HELOC interest deduction goes away under Republican tax "reform": Expect loan consolidation

You know the one, the one you take to help buy a car, fund tuition, or actually fix up the house.

When the credit card interest deduction went away under Ronald Reagan, consumers opened up Home Equity Lines of Credit in response, the interest on which was deductible. Now that HELOC interest deductibility is going away, expect those HELOCs to be refinanced under new first mortgages to recapture that.

Also expect this to impact consumer spending, negatively.

Reported here:

Individuals who take out home equity loans will no longer be able to deduct that interest under the new bill.

Sum Ting Wong: Low top marginal tax rates since 1986 have NOT delivered

Low top marginal tax rates have NOT delivered since 1986.

The average top marginal rate has been 38% for the last thirty years, 49% lower than the average rate of 75% which prevailed from 1956 until the Reagan tax reform of 1986.

After the reform, stocks have done little better than before, but gross public debt has increased at a rate 21% higher than before, growth of current dollar GDP has plunged by 66%, and growth of household net worth has slowed by 48%.

Where did the gains from the Reagan tax cuts go?

You know the answer. The number of US billionaires has exploded from just 41 in 1987 to 536 in 2015, up 1,207%. The money has gone into the pockets of the few, instead of into investment. From 1960 to 1986 net domestic investment grew 846% whereas in the 30 years since 1986 the metric has grown by only 117%, a contraction of 86% under the more favorable personal income tax regime.

The lesson seems clear.

Higher marginal income tax rates force the wealthy to invest in business and derive their income from investments taxed at the preferred lower long term capital rates. Lower marginal personal income tax rates, however, entice them away from going through all the trouble, in turn depriving the economy of growth, employees of growing incomes and wealth, and the government of revenue.

Like the formerly sound public policy which invented the 30-year mortgage to force people to save for the future in the housing piggy bank, the time has come to reincentivize business owners to invest more in their businesses by making the personal income option less attractive.

Neither Republican tax bill does this. 

  

House tax bill passes 227-205, Senate still working on theirs

From the story here:

[T]he bill would limit state and local deductions and the mortgage interest deduction, eliminate the personal exemption and nearly double the standard deduction. ... The most significant difference between the chambers' plans is the treatment of state and local tax deductions. The Senate plan would eliminate those deductions entirely. The measure could alienate some House Republicans who voted for the chamber's bill that would allow up to $10,000 in property tax deductions.

CNBC's Jake Novak lets it slip that his libertarian hatred of single family homes has been aesthetic all along

Seen here, italics added by me:

Second we have perhaps the most controversial proposal: The plan to cap mortgage interest deductions for new home purchases at $500,000, but keep the rules as is for existing mortgages. This starts the long-needed process of eliminating a tax policy that mostly aided the rich and has aided America's ruinous and unsustainable suburban single-family home sprawl. 

Funny how so many Americans like to live in that suburban sprawl instead of in cities.

Funny also how they overwhelmingly vote Republican.

The only reason itemized deductions are on the table is a minority of 30% of tax filers itemize

And when it comes to minorities, they're only as effective at protecting their interests as their lobbyists. We'll see how strong those lobbyists remain, but Republicans in the House and the Senate are clearly divided, and seem to have joined the side of the enemy. The latter aim to pitch deductibility of state and local income taxes, while the former aim to pitch deductibility of mortgage interest.

It's weird beyond odd that Republicans are having a war over tax deductions when they should be having a war over spending. Republicans used to be the "no new taxes" party, but have become the "no tax deductions" party instead, which means they're more interested in raising revenues than in cutting your taxes (which implies cutting spending).

Just 44.7 million itemized in 2015, out of 149.7 million returns.

Watch your wallets.

Discussed here.

Strike Three and You're Out: Both National Associations, of Homebuilders and of Realtors, pull support from House tax plan

Trump looks set to be defeated on tax reform as 2017 winds down, just as he has failed to overturn Obamacare and build The Wall. And considering what the tax reform is looking like, it's just as well.

The tax plan as it stands this weekend eliminates the itemized deductions for mortgage interest and state income taxes, keeping only the deduction for property taxes.

