the 3rd rails of Tax Reform - the Dangers for the GOP

[Swing low, sweet chariot. Comin' for to carry me home.]

when the $4T deficit reduction plan, including $1T in new taxes, was being negotiated behind closed, I heard they were going to remove 3 tax breaks:  mortgage, health insurance, and gifts to charity.

I have no idea what they were thinking, but this would have unleashed a reaction that would have dwarfed the anger at the town hall meetings which spawned the Tea Party Movement.

If the GOP is smart, they will hold town hall meeting to take the pulse of the people before decided which reforms to make, because a new tax bracket for millionaires is going to be MUCH more palable to the GOP base than elimination of these tax breaks.  McConnell has no clue that he came very close to destroying the GOP.

[Torie]

"Remove" is the wrong verb here.  For example, on mortgage interest deductions, the caps might be lowered, and the deduction converted to a tax credit, so higher bracket folks don't get more of a subsidy than lower bracket folks, with the net impact being that the value of the deduction for higher bracket folks will be less valuable. In short, "remove" is the wrong verb, because that is not what is really in play here.

[Swing low, sweet chariot. Comin' for to carry me home.]

"Remove" is the wrong verb here.  For example, on mortgage interest deductions, the caps might be lowered, and the deduction converted to a tax credit, so higher bracket folks don't get more of a subsidy than lower bracket folks, with the net impact being that the value of the deduction for higher bracket folks will be less valuable. In short, "remove" is the wrong verb, because that is not what is really in play here.

are you sure?  I hope you are right, because that is not how I interpreted it.

[Small Business Owner of Any Repute]

I think after the housing debacle there is no debate that at some point we need to eliminate the home mortgage deduction.  If you are for free markets and limited government intervention I can't think of a more appropriate deduction to eliminate.  If Congress was smart they and Bush should have eliminated this deduction once it was clear the housing market was appreciating above historical norms.

The home mortgage deduction can't be eliminated. It simply can't. It's political poison for both parties who desperately want to increase their share of the vote amongst the fickle suburban voter.

The reason, partially, is this: Many people factor in the savings from the mortgage deduction into their decision whether or not to buy a house in the first place. If you're talking about a 30-year mortgage, a family that borrows $300,000 at 4.75% would pay $1,560 a month ($1,187 of which is interest in year 1). That same family would be entitled to as much as $300 a month back thanks to the mortgage deduction. It's just too significant and too much a part of the decision to buy a house for anyone to remove it without seeing a flood of new, government-caused foreclosures.

[Verily]

I think after the housing debacle there is no debate that at some point we need to eliminate the home mortgage deduction.  If you are for free markets and limited government intervention I can't think of a more appropriate deduction to eliminate.  If Congress was smart they and Bush should have eliminated this deduction once it was clear the housing market was appreciating above historical norms.

The home mortgage deduction can't be eliminated. It simply can't. It's political poison for both parties who desperately want to increase their share of the vote amongst the fickle suburban voter.

The reason, partially, is this: Many people factor in the savings from the mortgage deduction into their decision whether or not to buy a house in the first place. If you're talking about a 30-year mortgage, a family that borrows $300,000 at 4.75% would pay $1,560 a month ($1,187 of which is interest in year 1). That same family would be entitled to as much as $300 a month back thanks to the mortgage deduction. It's just too significant and too much a part of the decision to buy a house for anyone to remove it without seeing a flood of new, government-caused foreclosures.

Of course, since mortgages expire, the mortgage tax credit could easily be phased out by eliminating the credit for all payments on new mortgages. The mortgage tax credit is absolutely terrible economic policy, and if we can eliminate it without causing reliance problems, so much the better.

That might not even cause so much trouble with idiot suburbanites since it would discourage riff-raff from the city (in their perspective).