In what would be another blow to the California housing market, the Obama administration’s new fiscal year 2010 budget proposes to cap the mortgage deductions on “higher income” households — well, if you consider making $208,850 extremely high income!
Here’s what the budget — it’s HERE — says, in part: “The Administration’s Budget includes a proposal to limit the tax rate at which high-income taxpayers can take itemized deductions to 28 percent — and the initial reserve fund would be funded in part through this provision This provision would raise $318 billion over 10 years.”
The Wall Street Journal reports …
Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments.
The changes would be phased in gradually over the next few years. For the 2009 tax year, the 33% tax bracket starts with couples with taxable earnings of $208,850, when adjusted for personal exemptions and various deductible expenses. A taxpayer in the top bracket paying $1,000 of mortgage interest, for example, would see a tax break worth $350 reduced to $280.
During his presidential campaign, Mr. Obama promised not to raise taxes on families earning under $250,000 a year, and the administration said that this plan would roughly line up with that limit. (MORE HERE)
The National Association of Realtors replies …
According to NAR’s analysis, changing the mortgage interest deduction will not only negatively impact the 2 percent of families who own homes targeted by the proposal, but also will impact home prices and values across the board. The middle class would see their home values reduced even further by such action, and NAR cautioned the Obama administration that any further pressure on home prices will hamper the economic recovery, raise foreclosures and hurt banks’ abilities to lend. (MORE HERE!)
As does the National Association of Home Builders …
“… this is not the time to talk about raising taxes on home buyers and home owners. This proposal will increase the cost of housing for many middle-class families, particularly in high-cost areas such as California and the Northeast, which will only further undercut the housing market, exert more downward pressure on home values and work against the President’s efforts to stabilize housing and turn this economy around. The proposed budget would also tax a ‘carried interest’ as ordinary income, which could significantly impact the multifamily and commercial real estate sectors at a time when they are already experiencing a severe downswing. At this critical point in the recession, we should be doing everything we can to stimulate demand in housing and avoid proposals that would reduce housing affordability and further destabilize prices. The notion of ‘robbing Peter to pay Paul’ just won’t work.” (MORE HERE!)
This follows other meager attempts to aid the ailing California housing market, like just an $8,000 tax credit nationwide for first-time buyers …
- DC to California: Drop Dead
- $8,000 home stimulus helps wrong states
- Maybe St. Louis will benefit from that stimulus housing tax credit
- Expert: ‘Coast will have to fend for itself’
- Why California is worth saving
Other real estate news …
- These Surf City homes are about to be foreclosed (2/26)
- Surf City’s million-dollar repos: ‘Palatial’ digs
- Calif. gets 11% of HUD quick recovery cash
- Hear how O.C. housing bottom is possible in 2009
- Is a pesky neighbor worth a $451,000 discount?
- Will California foreclosure moratorium work?
- Does housing need economic revival? Or vice versa?
- Listings drop 21% in south coast area since ‘07
- Surf City’s million-dollar repos: Park view
- Obama “gets it” and other reactions to his speech
- Obama promises new source for loans
- More homebuilding cuts seen for 2009
- NFL’s Carson Palmer selling Laguna home
- O.C. neighborhoods with the best home deals
- U.S. doesn’t need to seize banks, Fed chief says
wow, things just keep getting better for the $600K+ housing market
most people are complaining about Wealth Re-distribution…
… but what is really happening is the following:
tax payers in high cost of living areas
are paying people
who live in lost cost of living areas…..
…… the is very bad for places like the OC….
What I want to know is where is John Galt!
the most ironic thing in all of this… is that the blue states who voted for Obama with a high cost of living… are the ones who are transferring tax money to the red states……
its as if NAR is saying ‘lets keep prices elevated so its affordable to more people’
really. prices dropping are the ANSWER, not the problem.
Just wait till numnutz takes away the 250/500 capital gain exclusion
I’m certainly not wealthy by any means, but the top 10% the people in this country, pay 95% of the taxes. These are the same people that own small businesses and employ others. What incentive do they have, to expand? They are already facing huge costs for health care and other benefits. This article is right. The loss of the write off will be a disaster for the housing market.
We need a flat tax asap.
“At this critical point in the recession, we should be doing everything we can to stimulate demand in housing and avoid proposals that would reduce housing affordability and further destabilize prices. ”
.
llllllooooolllllll, damn that’s hilarious…. reduce housing affordability by price declines….
come on all you big strong men
throughout the land
uncle sam needs your help again
got himself in a terrible jam
way down yonder in mortgage land
so stop your whinin and complainin
you dont need no reasons or explainin
those poor homedebtors are dependin on YOU
and the guvment needs YOUR help to pull them
through-
After only six weeks in office Obama has become the biggest disaster this country has ever experienced. I never thought I would say this, but I miss Bush!
