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Obama threatens middle class mortgage interest deduction

By: Mike gamecock DeVine (Diary)  |  December 4th, 2012 at 05:31 PM  | 

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Still think President Barack Obama champions the middle class in their ongoing struggle to overcome the mess he inherited from Bush as he demands the raising of tax rates only on those earning over $250K/year? Well, it seems that the mess his re-election bequeathed has him threatening to raise taxes on middle class homeowners. In response to a question on Twitter asking if homeowner deductions were at risk, the President tweeted:

“Breaks for middle class [important] for families & econ. If top rates don’t go up, danger that middle class deductions get hit.”

Danger? Deductions for home mortgage interest under present law are allowed for home loans up to $1M. Unlike the December 31, 2012 sunsetting provisions of the laws concerning income tax rates, payroll (FICA) tax rates and the Alternative Minimum Tax; deductions for home mortgage interest, charity and state and local taxes are presently “permanent”. Therefore, the only “danger” that any of the deductions most depended upon by the middle class could get “hit” is if President Obama signs a bill hitting them. If, in the unlikely event the Republican House and Democratic Senate were to pass such a bill the Chief Executive could veto the danger. Only an even more unlikely 2/3 majority of both houses could then hit the middle class via a veto override.

Republicans in the House will not propose reducing the mortgage interest deduction to hit the middle class. None in Congress have ever proposed it, nor did Mitt Romney in his failed campaign.

Given these facts, we can only interpret Barack Obama’s tweet as another one of his gratuitous threats on the order of those made threatening to refuse to pay the military and Social Security beneficiaries in the event of a government shutdown during the Debt Ceiling crisis last year. The deal that averted crisis (America’s credit rating was lowered despite the deal) included the sunset laws that are now characterized as the “fiscal cliff.”

President Obama insisted then, as he has every year of his presidency, that tax rates automatically rise absent future deals. Spending, on the other hand, can’t be cut absent a deal, unless it concerns a military he refuses to employ even when U.S. consulates are under siege. Think such priorities champion the middle class? Neither do we.

For the record, we oppose any downward change in home mortgage interest deduct-ability given that ALL home prices presently factor in current law. Fewer houses will be built by would-be middle class laborers if the “rich” are attacked. Underemployment remains at Depression level rates today in an economy that is barely growing. History teaches that only if the housing market rebounds will America ever have a chance for a recovery worthy of the name and an eventual return to the prosperity to which we have been accustomed during most of our history.

We are convinced that President Obama cares not if tax rates rise in the New Year, but that he does care about who gets the blame. Given Election Day exit polls that found a majority of voters blaming former President George W. Bush for our ongoing economic woes four years later, Obama knows that it is not impossible to fool significant numbers of our economically ignorant electorate.

The best way for Republicans to combat this Democratic Party president’s permanent blame game campaign would be for them to:

  1. Pass a bill making the reduced payroll tax rate permanent (there is no Social Security lock box anyway);
  2. CUTTING (not merely retaining the so-called Bush tax cuts, partial h/t to Mark Levin) tax rates for the middle class;
  3. Send the bill to Democrat Senate Majority Leader Harry Reid; and
  4. Go home for Christmas secure in at least co-Champion of the Middle Class status.

Odds are that the mess Obama inherited from Obama already has us on a path to a Double Dip recession, even if the fiscal cliff is averted. You can’t attack small business for four years (six including the Democrat Congress elected in 2006) and avoid natural law with puny measures.

The only way Republicans could avoid blame in the liberal media would be if they all became Democrats, but the GOP has won elections in the past despite media bias and they won’t motivate their natural constituencies, including the middle class by making a deal abandoning the economic principles that form the basis for their viability. In the meantime, why not make their own bold move casting the Democrats as the enemy of those they claim to champion, rather than just saying they merely disagree with their “honorable” friends across the aisle.

