Fixing the Unfair Mortgage Interest Deduction

Center for Budget and Policy PrioritiesTwo months ago, the Center for Budget and Policy Priorities (CBPP) released an amazing report, Mortgage Interest Deduction Is Ripe for Reform. It argues that the mortgage interest deduction is a bad way to encourage home ownership. Now, this is the kind of talk that normally makes home owners freak out. And with good reason! Although we can trust CBPP, it usually seems that whenever the government “reforms” the tax code it means that middle class people end up paying more.

The idea is a good one, however. And it could, if we the people hold our elected officials accountable, work out really well. Currently, the mortgage interest deduction is a $70 billion per year program. That’s quite a lot of money. It is more, for example, than the amount of money raised in new taxes from the Fiscal Cliff deal. Of course, no one is talking about getting rid of this homeowners’ subsidy, so we aren’t talking about saving all of the $70 billion, but there is still a lot that we could save.

There is something that most people don’t have a good grasp of: tax deductions are no different than welfare programs. There is no difference between allowing some people preferential tax rates and just handing them checks. Sure: homeowners think this deduction is God given, but it is anything but. It is a policy choice. In other countries, it is done differently. France doesn’t allow interest to be deducted at all. The Netherlands allows all interest to be deducted, but property values are added to taxable income. And in India, they limit the amount of interest.

What most surprised me is how non-egalitarian the mortgage interest deduction is. A shocking 77% of it goes to homeowners with more than $100,000 in income per year. So effectively, we are subsidizing the wealthy to buy very expensive houses. As I reported earlier today, Fred Thompson’s primary residence was worth over $3 million. And good for him! I just don’t think that it is a government interest to subsidize his rich lifestyle. This graph provides a good overview of homeowner needs and where we actually put resources:

Mortgage Interest Deduction

CPBB suggests replacing the mortgage interest deduction with a mortgage interest credit. It would be better focused on the needs of homeowners. What’s more, it would actually help more people to buy homes than the current system because it would be better focused on the middle classes rather than the upper class. But since it would be helping just as many or more homeowners, the change would not hurt the construction industry. (It might hurt contractors who focus on very high end homes, but even that is not certain.)

Our tax system is a mess. It is extremely unfair in most ways. The marginal rates are just the tip of the iceberg. Reforming the mortgage interest deduction would be an excellent change in the right direct. I recommend going over and reading the whole CBPP summary proposal. There is a lot more than I’ve mentioned here.

Whores Hawk Reverse Mortgages

Henry WinklerA reverse mortgage is not necessarily a bad thing. Under the right circumstances it can really help a retiree. Basically, it is a way to sell your house while being allowed to live in it until you die. The estate of someone who gets a reverse mortgage doesn’t necessarily lose the home in the end. But for those who are the best suited to one, this is the case. One thing is certain: reverse mortgages are not so widely useful to seniors that people need to be alerted about them via national television ad campaigns.

I have my own problem with a reverse mortgage: it is yet another way of taking wealth away from the middle classes. Instead of a home being passed on to the next generation, it becomes just another bit of equity in the portfolio of a giant corporation. Now there is nothing wrong with the middle classes selling off property to obtain a better retirement. But that really isn’t what this is all about. The ads are specifically targeted at the elderly to get them to exchange wealth for consumerism, “Get this really expensive and confusing loan and go on vacation!”

Okay: corporations are evil institutions. I get that. But I’ve been really struck by who the paid spokesmen are for these things. At first, I saw Fred Thompson doing the commercials. I actually felt sorry for him. Celebrities often fall on hard times and have to do these kinds of ads to get their lives back together. And Thompson was a good candidate because he has even less charm and ability than my Uncle Don. But that wasn’t what was going with him. According to CNN Money, in 2007, Thompson’s net worth is a bit over $8 million and he had made over $9 million in income the year before. Given that $4 million of his net worth was rolled up in two homes with almost a million for a pension, I don’t think he’s been doing too bad.