This is unexpected (by me) and unfortunate. People with 200,000.+ incomes, living in places where that type of income is required to own a small single family home and raise a family, save for retirement, pay for med and life insurance,do not have the excess that seems to be implied when President Obama refers to this “top 5%”.
Top 1% of income earners pay over 39% of federal taxes and top 5% pay over 50% of federal taxes from the published figures I have seen. Which incidentall has been on the rise every year. The rest of the population combined does not pay as much as this “elite” group. It is definitely good politics, from one point of view, to engender the support of the numerically superior group (95%) by shifting the burden to those with a smaller representation, but the problem is that they disproportionately cut close to the bone on this pivotal group. Many of this “5%” are already making tough decisions based on reduced income and big overhead, acquired when things seemed different. This tax increase sends a bad message, branding people who have worked hard, educated themselves, and learned to navigate the business world, as criminals who somehow need to pay for their crime of “business or investment success.” It doesn’t inspire hope in me, at least in my immediate assessment.
wow, i don’t know why people voted for this guy, this is ridiculous. $200k a year in SoCal is not considered wealthy at all!
I wish he would bring back the personal interest deduction.
Ya all you Obama worshiping people who voted for him for “CHANGE”, well we are getting change and not for the good.
Is anyone surprised by anything that has come out of the White House in the past 4 weeks? This is exactly what many Americans were saying what would happen if Obama was elected with very liberal Speaker of the House Pelosi and Majority Leader Reid. Watch as the definition of “rich” slips down to Biden’s level of $100,000 per year and “middle class” that is being “helped” drops to $50,000.
http://www.dcsmusings.blogspot.com I do two math problems on California and Federal tax rates.
LMAO!! Do you guys need a box of Kleenex? LMAO!! Why cry about it? You wanted no bail outs for anything right? Well, no yearly bail out for you either.
It will get worse. The ObamaNation us coming after IRAs and 401Ks next if the left fringe gets its way. The proposals being floated are focusing on taxing the total amont per year even if not withdrawn! Not at income tax rates (because it would not be income in a year), but at some lower TBD rate. Buckle up. The redistributionists are coming after the water carriers to reward those drinking the water.
So Cal is the most pathetic place on the planet. I live in San Diego, and I have lived there for over 20 years. I’ve travelled all over the world, and I’ve experience a broad range of cultures. People in So Cal who think it is good for housing to be expensive are idiots. I am not a bitter renter. I have been very lucky in my life financially, and I am now semi-retired at the age of 48. I say the things that I say because I am very disturbed by the apparent desire in So Cal to keep housing prices elevated. Do you people want to make it impossible for your children to have a house? What is wrong with you? Are you so desparately under water that you don’t care about your childeren?
Want to see more about what Obama is going to do?? Go to http://blogobamatoday.com and you will see and hear about what heis going to do next.. The latest updated news in regards to President Obama
I can’t make sense out of it.
.
Greenspan can’t see the biggest bubble in history even though property prices are easily soaring past income levels. Then you have Obama taking bribes from Fannie/Freddie so they can continue lending to unqualified people. Then you have banks falsifying documents so they can create record commissions for themselves.
.
Now these same culprits are forcing the sane people who have sounded the warning signs years ago and didn’t choose to partake in fraud or ponzi schemes to pay for their lack of job responsibilities and crimes.
.
Iran, North Korea and Cuba treat their citizens better than this.
I’m a realtor in the Midwest.
We didn’t over extend ourselve as much as Californians did.
Most of the mortgage restructuring will take place in CA.
You will benefit more from this than other parts of the country.
It’s not our fault your incomes are just as inflated as your home prices.
Your unearned wealth helped buy up Washington and Oregon.
Capital gains should be taxed at your tax bracket.
Reagan stole the IRA from middle income people.
He taxed unemployment.
We haven’t even seen the Eco-Nazi cap and trade taxation yet.
This is going to be one helluva ride folks!
And just think, Gas will most likely double over the next two years!
YAY!
But Europe likes us now.
mav Says:
February 26th, 2009 at 3:44 pm
llllllooooolllllll, damn that’s hilarious…. reduce housing affordability by price declines….
Am I reading this wrong, but doesn’t price declines INCREASE housing affordability?? Also, doesn’t the mortgage interest deduction improve housing affordability (along with continued price reduction)??
Well how do you numnutz’s that voted for change feel about change now? It is only going to get worse.
$200, 000 a year in So Cal is not wealthy, but it’s hardly poor either. Give me a break. And by the way, yes, I’d be affected by this change.