Reported here:

[I]n a sign of the complex balancing act that [House Ways and Means Chairman Kevin] Brady must perform to produce a tax-overhaul bill this week, the property-tax announcement came on the same day that the National Association of Home Builders pulled its support for the legislation. The group’s chief cited concerns that the bill might undermine existing tax breaks that support the housing market. Likewise, a coalition that includes the National Association of Realtors said in an emailed statement that it “will vigorously oppose this plan.” ... It would appear that deductions for state and local income taxes and sales taxes would still be repealed under the planned House bill.

This is all the fault of our so-called conservatives in the US House. They aren't conservatives. They're doctrinaire libertarians who HATE people who want to get married, settle down and buy a house and have children. They view people as CAPITAL, whose value only decreases if it is too difficult to move them around at the whim of GLOBAL BUSINESS. That's why you'll never hear these people target the tax revenue lost to the lower capital gains and dividend tax rates, which are almost TWICE those lost to the mortgage interest deduction. These people are the enemies of localism and are instead the champions of the homogenization of society with its bland sameness everywhere. They are the ones who've shipped our jobs overseas and let in the tens of millions of immigrants who've further reduced our wages and opportunities.

One year from now you'll have another chance to send them packing.

I'll be voting for Mickey Mouse and Donald Duck before voting for a libertarian in 2018.

A cuck at Taki's Magazine falsifies some "moral equivalency" between Antifa and White Nationalism

From an "apocalyptic psychologist", here:

Lacking any higher values, and surrounded on all sides by the base and the untrue, white nationalists and diversity’s agents, Antifa and Black Lives Matter, understandably turn to violence—for at least it is real, a brutal assertion of something true in the midst of so much deception. Inspired by envy and pride, these groups all deserve one another, and the American public, relishing the opportunity to hate while appearing righteous, will delight in the evil spectacle.

The violence is all Antifa's, but hey, it takes a cuck to recognize cuckery in white nationalism, right? The truth is there is no white nationalist violence to speak of, let alone any white nationalism. One gets the impression for a moment that this cuckologist secretly isn't too happy about this. It's almost as if he's goading his readers with the unpleasant truth that, just like him, they're all just pussies.

Well, he is a Calvinist atheist.

White nationalism is pretty much a phenomenon limited to the internet's world of anonymous commenters, such as at Taki's. In the main the commenters there do a good job of giving voice to white identity, but most of the discussion ends up in arguments refighting every war ever fought and no one seems to be able to agree about much of anything important, including religion. Ardent Protestants and Catholics spar with each other, as do the theists with the atheists. The editors typically feature articles which tread right up to the line, creating the playground, but go no farther. Meanwhile the actual Party of Violence is threatening the real thing, the latest action being a nationwide event set to begin on Nov. 4.

We'll see how that goes. So far if it rains Antifa's legions have shown that they will find something better to do, so if the weather interferes, Nov. 4 may turn out to be just another bust no less than every demonstration of white nationalism has turned out to be a bust. In any case Antifa only makes its biggest splashes when the whites plan to show up to contest the field, so barring that I'm expecting nothing very remarkable on the first Saturday in November.

Besides, the nation's property owners, most of whom are white, have property to protect and keep busy doing just that. There are about 75 million owner-occupied single family homes in this country, occupied by 60% of the population. They look askance at anyone threatening that property, or the businesses in which they work or which they own, whether it's Black Lives Matter doing the rioting, burning and looting and killing the cops whose duty it is to protect that property, or any other group of hooligans promising this kind of trouble.

Until the lives and fortunes of these ordinary white Americans are at real risk, there will be no sympathy for movements claiming to fight on their behalf, despite what the alarmists at the Southern Poverty Law Center may tell you.

And from a theoretical point of view, ordinary whites have no sympathy either for those who only wish matters were so dire, or half-believe they really are. 

Three easy steps to joining the middle class

1. Get a job

2. Marry someone who also has a job

3. Pool your resources and buy a house

Three salvos this morning in the libertarian war against homeownership: Fortunately human nature is stronger

Insane libertarian fixation on mortgage interest deduction, edition 4716

You would think a libertarian would acknowledge that shielding YOUR money from taxation is a good thing, but you would be wrong. There are at least seven tax loss expenditures more costly to the tax man than the mortgage interest deduction, but their crazy war on it continues nonetheless. What it masks is the underlying hatred of conservatism homeownership represents. Homeowners settle down and raise kids instead of sacrificing themselves to the needs of global capitalists. That's their real problem with it.