Fred ThompsonOf course, Thompson is a Republican. I expect this kind of stuff from them. The purpose of life is to make as much money as possible and then to spend it ostentatiously. That’s when I started seeing Henry Winkler doing the commercials. I don’t know his politics, but he’s done a lot of work for special needs children and apparently suffers from dyslexia himself. That usually indicates a liberal. So I thought: despite all the acting and producing and kid book “writing,” surely he too much have fallen on hard time. Not so much. According to Celebrity Net Worth, Winkler has about $35 million.

These two men, with all their millions, seem to think that hawking bad financial products to vulnerable seniors is a good use of their name recognition. In Thompson’s case, it hardly matters; I already thought he was a dick and an idiot, and I think that’s a common take on the man. Winkler, on the other hand, I thought rather well of. But now I think he’s as big a dick as Thompson. And the only thing likely to change that opinion is if I learn that he’s being blackmailed.

Again, reverse mortgages are not necessarily a bad thing. But they aren’t so great that they ought to be advertised everywhere. And the fact that they are pushed so hard is all you need to know about just how great they are. My recommendations would be for Fred Thompson’s agent to get him a couple of TV roles where he plays the president—the only part he’s pretty good at. And Winkler ought to ask for a raise from Mitchell Hurwitz.

Remembering Medgar Evers

Medgar EversBefore we get to the birthdays, we need to discuss a death. Early in the morning 50 years ago today, civil rights leader Medgar Evers was assassinated by white supremacist Byron De La Beckwith. But that was not the first attempt on his life. Others had tried to run him over and fire bomb him. It is shocking that to this day he isn’t widely known outside the civil rights movement. In fact, Emmett Till is far better than known than he is, even though Evers was so important in getting out the story of Till’s torture and murder. But there can be no doubt of just how important and effective Medgar Evers was. Just look at the reaction he got from the Mississippi bigots.

Evers was shockingly young when he died: just under 38 years old. To provide a little context, his older brother (Republican civil rights spokesman) Charles Evers is soon to turn 91. So it is very possible that Medgar would still be with us. Meanwhile, his murderer, Beckwith, lived to be 80. He only spent 6 years in jail for the crime because it took 31 years to convict him when he was already 73 years old. Before that, he had been caught trying to plant a bomb at the home of a leader of the Anti-Defamation League. He was convicted of “transporting explosives without a permit.” What a justice system we have!

Here is this morning’s Democracy Now! segment on Medgar Evers:

On this day in 1929, Anne Frank was born. I think the enduring appeal of her diary is that it shows that life will go on regardless. There is a similar scene in Schindler’s List where a couple are getting married in the camp. Even when suffocated by evil, people still manage to hope.

The chess player Donald Byrne was born in 1930. He is best known for losing the so called “game of the century” to Bobby Fischer. I’ve always thought he showed very good sportsmanship for playing the game through long after he knew he had lost. Mostly, he underestimated the 13-year-old chess genius. The game is known for an amazing queen sacrifice by Fischer, but other than that, it isn’t that interesting a game. Fischer conspicuously ignored it in his My 60 Memorable Games. Byrne was a Master level player—one of the best Americans during his peak. In 1955, for example, while playing black, he beat one of the chess icons of the 20th century Efim Geller. Byrne was also an English professor. He died of lupus at the age of 45.

Geroge H. W. Bush is 89 today. I give him another year to live. He doesn’t look too good, but I figure he will make it to 90 and then move on to the undiscovered country. I think the same thing about Bob Dole. But he hits 90 next month, so don’t be surprised if he soon decides it’s just too embarrassing to continue to be a Republican icon in the modern world.

Jim Nabors is 83 today. I hope that married life is working out for him. I suspect that it is. Musician Chick Corea is 72. And John Linnell, of They Might Be Giants fame, and Scott Thompson, of Kids in the Hall fame, are both 54 today.

Out of respect for Medgar Evers, no one “wins” today.

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Michael Bloomberg Wants to Destroy the Democratic Party

Michael BloombergThis morning at the Plum Line (which is no longer free), Greg Sargent reported on Holding Dems Who Vote Wrong Way on Guns Accountable. It explained that Michael Bloomberg has sent out a letter to Wall Street fat cats telling them not to give money to four red state Democratic Senators who voted against the Manchin-Toomey background check bill. It is not altogether clear where Sargent stands on this move by Bloomberg, but he provided only the last paragraph to argue against the move and then pretty weakly.

