Here’s a serious proposal. Make blood donations tax deductible. Every time you donate blood, you can take a dollar off your federal income tax. It’s a small sum but it would incentivize people to donate blood. The public value of increased blood donation would easily outweigh the relatively minor decrease in federal revenue.
For an honest tax code, we should just set the progressive schedule to X%, with zero being a percent for whatever we deem as “too little” and absolutely no deductions, credits, or “other” taxes, like social security and medicare. You want to entire buyers to buy a Prius or slap solar panels on the roof? Write a check. We would have to modify the percentages, but it’d be worth it.
Additionally, businesses should get the same tax code. You have 20,000 in income? Zero percent income tax. You make 1,000,000 in income? 55% (pre-adjustment of tax rates, obviously.) No deductions, no loop holes, no obsequious bull crap. Each year, the government puts out a budget, says they need X% at each level, and everyone knows that for 2013, X% is going to uncle sam. The Feds don’t set a budget? They get no revenue. :mad:
Confession: I might hate our tax rules.
In an ideal world, starting from scratch, I’d consider this. But I’ll fight hard to not have it implimented now. Why? Because the value of houses today already includes the assumption of a mortage interest deduction. Many people, when considering what they can afford in a house payment figure in that deduction. If it went away today, we’d be paying about an extra $3500/year.
I would support putting a cap on the size of the deductable, and not include mortgages on second homes.
I think I’d vote for a mortgage payment deduction, as with the rent deduction, for one residence. (Not just the interest.) The amount of mortgage debt this country has is a scandal.
I’m pretty sure it doesn’t apply to second homes. But year, 2007 was the time to eliminate the deduction, and it will have to be done incrementally.
Of course, mortgage interest deductions were a contributing factor to that, you know. If the government incentivizes mortgage debt, people will have more of it. You are proposing to incentivize it more, so people will have more.
I think the incentive will be to pay it off. As with my own student debt, if it were a deduction, I would be paying off thousands a year more than I currently am, but this would not be an incentive for me to return to school.
Similarly, with a deduction on mortgage payments, I would have in incentive to pay it off sooner. And, there’s nothing wrong with an incentive to buy a home as opposed to renting, imho. Whether you are able to pay it off is up to the bank, not the government.
Couldn’t have said it better myself!
Making something cheaper does not generally encourage people to consume less of it; it has the opposite effect. An interest deduction makes borrowing cheaper; therefore people tend to borrow more.
The mortgage interest CAN be used for 2nd homes. You can deduct interest for mortgages secured by your main or 2nd home if the debt was used to buy, build, or improve the properties up to a limit. The cap for the amount of combined debt (main and 2nd home combined if applicable) that you can use for the deduction is 1 million dollars. Meaning if the combined principal amounts owed on your main and/or second homes exceed 1million dollars, the interest paid on those debts is only partially deductible.
You can also deduct mortgage interest related to a home equity loan or line of credit, even if the debt was NOT used to buy, build, or improve your home, but the total principal amounts for these types of loans that can be used for the interest deduction is capped at 100,000 instead of 1 million.
An area where some people miss out for this deduction is that a 2nd home and the debt related to it can include things such as a Winnebago or a boat, if they contain a sleeping area, cooking area and toilet facilities.
An area of abuse in this area happens when people refinance their mortgage and take cash out of increased equity. The portion of the interest on the debt that was refinanced and was NOT used to buy, build or improve the home cannot be used for purposes of the mortgage interest deduction. However, almost everyone takes the full amount of mortgage interest stated on the 1098 form they receive from their bank instead of disallowing the portion related to non eligible debt.
I think all medical,dental and vision expenses should be deductible,not just anything over 10% of your income. I would even include deducting insurance premiums.
I agree, and I think cosmetics should not. For example, botox, etc.
Thanks for the clarification.
Since botox has numerous non-“cosmetic” uses, you’ll have to scrutinize everyone’s medical records to decide whether it is deductible in each instance.
It might not be an incentive for YOU but it would be for others.
It is a near-certainty - like, I would bet a month’s pay on it - that your idea would vastly hike mortgage debt. It’s indisputably the case that the mortgage interest deduction caused an increase in mortgage debt. ** If something is cheaper people will buy more of it.**
No you wouldn’t. What on earth do you mean? Why would making mortgage payments cheaper give you an incentive to pay it off sooner? It would in fact make it cheaper to NOT pay it off sooner.
What would give you an incentive to pay a mortgage off sooner would be making it more EXPENSIVE, by either raising interest rates or eliminating/reducing the existing interest deduction.
He’s talking about a deduction for the entire amount of each mortgage payment, I think. I have no idea why.
Say, for example, I have 20000 in AGI. If I pay 10000 off on my mortgage my AGI will then be 10000, after the deduction, so I will pay less taxes and have less principle and compounded interest in the future. The incentive is to pay it off sooner.
The incentive would be to buy more house than you otherwise would, since you can deduct what you pay for it. I agree with the others - this would just increase the problem, not solve it.
I can’t say that I have a firm opinion on deductions as a whole, but my tentative position is that I don’t understand the rationale for having them. They seem like a strange hodge-podge, created more for political expediency than sound policy.
I think Chesire Human said it well: “A reasonable argument can be made for each individual deductible item. No good argument justifies them all collectively.” Note that I’m including business deductions in this statement. If we eliminated the vast majority of deductions and adjusted the percentages accordingly, I think we’d be better off overall, even if the tax revenue was identical.
I think a good portion of the accounting work done to minimize taxable income is wasted economic activity. Society has created a complex set of laws and regulations, and thereby artificially created an economic opportunity for those who can navigate it. But I just don’t see that the system we’ve created is beneficial or necessary for society as a whole.
I certainly could be wrong, though. I’m not a CPA; my understanding is still limited.
I’m not buying the incentive thing. Imagining I can write off a mortgage over time I still find no desire to go buy a mansion. Similarly with rent, just because I can write off rent doesn’t mean I would want to rent a penthouse on 5th Avenue. And you’re overlooking something rather simple here–a limit on the deduction.
Why would you have to borrow the money and then pay it off early to get the deduction? Why not just give the deduction for investment with cash. I have an AGI of $200,000; I buy a $100,000 piece of property with cash, I get a deduction from my AGI and only pay tax on the remaining $100,000.
If you don’t let me do this, then I will borrow the 100,000 to buy the property and then turn around and just pay it off to get the deduction under your scheme.
So what? Keep in mind we are talking about one residence per tax form here, not a portfolio of properties that I rent to someone else. You have to actually live in it.