As I predicted Real Clear Markets wastes no time trotting out another libertarian to attack your mortgage interest deduction, this time from the Manhattan Institute

George Herbert Walker Bush's legacy: It took only 7 years of NAFTA to destroy hours worked in the United States

Hours of all persons grew 44% during the Reagan bull market, which ended in August 2000. Since then, hours of all persons has grown just 3%.

NAFTA went into effect in January 1994, eleven years after the Reagan bull began and a little over one year after Bush inked the deal. Seven years later hours of all persons peaked.

It reminds me of Bill Clinton's innovation, the so-called Taxpayer Relief Act of 1997, which blew up the housing market after just 10 years.

Republicans take away your job, then Democrats come along and take away your house.

If you're living in your car, you'd better watch your back.  

Income inequality has increased really for just one reason: Growth of owner occupied housing is in decline

Homeownership is the ticket to the middle class, and fewer and fewer tickets are being issued:

Your mortgage interest deduction is only eighth in the latest list of top things on which government claims it loses revenue

But libertarians especially hate it. Expect more articles telling you it's got to go as tax reform talk heats up in Congress.

Here are the top 20 "tax loss expenditures" for 2016-2020:

1.  Exclusion of employer contributions for health care and insurance: $863 billion

2.  Lower tax rates on dividends and long term capital gains: $678 billion

3.  Income made by controlled foreign corporations: $587 billion

4.  Contributions made to IRAs and 401k plans: $584 billion

5.  Pension plan contributions: $424 billion

6.  Earned Income Tax Credit: $373 billion

7.  Deductions taken for state and local income taxes, sales taxes, property taxes: $369 billion

8.  Deductions taken for mortgage interest on owner occupied homes: $357 billion

9.  Obamacare "subsidies": $327 billion (what a laugh: they raise the cost, give you a subsidy, and count the subsidy as a tax-free gift)

10. Child tax credit: $271 billion

11. Expensing depreciable business property: $248 billion

12. Deductions taken for charitable contributions: $231 billion

13. Social Security benefits: $214 billion

14. Municipal bond income: $195 billion

15. Deductions taken for taxes on real property: $180 billion

16. Capital gains taxes excluded at death: $179 billion

17. Medical expenses and over the counter medications under cafeteria plans: $169 billion

18. Capital gains taxes excluded on sale of principal residence: $166 billion

19. Life insurance proceeds: $128 billion

20. Deduction for income from domestic production activities: $102 billion.

Total revenue the government claims it's "losing" because of its "benevolent" tax policy on these items: $6.645 trillion over five years, or $1.329 trillion annually.

My, how nice of them. 

As defined by homeownership, the absolute size of the middle class hasn't really grown at all since 2005

Robert Shiller blames housing bubbles on get rich quick flipper narratives, still completely misses the tax angle

Here, in The New York Times:

There is still no consensus on why the last housing boom and bust happened. That is troubling, because that violent housing cycle helped to produce the Great Recession and financial crisis of 2007 to 2009. We need to understand it all if we are going to be able to avoid ordeals like that in the future.

Ordinary Americans were suddenly able to make a lot of money by flipping their homes because of the tax law changes of 1997. Capital that was previously locked-up in housing by the rules of the New Deal until 1997 was suddenly unleashed to slosh around in the economy when lawmakers gave homeowners the right to avoid most capital gains on the sale of their homes as long as they lived in them only two years. Until 1997, if you didn't buy a more expensive home after you sold yours, you were exposed to a tax hit, unless you took the option of a once in a lifetime exclusion on the gain. The old arrangement had insured, along with the 30-year mortgage, that housing capital built up over a long period of time, creating forced savings for the middle class which could be safely liquidated in retirement without adversely affecting the housing market.

The Republican and Democrat geniuses who ran our government in 1997 changed all that, and within ten years the dang thing blew up. Yeah, I'm talking about you, Bill Clinton, and you, Newt Gingrich.

