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Reducing Incentives

 

I didn't choose the boredom of watching Obama TV last night, but two items from that caught my attention via diane at the All Sides Political Forum. Obama wants to cut the interest rate tax deduction for mortgages, and he wants to cut the tax deduction for charitable giving. Pay attention to what I've set in bold.

QUESTION: Mr. President, are you -- thank you. Thank you, Mr. President. Are you reconsidering your plan to cut the interest rate deduction for mortgages and for charities? And do you regret having proposed that in the first place?

OBAMA: No, I think it's -- I think it's the right thing to do, where we've got to make some difficult choices. Here's what we did with respect to tax policy. What we said was that, over the last decade, the average worker, the average family have seen their wages and incomes flat. Even in times where supposedly we were in the middle of an economic boom, as a practical matter, their incomes didn't go up. And so, well, we said, "Let's give them a tax cut. Let's give them some relief, some help, 95 percent of American families."

Now, for the top 5 percent, they're the ones who typically saw huge gains in their income. I -- I fall in that category. And what we've said is, for those folks, let's not renew the Bush tax cuts, so let's go back to the rates that existed back in -- during the Clinton era, when wealthy people were still wealthy and doing just fine, and let's look at the -- the level at which people can itemize their deductions.

And what we've said is: Let's go back to the rate that existed under Ronald Reagan. People are still going to be able to make charitable contributions. It just means, if you give $100 and you're in this tax bracket, at a certain point, instead of being able to write off 36 percent or 39 percent, you're writing off 28 percent.

Now, if it's really a charitable contribution, I'm assuming that that shouldn't be the determining factor as to whether you're giving that $100 to the homeless shelter down the street. And so this provision would affect about 1 percent of the American people. They would still get deductions. It's just that they wouldn't be able to write off 39 percent.

In that sense, what it would do is it would equalize -- when I give $100, I'd get the same amount of deduction as when some -- a bus driver who's making $50,000 a year, or $40,000 a year, gives that same $100. Right now, he gets 28 percent -- he gets to write off 28 percent. I get to write off 39 percent. I don't think that's fair.

So I think this was a good idea. I think it is a realistic way for us to raise some revenue from people who've benefited enormously over the last several years. It's not going to cripple them. They'll still be well-to-do. And, you know, ultimately, if we're going to tackle the serious problems that we've got, then, in some cases, those who are more fortunate are going to have to pay a little bit more.

QUESTION: It's not the well-to-do people. It's the charities. Given what you've just said, are you confident the charities are wrong when they contend that this would discourage giving?

OBAMA: Yes, I am. I mean, if you look at the evidence, there's very little evidence that this has a significant impact on charitable giving. I'll tell you what has a significant impact on charitable giving, is a financial crisis and an economy that's contracting. And so the most important thing that I can do for charitable giving is to fix the economy, to get banks lending again, to get businesses opening their doors again, to get people back to work again. Then I think charities will do just fine.

For Joe Biden, over 10 years time, he and his wife gave a whopping $3,690 to charities, despite nearly $2.5 million in income. Obama was similarly stingy until he became a senator. I'll get to the mortgage tax deduction reduction in a minute, but for all of those folks who work at charities who voted for Obama, still feeling the love? I'm telling you, Obama doesn't care about anyone except his own acquisition of power. There's no rationale to go after charitable contributions.

And the mortgage interest tax deduction: can you say rent? The mortgage interest tax deduction is one of the main reasons why people buy a home. As diane smartly said, "Many people will buy a house rather then rent because of the benefit of a tax reduction of the mortgage interest. That's why my kids quit renting and bought. Now the housing market, especially in my state is already in the toilet, remove any incentive to buy and things will only get worse. Now my son has talked of selling his house and going with a rent to buy option in a really chi-chi neighborhood here where the pricey homes have really been reduced in value and people are desperate to get out from under. His plan was should the housing market rebound, he'd commit to buy and end of with a really good deal. Take away the incentive for mortgage deductions, and someone like him would be a permanent renter."

As Obama says, these proposals of his won't "cripple" anyone, so he's quite comfortable getting as close to it as he can.

HopenchangeTM!

 


by Brett Rogers, 3/25/2009 7:56:34 AM
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Comments

Dear God. I didn't watch either and didn't recall he was going after the mortgage interest deduction. Just another back door tax increase. Looking at the majority of the people I know who's incomes fall well below the 250k limit Obama likes to refer to. Most have mortgages they pay on, take the interest deduction, so removing it hits "main street" even harder than those with higher incomes.

I'm now wondering when the Obamabots will start to collectively say WTF???

 

 

Posted by Anonymous, 3/25/2009 10:48:44 AM


What cracks me up is that he tried to pass off a refi as a tax cut, in another part of his speech.

We've already seen a jump in refinancing of some mortgages, as homeowners take advantage of lower rates. And every American should know that up to 40 percent of all mortgages are now eligible for refinancing. This is the equivalent of another tax cut.
It's all a big shell game for him.

 

 

Posted by Brett Rogers (http://www.beatcanvas.com), 3/25/2009 11:10:07 AM



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