing is most expensive, and a national average of about $244,000.

I'm sure that will be a comfort, say, in California, where the median home price in August was $568,890.

Yes, the commission also wants to repeal the alternate minimum tax, which will surely help many owners of high-priced homes (and also many owners of second homes -- the commission wants to eliminate the deductibility of second-home mortgage interest). But then there's this:

Deductions of the interest payments on home-equity loans ... would be disallowed.

As of mid-2003, "homeowners had $315 billion in outstanding debt from home equity lines of credit...The average line of credit available as of June 2003 was about $69,500." I can't believe that all those debtors are AMT payers.

This is supposed to soften the shock:

These provisions would be phased in over five years to allow taxpayers to adjust to the changes.

Yes, that might ease the pain somewhat until Bush is safely out of office, but it would also make a lot of people think twice about home-buying decisions right away -- if you're buying a home, you have to think about tax consequences a few years into the future.

Unless, of course, you're buying the home to flip it rather than to, you know, live in it for a while. And that gives away the bias of this commission: It rewards wheeling and dealing; it punishes working for a steady paycheck and saving up your pay to buy a house to come home to at the end of the workday. Consider this:

The commission would also raise to $600,000 from $500,000 the amount of profits from home sales that could be excluded from capital gains.

And consider other, non-housing-related proposals:

One would eliminate taxes on dividends paid by American companies and lower the top capital gains rate to 8.25 percent on the sale of stock in such companies, while continuing to tax interest income at the same rate as wages.

... the maximum corporate tax rate [would be lowered] to 32 percent from 35 percent.

That's a central tenet of Bushism: Everyone should be an entrepreneur, a capitalist, a buyer and seller. No one should be a worker -- certainly no one should want to be one. Workers are chumps.

The Bushists are half-right about that -- workers who voted for Bush are chumps.

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