Too bad Robert Shiller still doesn't get it.

It would probably be unwise to turn back the tax clock now that the damage has been done, but the reinflation of the housing bubble after the crisis wasn't inevitable. The Fed's unprecedented zero interest rate policy has been responsible for that.

When the next housing crash comes, we'll probably not understand it either.

Meanwhile, the median sales price of homes in the aggregate has never been higher, or more unaffordable, and remains the primary driver of wealth inequality in America. 

New York Times blames housing unaffordability on mortgage interest deduction, never mentions how the Fed just reinflated the housing bubble quite apart from it

Here.

Housing was on its way to being affordable again until the Feds stepped in to stop foreclosures from rising and prices from falling, late in 2008. As a result of rock bottom interest rates which existing owners used to refinance their mortgages, housing is now more expensive than it has ever been, but the Times attacks the mortgage interest deduction for causing the problem.

Prices are up 47% since the 2009 low, in just eight years! The mortgage interest deduction was invented over 100 years ago, and helped to build the post-war middle class.

The Times seems bent on further destroying it.

Senate Intelligence Committee aide anonymously tries to smear Trump with money laundering

Probably a Democrat aide. Democrats on the committee include Diane Feinstein, Ron Wyden, Martin Heinrich, Angus King (I), Joe Manchin, Kamala Harris and Mark Warner.

Here:

The Senate Intelligence Committee wants to see any information relevant to its Russia investigation the Treasury agency has gathered, including evidence that might include possible money laundering, according to a committee aide who spoke on condition of anonymity. Also at issue: to what extent, if at all, people close to Vladimir Putin have invested in Trump's real estate empire.

Talk radio and Republicans are trying to defend this latest indefensible continuing spending resolution

When Democrats took control of the Congress under Obama in 2009, they promptly added about $700 billion to Bush's outlays in the middle of his last fiscal year, and successfully made the new level of spending the baseline for the rest of Obama's two terms. This was done in the name of rescuing the country from the financial/housing crisis.

They sold it as an $800 billion stimulus, but it was in reality the most outrageous expansion of federal spending ever: $5.6 trillion over 8 years. The sum is $1.28 trillion in excess of Obama's entire dollar GDP increase for his presidency. It means we spent $1.30 for every $1 of Obama's GDP.

But you have heard nothing about it because Republicans are co-dependents in government spending.

Spending soared overnight from $2.8 trillion to $3.5 trillion, and stayed at that level right through the final days of the Obama administration, despite Republicans taking the House in 2010 and the Senate in 2014.

Now that the tables are turned, Republicans are claiming "the rules" mean they have to compromise with Democrats and continue spending on Democrat items under the Christmas Tree, like Planned Parenthood, sanctuary cities, border security without The Wall, and a variety of non-defense spending items, in order to get what they want in the $1.1 trillion continuing spending resolution, which basically boils down to a big increase in defense spending, but not much for what Trump advocated and promised the people.

Disappointed doesn't begin to describe our displeasure with this disgraceful pack of spendthrift bastards occupying The Swamp.

And they appear to have eaten Donald Trump.

Middle class according to Pew Research Center is just trying to make everyone feel better

MarketWatch here says that Pew estimates middle class household income for a family of 3 at between about $35,000 and $105,000 for 2011.

To understand how too liberally defined that is, consider that in 2011 almost 60% of individual wage earners made $35,000 or less . . . about 91 million wage earners out of 151 million.

Actually the middle third of all those paycheck earners, 50 million, made between just $15,000 annually and not quite $40,000, the average of which is about $27,500. Make over $40,000 and you were already in the top third of individual wage earners that year.

A couple making $27,500 can survive in this world, but it wouldn't have been able to buy the median priced home of $225,000 in 2011. Just financing that without a down payment, an impossibility, at the average 30-year rate of 4.5% in 2011 would have meant 50% of income going to principal and interest.

Putting 10% down would drop that to 45% of income, still hardly affordable. And who do you know making $27,500 with $22,000 saved for a down payment on a house?

They'd be renting, most likely, and not yet solidly middle class.

In 2016 the average median sales price of a home in the US soared to nearly $314,000, putting the American dream even farther out of reach than ever before for the majority.