We are going from comical to worrisome to downright scary. That sheep this country put in the whitehouse…he’d be a wolf, folks.
mortgage deduction is a bad idea
it is not fair for renters, who were more financially responsible
Obama, dont go too far, to please the home owners and banks
I easily make $250K/yr. How the heck am I suppose to afford my new Porsche Carrera, Gucci watches, vacations in the Bahama on my private jet, and my other three homes in Europe if I can only deduct 28% of my deductable interest!! NAR–you have got to demad a stop to this. This is out of control!
It seems to me everyone is “wealthy” under Obama’s view, so I know the communist regimes see the same to their poeple. Take from richers and distribute to poorers, that sound similar to Soviet Union, Cuba, N. Korea, Vietnam, China….. I bet tomorrow the
Dow Jones will be going down at least 200+ point.
We had eight years of idiocy and reckless politicians spending, “borrowing,” and stealing when they felt like it. We did nothing to stop it.
Obama is just the poor fool who wanted to be president so badly he was willing to inherit a mess no one can possibly clean up. Read my lips. Yes, there will be taxes. Yes, we will have to pay for this.
Bankruptcies and bailouts of banks, fannie/freddie, entire states… as bank execs spend out money like there’s no tomorrow. What, did you think it would be free??? Did you think “someone else” would pay for it? Guess what? We are all “someone else”…
We elect congressional “representatives” who give themselves cushy offices, pay raises, neverending retirement pay, benefits, and perks with our money. As soon as these budget deficits happened the taxpayers should have been screaming for a freeze on gov pay raises and yes, an across-the-board cut in government salaries. We do nothing. But we are suprised that they will tax us to pay for their jobs and benefits. We are surprised and hurt that they will tax us to pay for the financial bailouts.
Get it through your head. This money is coming from somewhere. Trillions upon trillions.
I don’t think the mortgage restructuring is going to occur in California. People here who need it are not able to qualify. I know it’s hard to imagine in the Midwest, but people out here bought homes for 600K and they are now worth 350K (maybe), no one is going to “restructure” that (nor do I think doing that would help the situation). The 105% of value really kills it for California. Over here, most of us think that California, Nevada and Florida aren’t going to get any help for their mortgages.
When Obama was elected, I decided to give him the benefit of the doubt and look at the positive. This guy has not positives.
Less than 3% of the households in the US make over $200,000. People who make that much have more than 99% of the world. It is time for these very blessed people to stop whining.
Semi retired at 48 years equals layed off.
Hey California law makers. It is going to be a long time for housing to recover so the state can reap in millions and millions more from property taxes. Another nail in the coffin for California.
Yes Nice! Read for Housing marketting…
Limit to the tax rate at which high-income taxpayers is the best way to deduct mortgage.
First of all, in case you whiners haven’t noticed, the US federal government and California state governments are both broke.
They are essentially insolvent.
Got it? More cuts are going to be on the way.
Homes are not stocks. Nor are they fullproof retirement funds. They are simply places to sleep and keep your stuff locked up. Period.
Those Americans who don’t find themselves completely upside down in debt, need to calm down for a second and find some where else to stash their cash.
Worst idea ever.
…and I do mean, ever!
[ youtube=http://youtube.com/w/?v=xCeRxbRw4PI]
http://youtube.com/w/?v=xCeRxbRw4PI
youtube embed check:
[youtube=http://www.youtube.com/watch?v=0BC6KCOGrV4]http://www.youtube.com/watch?v=0BC6KCOGrV4
Do you all realize that the interest deduction is a subsidy that cheapens the accumulation of debt? In case you have not noticed, the real problem we face, the underlying problem, is too much debt. The interest deduction should be eliminated for everyone. It is a nonsensical policy that rewards economic behavior that is 100% long term detrimental.
Welcome to Obamaland, tax and spend untill theres no more rich. However the rich are not stupid and will stop investing in stocks and real estate thus avoiding high taxes from capital gains. Great going Obama worshipers, try getting a job from the homeless.
I agree with a flat tax and then we can get rid of the IRS, The way Obama is going after the $250k plus folks pretty soon we’ll all make the same. Isn’t that really ideal for President Obama? I am one of those who makes more tan $250k, but not a whole lot more. Living in California, with fixed costs and bills, I have almost nothing left after paying my expenses. By taking more from me, I will have to cut my spending way back, so good-bye retail. And then you take the money you stole from my hard work hand it down the income rung in the form of a $13 a week stipend to the other guy and what really was accomplished? What was not accomplished will not help our economy, so whats the point? Obama is a one term president.
This is going to kill the incentive to own a home! Very sad.
Great! Obama came and the plan worked It!!!
Bill, i’m from Iran now living in Canada. I don’t know about the States but I’m not thinking of going back there even for a visit. you are living in the wealthiest country of the world and you compare your status with ppl in Iran??? what a joke!
http://www.knock-knock.ca