There are a couple of expiring provisions that many individual taxpayers will care about:
- The tax subsidy for riding mass transit will fall from about $245 a month to $130. The tax subsidy for parking will remain at $250.
- The deduction for qualified tuition and related expenses will expire.
- The ability to donate money from your IRA tax-free will expire. This has been very popular with retirees.
Many businesses will care about these expiring items:
- The amount that banks write off in mortgage loan forgiveness for people whose houses are under water has been tax exempt, but will once again be counted as income for tax purposes.
- The tax credit for research and development (R&D).
- Small businesses will see a reduction in the amount of equipment purchases they can expense (so-called 179 expensing).
- Big businesses will lose the 50% bonus expensing for capital investments.
Some tax breaks most of us won’t miss:
- Multinational businesses will lose two key provisions: “Active financing,” which is the equivalent of deferral for banks and businesses that finance the foreign sale of their own products (such as tractors); and, “look-through treatment,” which allows companies to move cash between foreign subsidiaries without triggering a U.S. tax liability.
- Special expensing for film and TV productions.
- 3-year write off for race horses under two years old.
- Faster depreciation for motor racing tracks.
- Lots of tax subsidies for renewable energy programs such as biodiesel, electric motorcycles, and energy-efficient appliances.
An economy where the players produce value by making choices of their own in a tax neutral environment is a much stronger economy that produces yet more revenue from enhanced growth. That's what tax reform is about. Let the favors go, every one of them.
Dudes if it's good for you, that doesn't mean it's good for America -- usually quite the opposite. Washington sitting on its hands and not renewing will add $50 plus billion to the bottom line. Do it. KA-CHING.
Not extending the Mortgage Debt Forgiveness Act of 2007 would result in the largest regressive tax in our nation's history. It would result in the least fortunate of American homeowners (those who are losing their houses via either short sale or foreclosure) being taxed for the difference between the net proceeds of the short sale/subsequent foreclosure sale and the what is owed on the mortgage. And while I am aware of the insolvency provisions in our tax codes, the practical matter is that a person with even minor assets would get hit with a six figure tax burden for years to come. Let me give an example from the real world. ( I have done over 100 short sales in my career, so I know a LOT of such examples.) I have a husband and wife who short sold their condo for $14K. The loan was written off to the tune of around $130K. This will be presented to them as a 1099 (income) for the tax 2013 tax year. If the act is not extended, (which it will most likely be extended as it has bi partisan support), they will lose every last dime they have, PLUS they will not be able to save a dime until such point as their tax deb of around $35K is paid to the Federal Government. The net effect is to drive one more wedge between the haves and have nots. And to repeat, despite the glib writing of the article that you quote, the "writeoff" applies to people who have had their houses foreclosed upon not just short sales or modifications. Let me draw a picture of just how goofy this idea is. In 2014, It would result in about five thousand homeowners/former homeowners in Chicago's impoverished neighborhoods suddenly having "incomes" that are above the $94K median income that currently exists in Chicago's richest neighborhood--The Gold Coast.
ReplyDeleteWow! A "six figure tax burden" for years to come. What gives rise to that -- jumbo mortgages to poor people in poor neighborhoods? Incredible burden.
DeleteOn the retail side of my business, the average sale price of my short sale/foreclosed upon deals in 2013 was $185K. The difference between net proceeds and what was owed to the lender was about $160K. Almost all of these people had some money, but not much. As a result, they all would have been down to zero assets for years to come. NONE of these were JUMBO loans. Moreover, the increase in housing prices in poor neighborhoods was much less post Gramm Leach Bliley than in working class neighborhoods, where house prices were propped up by free money. So Republican claims that easy money given to poor folks was the a primary or even secondary cause or even tertiary cause of the housing market collapse is simply not fact based. But the hit to impoverished neighborhoods has been disproportionate on the down side due to poverty and the lack of FHA support. What lack of FHA support someone like you may ask? Well, Grady, the FHA programs work very well in working and middle class neighborhoods, but do not work well in poor neighborhoods. Why? Because the loan requirements of an FHA 203K loan are such that the rehab portion of the loan can only be 50 percent of the purchase price. That works great in middle or working class neighborhoods, where the average sales price is $150K, whereby one can get up to $75K in financing. But does not work in a neighborhood, where the average price of a (formerly) beautiful 3 or 4 bedroom bungalow that has been savaged by marauders can be had for $30K. So the net result of this is an endless downward spiral. And your solution is to write some thoughtless smarmy comment.....But there is more.
DeleteThe above comment was written by Grady's brother Scott a Real Estate Broker in Chicago who runs distressed property funds (that he set up with two partners) for the rich, but who understands on a first name basis the hell that people go through when they can no longer afford to pay for their houses, because they were in the wrong business (i.e not US government or health care related), had a health care crisis, saw a marriage fall apart or lost a spouse through death. or lived in the wrong neighborhood (where the idiot big banks effectively red lined poorer neighborhoods from participating in short sales, and as a result destroyed home valuations to the extent that in impoverished neighborhoods, housing values have regressed over 20 YEARS.). This message from Scott Foster who is a registered Republican in the most ethnically diverse area of the country except for a few areas in Brooklyn where only 15 percent of the voters are Republican, and who in a week from now, will have fully 30 percent of his listings with African Americans, yet have a listing in the wealthiest Chicago suburb--in other words an intense pragmatist who sees the world for what it is NOT what one wishes it to be.
