White House Petition: Paid-Off Residence Tax Credit, Mortgage Payoff 401k

[sebastmarsh]

Hello fellow Mustachians,

Like many of you, I've been kind of disappointed at the quality of dialog in this discussion.

I thought, instead of complaining about it, why not try to do something constructive?

So I created a petition on the White House "We the People" site for (1) a paid-off primary residence tax credit, and (2) allowing mortgage payoff to be 401k tax-deferred.

The petition --

https://petitions.whitehouse.gov//petition/create-paid-primary-residence-tax-credit-allow-paying-ones-mortgage-be-tax-deferred-401k-contribution

The math and relevant history of the tax code --

https://medium.com/@sebastmarsh/lets-do-something-constructive-a-wethepeople-proposal-1143f3ca6517#.2ogo9rpsk

Obviously, potentially very relevant to people here -- if the petition gets 100,000 signatures, the White House responds. Feedback? Thoughts? Agree/disagree it'd be a smart policy? Click and vote for it if you have a moment? (It takes under 3 minutes online, it's really painless)

All feedback welcome! I think it makes a lot of sense, because currently the mix of tax code and monetary policy really incentivizes carrying more debt, which is probably not as good as things could be. This is my small attempt to do something more constructive/smarter during this election season.

[boridi]

Make sure your petition spells principal correctly

[kpd905]

A $5000 flat tax credit is pretty hefty.  I can go find a $10,000-15,000 junker house in my hometown and buy it tomorrow if I can get that credit every year indefinitely.

[FIPurpose]

A $5000 flat tax credit is pretty hefty.  I can go find a $10,000-15,000 junker house in my hometown and buy it tomorrow if I can get that credit every year indefinitely.

Yeah an appropriate tax credit would be closer to $200-500 for primary residence only. If your mortgage is 150000 at 4% in the 15% tax bracket is max benefit of $900. That assumes you're already above the standard deduction.

[seattlecyclone]

Is it really good for the country to provide even more incentives for homeownership than we already have? Renting makes a lot of sense for a lot of people, and I don't think we should really have the government in the business of making owned homes cheaper. I know we already do this in a lot of ways (by making mortgage interest and property tax deductible, having a government-sponsored enterprise making 30-year mortgages a viable product, etc.) and I don't really think it makes sense to expand that one bit.

[FIPurpose]

Is it really good for the country to provide even more incentives for homeownership than we already have? Renting makes a lot of sense for a lot of people, and I don't think we should really have the government in the business of making owned homes cheaper. I know we already do this in a lot of ways (by making mortgage interest and property tax deductible, having a government-sponsored enterprise making 30-year mortgages a viable product, etc.) and I don't really think it makes sense to expand that one bit.

I agree. It would be better to just end the tax deduction

[matchewed]

Is it really good for the country to provide even more incentives for homeownership than we already have? Renting makes a lot of sense for a lot of people, and I don't think we should really have the government in the business of making owned homes cheaper. I know we already do this in a lot of ways (by making mortgage interest and property tax deductible, having a government-sponsored enterprise making 30-year mortgages a viable product, etc.) and I don't really think it makes sense to expand that one bit.

Right, so sebastmarsh, why? What purpose does this serve?

[Hotstreak]

The perpetual future benefit of this tax deduction would be reflected in the purchase price of homes.  Prices would go up, property taxes tied to home value would also go up.  Folks would need to save more cash to make their down payments and more people would push up against the Jumbo loan limit, increasing their borrowing costs.

[BlueHouse]

I always had the impression that the reason for mortgage interest tax deduction was to get people to buy (more) on credit, thus freeing up their cash for other purchases and expanding the economy.  The government thinks it's good for people to owe money.  Anyone who can either leverage their investments using the existing tax code or who doesn't play the mortgage loan game is already ahead of the game. 

Did you start the petition to reduce the debt of the general public?  Or because you feel you're getting the short end of the stick and you want to level the playing field? In other words, WHY do you think this petition is a good thing? 