Mike DeVine

“One man with courage makes a majority.” – Andrew Jackson

Editor – Hillbilly Politics

Co-Founder and Editor – Political Daily

Atlanta Law & Politics columnist – Examiner.com

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  • gawken

    There are so many ways that Obama can “back-door” into ending the mortgage deduction for the middle class. As just one example, the standard deduction for everyone now is a floor..you get it regardless.. Well, the opposite of a floor is the ceiling, so why not propose capping the total of itemized deductions as a percentage of one’s AGI.. so if your AGI is, say $100,000, and the maximum percentage allowed is 25%..well, most who have mortgage interest, taxes ( including real estate and state and local taxes) and charity, and medical..it’s easy to sell as being “fair” in that everyone gets the same % deduction..

    and this also helps to kill charitable giving…

  • perdido

    Oh, man. I see that and all I can think of is Gary Larson’s comic with the hiding dog thinking “please, please, please.” as the cat approaches the open drier door with the sign saying, “Cat Fud”.

  • http://www.TerriersOfTheRight.blogspot.com Flagstaff

    Good suggestions, Mike. A bold initiative instead of tentative baby steps.

    As for tomorrow, I suggest that Speaker Boehner pull the already offered deduction reductions off the imaginary table.

    I could even see letting the President have his tax hike on the “rich,” although I think the bracket should start much higher than $200,000, given no change in deductions. Yes, we know it won’t help balance the budget, but realistically there is nothing Obama is going to do (other than push us off the cliff) that MIGHT have a chance to address the deficit. He’s already talking about “reducing budget growth,” not reducing spending.

    IMHO, Obama cares not a bit what happens, only that it takes as long as possible and inflicts as much pain as possible that he can blame on Republicans. His goal is not fiscal responsibility, it is turmoil and delay, while the situation continues to worsen.

    People like Rick Santorum are finally coming out with the right take on Obama’s actions–they don’t make sense unless his goal is something other than what he says it is, and something other than what sane folks would consider good for America.

  • commonsenseobserver

    The mortgage deduction is distortionary and skewed towards debt-financed luxury.

    On the other hand, while I don’t think Obama was specifically referring to that, he’s an idiot if he thinks we’re going to take this political risk. While the deductions cap proposed by Hill Republicans would mostly have hit upper-income families exploiting the cluttered, unfair, and inefficient tax code, eliminating or reducing the mortgage interest deduction, which has far more powerful supporters, without the benefits of real spending restraint and pro-growth tax reform, would mean political suicide.

    We could agree to some revenue increases if we do not want any tax hikes (though I favor L.I.B), but we cannot agree to base broadening measures that directly hit the middle class without pro-growth tax reform, along the lines of Bowles-Simpson or the Ryan Budget or Domenici-Rivlin (with no sales tax, please).

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    But Obama could only do that via bill passed by a GOP House. I wish we would eliminate or greatly restrict the deduction for state and local taxes as they most;y subsidize high tax blue states.

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    I wish we would eliminate or greatly restrict the deduction for state and local taxes as they most;y subsidize high tax blue states. I do think there is merit in the Corker proposal of limits to deductions, but given the character and goals of this President, and that he will never agree to any deal that heals the economy, reduces spending, etc, the next four years must be about winning the PR battle for future elections. Obama will not sign legislation that would be a net positive for the US.

  • commonsenseobserver

    That is true. Which is precisely why I don’t understand the fuss here about the Boehner offer in the first place- there was no question of Obama accepting it.

  • norris

    If you have a mortgage of $100,000 and a interest rate of 3.5% the deduction amounts to $3500 you won’t be taxed on. If you don’t have twice that amount in deductions the standard deduction is the best bet. If you take the standard the other deductions are worthless.

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    Yes ‘staff re Obama. Scorpions will be scorpions, therefore Republicans should focus solely on the PR game for the next election.

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    Norris, I hear you but I worry that reducing the mortgage interest deduction below the current level would adversely effect the critical housing market, even if those that actually use it at the higher levels are few. What do you think?

  • mtmnd

    Obama is obviously just trying to scare people, but unfortunately the GOP has been complicit in this. The calls for raising revenue through unspecified tax reform makes such scare tactics inevitable.

