I shall bring up an old idea I had a while ago that if we really wanted to help America avoid a recession and put her back on track, the the most effective stimulus package would not be to cut taxes (though that wouldn't hurt) or increase government spending. It would be to make any paying down of your mortgage tax deductible.
CDO's might have some value and start trading again. Defaults would go down. Interest rates would go down. And the future solvency of America would improve.
But, as always with modern day America, that's unconventional! That won't work! It's too revolutionary! Why it's so simple, it's like a sales tax replacing an income tax! It just can't be done! It's like Obama winning the democratic nomination! Why, next thing you know women will be getting their husbands martini's, men will learn how to wear suits and buy flowers for their wives, and children will be forced to do their homework and get good grades! What you think this is some mythical place like 1940's America?
6 comments:
Why not expand that to more than just mortgage payments. What about tax breaks if you pay off a loan early? With 6 year auto loans and 40 year home loans why not give an incentive to pay them off early? I'm an accountant. I hate lining someone elses pockets with any interest I might pay so any loans I have I make additional payments to get rid of them quicker.
It would probably work, but it would also create even more possibilities for the government to tell the people what to do with their money.
You know what preceded the glorious 1940s in America. Yeah, a full-blown recession that wiped off all the bubbles and unproductive parts of the economy (and sadly also many productive parts). Instead of avoiding another recession, like they did in 2001, why not abolish all perverse incentives in the tax system and in the banking system and let it all unwind?
Of course it will hurt, but then it's over. It's like pulling off the tape fast or slow.
You're my dream man, Captain!
Cool, let's get married! Bring the martini's and french maid outfits!
I'll bring the suits, flowers and Frank Sinatra CDs!
;)
Too bad it's the interest that's tax deductible instead of actually paying down the loan itself. We've got a mortgage crisis, and the government is encouraging people to rack up more debt and just sit on it. Freaking ridiculous.
Tax deductible mortgages are only useful for people who pay tax. Which excludes a significant portion of the US population, and a significant portion of US homeowners.
I agree with your idea in that it does make some sense.
But on the other hand, the tax code is complicated enough already, I think they should get rid of all deductions and move to a flat tax instead.
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