[ender]

Is it really good for the country to provide even more incentives for homeownership than we already have? Renting makes a lot of sense for a lot of people, and I don't think we should really have the government in the business of making owned homes cheaper. I know we already do this in a lot of ways (by making mortgage interest and property tax deductible, having a government-sponsored enterprise making 30-year mortgages a viable product, etc.) and I don't really think it makes sense to expand that one bit.

+1

[Paul der Krake]

I have single-handedly saved the government tens of thousands of dollars by not being incarcerated.

Where is my money?

[GrumpyPenguin]

Is it really good for the country to provide even more incentives for homeownership than we already have? Renting makes a lot of sense for a lot of people, and I don't think we should really have the government in the business of making owned homes cheaper. I know we already do this in a lot of ways (by making mortgage interest and property tax deductible, having a government-sponsored enterprise making 30-year mortgages a viable product, etc.) and I don't really think it makes sense to expand that one bit.

I agree. It would be better to just end the tax deduction

+1 to this as well. 

[Spork]

Is it really good for the country to provide even more incentives for homeownership than we already have? Renting makes a lot of sense for a lot of people, and I don't think we should really have the government in the business of making owned homes cheaper. I know we already do this in a lot of ways (by making mortgage interest and property tax deductible, having a government-sponsored enterprise making 30-year mortgages a viable product, etc.) and I don't really think it makes sense to expand that one bit.

I agree. It would be better to just end the tax deduction

+1 to this as well.

+2

I'm never convinced that:
* making taxes more complicated is beneficial to anyone other than tax preparers
* making/subsidizing blanket decisions such as "wouldn't it be great if everyone owned a home" actually work the way they think they do.  It's more likely the subsidy just makes you buy a bigger house or makes folks that really SHOULDN'T buy a house buy one anyway.

[ender]

* making/subsidizing blanket decisions such as "wouldn't it be great if everyone owned a home" actually work the way they think they do.  It's more likely the subsidy just makes you buy a bigger house or makes folks that really SHOULDN'T buy a house buy one anyway even though it has no actual tax impact for many/most people

Fixed :P

[Spork]

* making/subsidizing blanket decisions such as "wouldn't it be great if everyone owned a home" actually work the way they think they do.  It's more likely the subsidy just makes you buy a bigger house or makes folks that really SHOULDN'T buy a house buy one anyway even though it has no actual tax impact for many/most people

Fixed :P

Yes, you are quite correct. 
I'm old enough to remember when it DID have a significant tax benefit.... but even then the whole idea of spending an extra $1 to save 20 cents seemed foolish.  I tried having that conversations with quite a few of my friends and they just couldn't quite grasp it.

[accolay]

Is it really good for the country to provide even more incentives for homeownership than we already have? Renting makes a lot of sense for a lot of people, and I don't think we should really have the government in the business of making owned homes cheaper. I know we already do this in a lot of ways (by making mortgage interest and property tax deductible, having a government-sponsored enterprise making 30-year mortgages a viable product, etc.) and I don't really think it makes sense to expand that one bit.

I agree. It would be better to just end the tax deduction

Agree. Actually, probably get rid of all deductions. As far as the mortgage interest deduction, it will never go away: home builder lobbies, tax professional lobbies, realty lobbies.

[FIPurpose]

I disagree that it won't go away. Past few presidents have been for its removal/change. With budget woes, it will probably be easier for Clinton to raise taxes this way than through a rate hike. Id say look for a change to this piece of tax code in the next decade.

[Dee18]

I don't see how this is progressive.  This will definitely help the "haves."  I am happy I was able to pay my house off, but I don't think I deserve a tax break for that over the person next door who is renting because they make less money.

[Proud Foot]

So I created a petition on the White House "We the People" site for (1) a paid-off primary residence tax credit, and (2) allowing mortgage payoff to be 401k tax-deferred.

Why do we need a credit for having a paid off primary residence? My understanding of the mortgage interest deduction was to help lower-middle class afford owning a house (back when owning ones home was the American Dream).  Is not having to pay interest not enough of an incentive for paying off your house?

