Bert Robbins wrote:
wrote in message
...
On 12 Mar 2006 15:36:23 -0800, wrote:
NEWS From BoatU.S.
Boat Owners Association of The United States
880 S. Pickett St., Alexandria, VA 22304
BoatU.S. News Room at http://www.BoatUS.com/news/releases.asp
FOR IMMEDIATE RELEASE
Press Contact: Scott Croft, 703-461-2864,
Date: March 9, 2006
SURVEY REVEALS GREAT DISTASTE FOR PRESIDENTIAL TAX PANEL'S
PROPOSAL TO END SECOND HOME MORTGAGE INTEREST DEDUCTION
I do understand how a person who is struggling to pay one mortgage
doesn't want their tax dollars subsidizing someone's 2d home (or
yacht)
What about they hourly guys that build those yachts? What about the hourly
guys that build those houses. What about the hourly guys that perform
maintenance on the boats and houses and their contents? It might not be fair
but, it does keep the economy moving along.
We know from experience that it doesn't take too much tinkering with
the tax code to have a serious impact on the boating industry. When
the ill-advised "luxury tax" went into effect for a few years in the
early 90's, the construction of new boats plummeted.
Our entire tax system is an excellent example of government run amuck.
When the income tax was first introduced, the rate was about 1% of all
income. Pretty simple.
Now the tax law fills an entire bookshelf, and is used for social
engineering. Many people pay about 50% of their income to the
government in a combination of federal, state, and local taxes- and the
"self employed" pay more when the additional 7.5% for FICA is added in.
(And the government *still* doesn't collect as much as it spends!)
Heck, we're all just sharecroppers on the government farm. (Good thing
we don't live in a socialist country where we'd all just be
sharecroppers on the government farm...........)
As sharecroppers, I guess we're entitled to subsidized housing. The
government subsidizes housing directly for people in the lowest
economic classes with free or cut-rent apartments in "the projects".
The government subsidizes housing for the middle and privileged classes
as well, forgiving the tax on any income used to pay for mortgage
interest.
The funny thing is that the mortgage deduction was originally designed
to help make home ownership more affordable. It hasn't worked. Buyers
routinely calculate the number of "real" or after tax dollars needed to
pay for the monthly housing bill, and will spend as many as they can
afford- or more- and as a result the price of property is bid up for
everybody. I'd hazard a guess that housing prices across the nation
would probably be 20 - 25% less if mortgage interest were not
deductible, so after a painful adjustment period where RE values would
decline a bit real estate and home ownership would indeed be as or more
affordable than with the mortgage interest deduction.
Even if you save 30% of the interest through a tax deduction, you're
still peeing away 70% of the interest. Big mortgages for personal
consumption are ridiculously expensive.
A lot of people crowing about the amount their home has "appreciated"
would sing a different tune if they deducted the total amount of their
non-deductible interest expense from the paper profits and accept that
even if they do sell, they will then become "buyers" in the same red
hot, often overpriced, real property market. Net result of course is no
real gain- an equivalent property to the one just sold will cost all
the dollars they just collected and a nicer property will cost even
more.
It's surely possible to craft an argument in support of the current
policy of government subsidized housing for most Americans, (with the
exception of middle and privileged class renters or those who own a
home debt free). If, as a society, we choose to follow that course- and
for a couple of generations and through many different congresses and
administrations we have- we might want to consider whether the ski
lodges in Aspen, the 70-foot Westports, etc, should all be government
subsidized in addition to those taxpayers' primary residences.
After an adjustment period of no mortgage deductibility, prices for
used boats in particular would decline. We boat owners would all wail
and moan about the loss of "equity", but the upside is that the prices
of the boats we want to buy next will have declined as well. Prices
won't sink out of sight, as the lower cost of entry will bring a
greater number of people into boating and the increased demand will
help sustain a level of "realistic", economically defensible pricing
based on supply and demand rather than a machination of the tax code.
My theory: arrange your finances so that personal housing and all
personal consumption is debt free. That includes boats. Pay off the
investment real estate as soon as possible.
The government punishes me for this non-conformist behavior with a
walloping bill for AMT each year, but models where we rush out and
borrow a lot of money simply to save a portion of that interest on the
tax bill never pencil out as attractively.
Besides, there are a couple of dirty little secrets about boats. First,
they're not an investment in any way, shape, or form- they are an
expensive luxury. Second secret, there is no direct correlation between
the cost or LOA of a boat and the amount of fun one will have with it.
Folks forced to "settle" for a smaller and/or cheaper boat by a change
in the tax law would still go boating and still have as much fun as
they've ever had with clothes on.