ReplyDeleteSo what happens is that investors pick up these properties on the ultra cheap, rehab them and sell them for a significant profit over and above ANY other area. In short the rich get richer, and the working poor and near poor have no opportunity to "cash in" on the distressed sale market. So the gap grows. Yo Grady. I see from previous posts that you blame the Dems as much as the Repubs for GLB. Hmmm. All three authors of GLB were Republicans, and the lead guy of course was Phil Gramm, (one of John McCain's top advisers in 2008). And why was Gramm so motivated to pass GLB? In part because his experience with "overregulated" housing markets in Texas led him to believe that less regulation was a better thing. History lesson Grady. When there was the S&L collapse in Texas in the 80s, there was much tighter government regulation put in place on getting loans in Texas, and there were other rules put in place that were essentially "truth in advertising" rules about selling a house. The net result is that housing price increases in Texas lagged the rest of the country going into 1999 and AFTER 1999. (Take a look at Case Shiller for Dallas if you don't believe me.) So when the housing crisis hit, the drop in prices was MUCH less than the drop in prices in other areas of the country. And as a result, there was as a percentage fewer devastating foreclosures and more stability. ALL OF THIS CAME AS A DIRECT OF THE VERY SAME GOVERNMENT REGULATIONS THAT YOU ESCHEW.
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DeleteLet me give you an example of the sort of person whom you feel should be taxed as a result of doing a short sale. This happened just this morning. I have a client who lost her job as a school teacher with CPS (Chicago Public Schools) because of a cut back in funding for charter schools. (A year later, she got a job in CPS, but she is struggling to get back on her feet.) The address of her short sale is in the Greater Grand Crossing neighborhood of Chicago, where there were 16 homicides last year, including one that involved her neighbor a block away who shot and killed a ten year old girl. Because she wants to have a second chance, AND because she wants to buy a two flat for her sister to live in, she is trying to do a short sale as a short sale will give her an opportunity to purchase a two flat much quicker. The woman is now living in a house with her new boyfriend after having divorced her (now former) husband, a Chicago cop. I met an agent who has been in the business for 25 years, and who is surviving doing BPOs. (His son graduated summa from NU, but could not get a job as he was the class of '08, until he landed a job with the British government off of a Craigslist posting. We were met at the property by the husband of the sister. He has lost his job, and it is tough. The property had NO heat, and the other agent and I went through it from top to bottom. The basement and first floor were empty except for a small Christmas tree on the first floor, and so was the second floor in the front. ONLY when I and the other agent (who was there to evaluate the property for the seller's lender) went to the second floor back did we discover huddled in one room around space heaters and two mattresses, the wife and the four kids. We both gave them money ($200 apiece) and walked out with tears in our eyes. Over the past 30 years trickle down just was that A TRICKLE to the bottom, and a gush of money to the top that created the huge income imbalance that we have today. I so remember watching the wedding of Charles and Di, when Evelyn turned to me and said, "In our country, the royalty is the middle class." Beginning with Ronald Reagan that is no longer true, and what needs to be done first is to tax the upper classes a higher marginal tax rate.
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ReplyDeleteI see, now the "six figure tax burden" for years to come is a one-time $35K tax bill. The mortgages would have had to have been jumbo to result in the six figure bills that you first complained of.
DeleteThe issue is simple. There are many things that this country cannot afford any longer. We cannot afford to pay outrageous monies for our aging baby boomer population retirement accounts especially those in the public sector, such as yourself, especially those such as yourself who worked for a government entity that had a chronic deficit doing a function that you pushed to privatize (at least several components) And that is profoundly to your credit because had they adopted your "radical" ideas, you would have saved this country BILLIONS. So from where I sit, you are a true hero along with people like Richard Levernier who blew the whistle on 60 minutes about poor security at our Nuclear Power Plants. We can no longer afford to pay 17% GDP for medical care. So that means that there has to be real limits on what kind of care is given for what kind of condition and at what stage of a person's life that is given. (To me, it was an incredible act of narcissism for Nancy Reagan to keep her husband alive, unless of course the money came from private funds.) Trust me, when I get to that stage, I am taking a boat out onto Lake Michigan and tipping it a mile or two off shore to see if I can swim back to my house. If not, I lose, and Lucy wins. We cannot run deficits as we have done for the last 30 years. With the inclusion of medical care and gay rights being near completion (as should have been done 40 years ago in my opinion), we really are an equal society. (And I don't want to hear the nonsense about women getting only paid a percentage of what men get paid. With the same job and the same number of hours worked, women actually get paid slightly more.) Indeed, the number of American men who work into their seventies leads the planet. American men are the longest working, hardest working people with the possible exception of South Korea....
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