    Romney and now Boehner have offered up spineless, empty vessel “plans” raising taxes without really admitting they are raising taxes, but have refused to specify how exactly this will work or where the revenue will come form. They’ve given the left (and the press) free reign to fill in whatever sordid details suit them. Thus Obama’s tweet and recent press coverage about the dire possibility of cutting the mortgage interest deduction. They can pretend that this will happen in part because the GOP has refused to put forth specifics to the contrary.

    Unfortunately, though, conservative politicians may be somewhat complicit in all this as well, because conservative politicians haven’t exactly been explicit and forthcoming about how exactly they would solve the fiscal imbalance through cuts alone. Where is the conservative plan spelling out how exactly this crisis can be averted through cuts only? Where is the detailed list of everything that needs to be cut? And why aren’t conservative Congressmen pushing such a plan loudly and proudly?

  • txgop

    I agree…to me, living quarters (be it apartments, duplexes, houses, etc.) should be on equal footing, rather than one being ‘tax favored’ while the others are not. I would be in favor of eliminating the mortgage interest deduction in exchange for a similar lowering of tax rates and offsetting reduction in spending.
    And if the Republicans can effectively (big if, I know) communicate that historically, from Kennedy to Reagan to Bush, tax rate reductions have led to increased revenues, rather than ‘costing’ the government money as the Left argues with no reasoned response…doesn’t this ultimately get us closer to a more broad, even tax code?

  • http://www.examiner.com/x-1597-Charlotte-Law--Politics-Examiner Mike gamecock DeVine

    Bravo mtmnd. Where is the plan? Ryan’s was vilified and even it was quite puny. The fact of the matter is that any plan big enough to avert catastrophe would have to reduce the benefits of CURRENT beneficiaries of Soc Sec and Medicare. The promises made to Baby Boomers were excessive. We can’t afford to honor them, and Natural Law ensures that they won’t be honored. But have we the electorate that could deal with such a message or even one man with courage that could make a majority by enunciating that BEFORE the next inevitable crash? I doubt it too.

  • rustyoldgarand

    Blue-leaning urban dwellers will be most hit by the elimination of the mortgage interest deduction, because their real estate prices are higher. It’s not really that bad from where I’m sitting.

  • freemkts

    Most mortgages are worth more than $100,000 and few people have interest rates of 3.5%. Then when you factor in other deductions, including the insidious property tax, and most folks have to itemize.

    Personally I hate the fact that govt subsidizes housing purchases, in the name of the American Dream, but it is what it is. A good first step would be limiting mortgage deductions to one house and no jumbo mortgages. The govt should not be subsidizing people to live in mansions.

  • mtmnd

    This may resonate on its face, but I am not sure it reflects reality. Yes, those living where real estate is relatively expensive would be bear a heavier burden, but plenty of conservatives live in such areas. Take a look at the demographics in the red state suburbs, for example. A heck of a lot of conservatives and potential conservatives would be hit hard by the tax increase, not just “blue leaning urban dwellers.”

    In fact, the only ones exempt from the new tax would be those who cannot afford a home and must dwell in apartments or otherwise rent. Such people don’t really represent the conservative base, do they?

    And as M g DeVine mentioned, those who earn a living in the housing industry would be hurt as well.

  • Viet71

    Rest easy. The mortgage interest deduction was enacted in 1917. Same year as the charitable deduction. These are truly sacred cows.

    The deduction for state and local taxes — the first itemized deduction, enacted in 1916 — isn’t so sacred. It’s a preference for AMT purposes. The AMT clobbers folks in blue states like CA, CT, and NJ, which have high income and real estate taxes.

    Good thing the tax laws are so frigging complex only a few Americans (top tax professionals) can begin to grasp them and their planning implications. The only thing about taxes on which everyone agrees but which will NEVER happen is simplification.

    Why NEVER? Because the tax law is the principal way of allocating places at the trough. It’s POWER in the hand of elected officials.

  • rosenstern

    I believe we should support ending the mortgage deduction. The principle is that government should not be distorting the free market. Whether an individual believes that owning a home is better or worse than renting a home is their individual choice. Regardless of any personal views on the matter, the point is that government should not have their thumbs on the scale – it just isn’t their job.