SENATE BILL: Residential Taxation Reform Act of 2014 (Law'd)

[Fmr. Pres. Duke]

Wait.

If you're currently locked into a 30-year mortgage, then the deduction going away would increase costs rather considerably for those people who budgeted for the former legislation. We should grandfather in existing mortgages. If the goal is to change investment habits, grandfathering wouldn't effect the end goal.

Yes, which is why I am curious about why so many are behind this. A lot of people rely on the deduction to maintain property/rental and pay their mortgage. I'm concerned if we do away with that, it will hurt people more than it will help.

[President Tyrion]

Wait.

If you're currently locked into a 30-year mortgage, then the deduction going away would increase costs rather considerably for those people who budgeted for the former legislation. We should grandfather in existing mortgages. If the goal is to change investment habits, grandfathering wouldn't effect the end goal.

Yes, which is why I am curious about why so many are behind this. A lot of people rely on the deduction to maintain property/rental and pay their mortgage. I'm concerned if we do away with that, it will hurt people more than it will help.

Yeah, we need to allow people to plan for this change, and I don't think there's an appropriate way to address existing commitments.

Another thing I worry about is the rental market. Since we're disincentivizing property ownership, the rental market would see more demand, and higher prices in uncontrolled environments.

With this bill, real costs in housing are bound to increase, IMO. It's true that the tax exemption currently functions as a regressive subsidy, though.

[Southern Senator North Carolina Yankee]

You must be logged in to read this quote.

Sponsor Feedback: Origination
Status: Senators have 24 hours to object.

[Southern Senator North Carolina Yankee]

The amendment has been adopted.


What now?

[🐒Gods of Prosperity🔱🐲💸]

Let's try to consider some alternatives.

Here is a proposal for converting the mortgage interest deduction to a non-refundable tax credit:



It would direct the benefit more to those who most need it while reducing the overall cost of the deduction. I don't know though whether it would help with the problem of people taking on or not paying down their debt.

[Fmr. Pres. Duke]

I would be open to that, shua.

The more I think about it though, simply removing the deduction entirely would have negative effects on a lot of things. I won't deny that it favors the wealthy more than the poor, but the working class still takes advantage of it.

[Southern Senator North Carolina Yankee]

I agree there has to be a transition of some sort as doing this abrublty could cause a big financial and economic mess.

I think shua's idea for a replacement is doable.


What do you think about it, DC?

[Fmr. Pres. Duke]

If we decide to cap or even go with shua's idea, we need to make sure the new laws apply to all new mortgages or applies when someone refinances. Otherwise, you are grandfathered in. I don't favor switching all current mortgages over to a new law upon passing this bill.

FTR, I favor a cap on the deduction. I was going to propose that yesterday, but I have been battling some food poisoning and didn't post. I'm glad Nix got to it.

[DC Al Fine]

What about A) placing an overall cap on deductions and B) grandfathering in those who have already taken out loans for the next, say, 20 years?

This would do something to limit how much extra benefit current homeowners receive without devastating their financial plans.

A is fine, but B is a bit much. Even if you're locked into a 30 yr mortgage, the interest load will be much less 10 years down the line.

As for shua's proposal I'm happy to stop subsidizing the rich's homes, but this proposal seems like it would recreate some of the sadder stories of the hosung bust as its even more encouragement to over-borrow.

[Fmr. Pres. Duke]

I'm not going to sign any bill that changes the law mid-mortgage. A lot of people take out these loans and budget their lives around the deductions, and it would be unfair if we unilaterally changed the law and forced people who had already signed contracts to abide by it.

A cap would be the most feasible because that wouldn't require grandfathering; we could just limit the total amount of deductions a person could make under the provision.

[President Tyrion]

I'm not going to sign any bill that changes the law mid-mortgage. A lot of people take out these loans and budget their lives around the deductions, and it would be unfair if we unilaterally changed the law and forced people who had already signed contracts to abide by it.

A cap would be the most feasible because that wouldn't require grandfathering; we could just limit the total amount of deductions a person could make under the provision.

How is a cap any different in that regard? It would still change the effective taxation on existing loans.

[Fmr. Pres. Duke]

I'm not going to sign any bill that changes the law mid-mortgage. A lot of people take out these loans and budget their lives around the deductions, and it would be unfair if we unilaterally changed the law and forced people who had already signed contracts to abide by it.

A cap would be the most feasible because that wouldn't require grandfathering; we could just limit the total amount of deductions a person could make under the provision.

How is a cap any different in that regard? It would still change the effective taxation on existing loans.

Truthfully, I'd prefer to grandfather all existing loans regardless of which route we take; I won't even be sad if we keep the system as it is.

I guess my line of reasoning there is that a cap would likely affect the wealthy more so than the working class since they deduct more from their mortgage interest payments than the working class.

I am just trying to avoid a situation where we throw a lot of budgets out of control because we remove the deduction entirely. Some people who cannot afford to lose these deduction will be in a lot of trouble if we do something like that. While many here may not believe this deduction helps working class people, it does. It may help the wealthy more, but it still helps the working class.

[🐒Gods of Prosperity🔱🐲💸]

If we do a cap, does it make more sense to do an annual cap or a total cap?

[Fmr. Pres. Duke]

If we do a cap, does it make more sense to do an annual cap or a total cap?

I was assuming we would cap it at a specific amount of deductions per year. But I'm open to alternatives.

[President Tyrion]

If we do a cap, does it make more sense to do an annual cap or a total cap?

I think annual is better. Taxes are an annual construct, after all.

[Fmr. Pres. Duke]

We could easily finish this bill with an amendment setting a cap. Problem is, I don't know much about what would be a fair limit to cap it at - maybe 25 cents on the dollar? My goal is to make this so the wealthy don't overwhelmingly benefit anymore, but we also don't hurt those who rely on the deduction in their annual budgets. Right now, we allow homeowners to deduct up to $1 million a year from their taxes using the mortgage deduction.

If we want to explore shua's proposal, that's fine too, but I'm not very familiar with it.

[Southern Senator North Carolina Yankee]

So we gonna have an amendment to that effect?

[Southern Senator North Carolina Yankee]

Hello out there?

[DC Al Fine]

If an amendment isn't forthcoming, I'd like to bring this to a final vote.

[🐒Gods of Prosperity🔱🐲💸]

I'll be putting forward an amendment shortly.

[🐒Gods of Prosperity🔱🐲💸]

amendment

You must be logged in to read this quote.

From my research, this change would cut the MID nearly/roughly in half in terms of tax expenditures  - by about $40-50 b - and so I propose putting most of the savings toward lowering a tax paid by everyone.

[Simfan34]

I suggest the savings be reinvested into worker-owned enterprises, or cooperatives.

[DC Al Fine]

Hostile.

Will probably vote for the final bill if this is it, but I want to keep my version

[TNF]

You must be logged in to read this quote.

[Simfan34]

I suggest the savings be reinvested into worker-owned enterprises, or cooperatives.

I was obviously joking. Can we implement the tax credit? Obviously we can not vindictively remove a deduction without giving The People relief somewhere.