All posts by Thomas L. Knapp

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“Tax Reform”: Dump the Home Mortgage Interest Deduction

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1040 Tax Form

The US Senate’s version of “tax reform” reduces the amount of mortgage interest that home buyers can deduct from their taxable incomes. Currently, the maximum deduction is for interest paid on mortgages of up to $1 million on two homes or on home equity loans of up to $100,000. The new bill would cap that at $500,000 on one home. The House version doesn’t reduce the mortgage cap, but does away with the home equity deduction.

This fairly minor piece of the “tax reform” puzzle is drawing a lot of comment, and quite a bit of resistance and criticism both on Capitol Hill and in public discussion. Here’s why:

 

For obvious reasons, people who are in the process of buying homes love the home mortgage interest deduction. It lets them claw back a little bit of money they’d otherwise pay to Uncle Sam. About 20% of American taxpayers benefit from the deduction each year, and politicians want their votes.

Politicians also love campaign contributions from the other parties who benefit even more from this deduction — home builders, realtors, and mortgage bankers and brokers.

I’m a big fan of tax cuts. In any amount, of any kind, for anybody. The less money the government takes from Americans, the better. But I’d rather those cuts didn’t come in the form of “targeted” deductions or credits.

At present, the home mortgage interest deduction represents $70 billion less in annual federal tax revenues than would be the case if it didn’t exist. That raises two possibilities:

The first possibility is that the government is getting that $70 billion elsewhere. That is, from the people who aren’t paying down mortgages.

The second possibility is that the government didn’t need that $70 billion and is just letting it go back to taxpayers.

If the government is getting the money from people other than home buyers, well, that doesn’t seem very fair. So what if I decide to spend my money on beer, football tickets and a new big screen 4k television instead of on the monthly payments for a McMansion? Why should that increase my tax bill?

And if the government doesn’t need the money and is letting it go back to taxpayers, why not just reduce the tax rate and let it go back to ALL the taxpayers instead of creating a targeted deduction that only gives it back to 20% of them?

A lot of marketing dollars have gone into promoting the idea that owning a home is invariably a good idea and an essential piece of “the American dream.” But in fact, there are good reasons for many people to rent. Why should the burden of financing government fall more heavily on their backs?

The home mortgage interest deduction is part social engineering for the financial benefit of generous campaign contributors, and part vote-buying from a demographic created in part by that very social engineering. I’m surprised the politicians are tinkering with it at all. But since they are, they should dump it and replace it with a general rate reduction.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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A Pizza Problem: Why Those Third Party Polls Don’t Pan Out

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RGBStock.com Vote Pencil

According to a recent survey conducted by NBC News and GenForward, 71% of millennials believe America needs a third political party. That sentiment varies with race, sex, and current party affiliation, but  holds strong majorities in every demographic.

There’s nothing particularly new here. In every presidential election, pluralities or majorities say they’re “willing to vote for” or “interested in seeing” a third party candidate. In between, pluralities or majorities proclaim the “need” for a third party.

That excites third party activists like me (I’m a long-time Libertarian). But in election after election, the actual voting returns Republicans and Democrats to Congress and  the White House.

Why? For part of the answer, consider pizza toppings.

According to a 2011 Point of Sale survey by Brian Roemmele, pepperoni accounts for 36% of topping orders. That leaves 64% as a “different topping” market which could presumably out-sell pepperoni.

But there’s a problem: Customers don’t agree on what that different topping should be.  14% order sausage, 11% prefer mushrooms, 8% just want cheese. Tomatoes, peppers, and anchovies account for 2% each. 64% of customers want something other than pepperoni on their pizzas. But they don’t want the SAME something.

 

Think of the Republicans and Democrats as the pepperoni of politics — and consider the fact that in politics, when a bunch of people put in their various orders (that is, vote in an election), only the pizza with the most popular topping actually gets made. Everyone else goes hungry.

Many, maybe most, Americans want a third political party. But some of them want it to be a party of the left and some of the right, while still others want a centrist party or are obsessed with different sides of single issues (like abortion or guns or drugs).

Plurality or majority support for a generic third party in principle is not the same thing as plurality or majority support for a specific third party in the voting booth.

In practice, most voters who say they want a third party end up voting Republican or Democrat, or just not voting. Why?

Perhaps they can’t find a third party they agree with any more than they agree with the Democrats or Republicans.

Or maybe they find a third party they like, but  fear-mongering supporters of the “lesser evil” variety of pepperoni convince them that their preferred party can’t win and that the “greater evil” pepperoni type absolutely must be defeated.

Or, as too often happens, the pepperoni lobby makes it difficult or impossible for the restaurant to even put anchovies on the menu. Er, that is, major party  legislators pass “ballot access” laws to exclude the option of voting for third party candidates.

Is it impossible for third party candidates to win elections? No. They often do at the local level and occasionally for state legislature or Congress. But it’s a tough row to hoe.

For a new party to consistently get into the winner’s circle, voters are going to have to coalesce around something more specific than “something else.” Hopefully, that something else will be freedom.

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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Happy Holidays. Yes, All of Them.

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Happy Christmas, painted by Johansen Viggo
Happy Christmas, painted by Johansen Viggo (Photo credit: Wikipedia)

It’s “War on Christmas” time again. In a November 30 speech in St. Charles, Missouri, US president Donald Trump mounted a stage festooned with Christmas trees to kick off the annual Airing of the Fake Grievance:

“[Y]ou go to the department stores and you see ‘Happy New Years,’ and you see red, and you see snow, and you see all these things. You don’t see ‘Merry Christmas’ anymore. With Trump as your President, we are going to be celebrating Merry Christmas again …”

When I was younger, the Annual Grievance was that Christmas had become too commercialized and that stores were starting to “celebrate” it far too early in their sales campaigns. These days, it’s that Americans don’t focus exclusively on one, and only one, December holiday.

I haven’t personally noticed any dearth of Christmas cheer this year or in recent years. I’m seeing Christmas observances all over the place, in both Christian (Nativity scenes, “Reason for the Season” church signs, etc.) and secular or semi-secular (Santa Claus, silver bells, what have you) form. Perhaps Trump doesn’t get out into fly-over country often enough.

That said, it’s worth noting that December is indeed a month of holidays, not all of them Christian. According to HolidaysCalendar.com:

Sunni Muslims celebrated Maulidur Rasul, the birthday of the Prophet Mohammed, on December 1. Shia Muslims celebrate it on December 6.

Buddhists celebrate the enlightenment of Siddhartha Gautama — Bodhi Day — on December 8.

From December 13-20, Jews celebrate Hanukkah, commemorating the liberation of Jerusalem from foreign occupation in 165 BC.

December 21 marks the Winter Solstice and the beginning of the ancient pagan festival of Yule.

Kwanzaa, a celebration of African culture, commences on December 26 and runs through New Year’s Day.

On December 23, Seinfeld fans will celebrate their 21st Festivus. Others may put up feasts and ceremonies for National Mutt Day (December 2), Wear Brown Shoes Day (December 4), Ugly Sweater Day (December 19) or perhaps something a little more serious like World AIDS Day (December 1) or Bill of Rights Day (December 15).

And yes, of course there are all kinds of Christian holidays — Advent Sundays, the feast days of Saints, etc. — leading up to Christmas (December 25 for some Christians, January 7 for others).

Like it or not (personally, I like it a lot), America IS a multi-religious and multi-cultural country with holidays galore. So what if you don’t celebrate them all? Why not just congratulate those who do?

Shut yer griping, Trump. Merry Christmas AND Happy Holidays!

Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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