Yesterday, Republican lawmakers rolled out their tax reform plan. It’s a complicated, multi-faceted bill with many moving parts, about which I haven’t yet formed an opinion. But there was one particular item that caught my attention, the limitation of the home interest deduction to $500,000.
Question: How many people do you know who have a mortgage in excess of $500,000? Not very many, I bet. Someone with a mortgage that big would be someone quite wealthy. The payment on a mortgage of say, $750,000 would run somewhere around $3500 a month. I say, more power to ‘em. If someone has done well enough to want to build a big old house in the country somewhere and borrow that kind of money to do it, God Bless. This is America. Building big old houses is kinda what we do!
But, let me ask you another question...why should the tax payer be forced to subsidize someone’s multi-million dollar McMansion? Why is Uncle Sam in the business of helping someone build their ten bedroom dream house? Why does someone wealthy and successful enough to build that ten bedroom house need the government’s help in the first place? These questions answer themselves. No reasonable person can justify this sort of tax giveaway with a straight face...but brace yourselves, the justifications are about to begin, and they will be loud, long and bipartisan.
First of all, the Home Builders and Realtor lobby groups will be apoplectic that this particular form of corporate welfare might disappear, for reasons that should be obvious. When the tax code provides subsidies to anyone and everyone who buys your product, with no limits, that’s a pretty sweet gig. But what is going to be hilarious will be the howls of protests coming from the Uber-wealthy status-home owners...from both ends of the political spectrum...who will be impacted by the loss of this freebie. All of those California Progressives who constantly lecture the rest of us for our opposition to out of control government spending, will scream like stuck pigs if they can no longer divert millions of tax payer funds away from poverty programs in order to provide them with their mortgage interest subsidy. Millionaire conservatives who ordinarily spend all their time extolling the virtues of self reliance, will wail like spoiled children if it looks like their mortgage interest free ride might end.
Listen, anyone who reads this blog knows my views on our tax code. What the Republican Party rolled out yesterday doesn’t even come close to my preferred reforms. Still, I can understand the basic idea for the mortgage interest deduction..in theory. Originally, the notion was...home ownership is a net positive for people and the economy for a whole host of reasons. If the government can encourage home ownership by providing tax incentives, that would also be a net positive. Fine. But, somewhere along the line, like so many other government attempts at dogoodery, it went off the rails. A tax incentive designed to encourage first time home buyers and others for whom the purchase of a home was a colossal undertaking is one thing, allowing the likes of Barbara Streisand to stick the tax payers with the bill for her California dream home and the 10 million dollar mortgage that comes with it...is something else altogether.
Far be it from me to criticize anyone’s desire to build a mansion. But, if you’re wealthy enough to do so...do it with your own money.
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