And could you explain #2?  How would this work? Are you meaning allowing individuals to use their 401k to pay off their mortgage?

[FIPurpose]

My guess is that his intention is that you could stuff pre-tax money into the house? So that when you sell it, you pay taxes on the event. Really bad idea since that would likely cause people to pay more in taxes than they would otherwise. This is why we pay and elect people to write these things.

[MrsPete]

Is it really good for the country to provide even more incentives for homeownership than we already have? Renting makes a lot of sense for a lot of people, and I don't think we should really have the government in the business of making owned homes cheaper. I know we already do this in a lot of ways (by making mortgage interest and property tax deductible, having a government-sponsored enterprise making 30-year mortgages a viable product, etc.) and I don't really think it makes sense to expand that one bit.

The average American isn't saving, or isn't saving enough.  A paid-for home makes retirement more possible for that average person; thus, I think it's wise for government/society to encourage it.  However, I don't know that we need this current suggestion PLUS what we already have. 

[Prairie Stash]

Is it really good for the country to provide even more incentives for homeownership than we already have? Renting makes a lot of sense for a lot of people, and I don't think we should really have the government in the business of making owned homes cheaper. I know we already do this in a lot of ways (by making mortgage interest and property tax deductible, having a government-sponsored enterprise making 30-year mortgages a viable product, etc.) and I don't really think it makes sense to expand that one bit.

I agree. It would be better to just end the tax deduction

https://en.wikipedia.org/wiki/List_of_countries_by_home_ownership_rate
Canada has higher home ownership rates and doesn't have the deduction. I wonder what purpose the deduction serves? All the tax code meddling, why not make a petition to simplify the tax code and remove deductions.

[No Name Guy]

Amazing....lots of Libertarian views here.  Why, I ALMOST hear most on this thread advocating for the simple flat tax with no deductions.  Send in XX% after some threshold of income.

And yes, deductions, exemptions, allowances, etc in the tax code are, for those ignorant of how DC works, a way to give money to favored interests by obscuring it within a complex code.  Griping that your most hated politician of the other party isn't paying "their fair share"?  You may thank the complex tax code.

The home mortgage interest deduction favors high income earners in the Northeast and California primarily.  The pittance the middle class gets out of this is the "bread" (as in bread and circus) to distract you from the fact that the benefit is going to the rich.

Nope..... No Name Guy's tax code is this:

________:  Income, all sources (realized net cash income from any and all sources, by any and all means).
-___XXXX:  Personal exemption to not tax the poorest income earners (equal amount per person).  Set somewhere below 20k / person US.
------------
_________:   Taxable Income

x     ___XX%:  Tax Rate
--------------
_________:   Tax Due

Simple, transparent and no bullshit social engineering to push people into (or punish them for not making) unsuitable for them decisions (like many people who ought to be renters since that's the best choice for their unique circumstances).

[snacky]

This sounds like a nice tax perk for rich people, largely. If you look at who, statistically, has no mortgage and owns their home you're going to see a lot of people who are getting by just fine without another tax perk. If the government is going to use tax credits to redistribute wealth they should be doing it in the opposite direction.

[MrsPete]

Amazing....lots of Libertarian views here.  Why, I ALMOST hear most on this thread advocating for the simple flat tax with no deductions.

I don't know enough about flat tax to argue pro or con, and I don't really know whether that's a Libertarian viewpoint or not ... but I think I'd go for a flat tax.  Let EVERYONE pay something towards the upkeep of the country, let EVERYONE pay the same percentage.  Sounds fair. 

[accolay]

Flat taxes are proposed by people who have money so they can pay less, while people who don't have as much money would have to pay more all while federal revenues decline. It's also proposed by people who want to abolish the IRS, because it's not like the other real branches of government decide on federal taxes or something.

I agree we need our taxes simplified, but the flat tax isn't it.

[DA]

To echo others, this is a silly idea.  But if you really want to see it enacted, why petition the White House?  Congress would need to pass the legislation.  I realize that the President can influence Congress, but you might get better traction convincing a Rep or Senator from your state.