To a large extent, this makes me angry because of my priorities. Economics is what most matters to me and Michael Bloomberg is very much the enemy. And this little move of his might please a very small part of me, but its bigger effect will be to help Republicans win. And on economic issues, those Republicans agree with Michael Bloomberg. I doubt that is his specific intent. But it certainly doesn’t hurt that he will be switching out a Democrat who disagrees with him on guns and the economy for a Republican who only disagrees about guns. Why New Yorkers think that Bloomberg is on their side, I will never know. I also don’t know why he calls himself an “independent.” He is a typical blue state Republican: liberalish on social issues and that is all.

Just on the merits, this “kill off the conservative Democrats” is a bad strategy. It does nothing to increase the pro-gun reform movement. In fact, it may do the opposite. By lowering the competitiveness of Democrats in red states, it weakens the environment in which people can discuss gun law reform.

What we all need to remember is that gun reform is a single issue. Michael Bloomberg is not a Democrat. Other than a couple of issues, he is very much against the liberal project. There are plenty of gun reform groups one could support that don’t have a vested interest in getting Republicans elected by default. Look, I have no love for blue state Democrats either. But the truth is that on the vast majority of issues, they go along with the party. If voting against largely symbolic gun reform bills is what it takes for them to stay in office, I’m all for it. And so should be any Democrat, or even any left-leaning person.

And there is another part of the whole Michael Bloomberg circus that I hate. It shows that just because he has a lot of money, he can cause great harm to the democratic process. He doesn’t care if he destroys the Democratic Party or even the whole country as long as he gets his way on his pet issue. Sargent wrote, “They view this as a battle that could take many years to win and will require a major shift in basic thinking about gun politics among many top Democrats.” Why the focus on Democrats? This reminds me of David Frum’s ridiculous argument that we should vote for Romney because the Republicans would just continue to misbehave if Obama were re-elected. In this case, Bloomberg is saying that the Republicans are just wacko. So let’s reward them by attacking Democrats.

Michael Bloomberg is an evil and dangerous man.

Snowden Isn’t Traitor Not That it Matters

Edward SnowdenThis morning, Dylan Matthews at Wonk Blog (which is no longer free) explained, No, Edward Snowden Probably Didn’t Commit Treason. You see, Dianne Feinstein isn’t the only high profile idiot saying—based upon no evidence, I might add—that Snowden is a traitor. But it turns out that treason is a very specific legal construct that is hard to meet.

Basically, in order to commit treason, an individual must either go to war against the United States or must help a country that is at war with the United States. That clearly doesn’t include Snowden. In fact, it didn’t even include Julius and Ethel Rosenberg. We weren’t at war with the Soviet Union, so no treason for them.

There is even a question as to whether we are at war with al Qaeda. Of course, there is no question that our lapdog judiciary would see it that way. And that is what most concerns me about all this talk of treason. Even under the worst case scenario, Snowden is not a traitor. But as we’ve seen time and time again, the government has no problem stretching the law to unbelievable lengths in order to justify all of its vile acts. Just look at how the Obama administration has used the Espionage Act of 1917 to go after leakers. John Kiriakou was charged with three counts of violating it because he blew the whistle on our torture program. Go team!

In the end, I’m sure the government will go after Snowden under the Espionage Act too. But the truth is that it could go after him under the treason clause of the Constitution. And that should really concern us. At this point, the law is just a play thing for the government. If the government doesn’t like what you’ve done or what you’re doing, it will come after you. And there is nothing you can do about it. Kiriakou is a good example. In the end, all of the threats of the Espionage Act and even “making false statements” were dropped. But they still got him. He’s still going to spend two and a half years in jail.

So I don’t think Feinstein and friends really think that Edward Snowden is guilty of treason, except maybe in the colloquial sense (although that’s bad enough). They are just laying more of a foundation for further destruction of our civil rights. King George III: 1; American Revolutionaries: 0.