Paying for the Payroll Tax Cut Extension
It sounds simple enough - the Senate on Saturday morning approved a two-month extension of a payroll tax cut that is due to expire at the end of December. But did you know that the cost will fall on people who buy a house or refinance their mortgage starting in 2012?
Title IV of the bill is called "Mortgage Fees and Premiums," and what it does is to raise the fee that Fannie Mae and Freddie Mac charge to back home mortgages.
It would mean someone buying a $200,000 home starting in 2012 would have to pay about $17 extra per month - that's $204 per year.
The usual number used by the Obama Administration to talk about the payroll tax cut is that it gives working Americans about $1,000 per year in extra cash - except if you are buying a new house or refinancing, then you are going to lose around 20 percent of that tax break.
The fees charged by Fannie and Freddie wouldn't be done directly to homeowners, but to banks and other lenders; it would raise $35.7 billion over 10 years according to the Congressional Budget Office.
One interesting side note is this - instead of the extra money going to Fannie and Freddie to help the bottom line of those housing giants, which are losing billions each year - the money would go into the general Treasury.
When the idea was floated earlier this month by Sen. Bob Casey (D-PA), both the National Home Builders Association and the National Association of Realtors joined in a letter declaring the idea "counterproductive."
"Congress is essentially proposing to raise taxes on millions of potential home buyers in order to pay for a payroll tax cut and other non-housing legislative initiatives," said Bob Nielsen, the Chairman of the NAHB.
"With the housing market struggling to regain its footing, such a short-sighted move would be extremely counterproductive and threaten the fragile economic recovery," Nielsen said in a statement last week.
"That's exactly what the housing market needs right now," one House GOP lawmaker said sarcastically to me on Sunday night.
So, the increase in those housing fees would pay for a two month extension of the payroll tax cut ($20 billion), two months of extra jobless benefits ($8.4 billion), two months of a Medicare "Doc Fix" ($6.6 billion).
Early in my career as a reporter, I interviewed a local Chamber of Commerce official in Florida, who left me with a line that I have always remembered:
"What the big print giveth, the little print taketh away."
And that's very true with this two month payroll tax cut extension bill as well.
Some of you would get a continued tax cut - but those who decide to buy a new house or refinance their mortgage starting next year would see some of that tax cut taken back by Uncle Sam.
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26 comments Add your comment
Paying for the Payroll Tax Cut Extension – Atlanta Journal Constitution (blog) | Mortgage Plus Today
December 18th, 2011
9:35 pm
[...] webmaster@technorati.com wrote an interesting post today onHere’s a quick excerpt [...]
Paying for the Payroll Tax Cut Extension – Atlanta Journal Constitution (blog) | World Mortgage Online
December 18th, 2011
9:39 pm
[...] webmaster@technorati.com wrote an interesting post today onHere’s a quick excerpt [...]
ByteMe
December 18th, 2011
9:53 pm
The usual number used by the Obama Administration to talk about the payroll tax cut is that it gives working Americans about $1,000 per year in extra cash – except if you are buying a new house or refinancing, then you are going to lose around 20 percent of that tax break.
But if you have the money to buy a new house and come up with the 20% down that most lenders are now requiring, you probably didn’t need the tax break anyway.
Paying for the Payroll Tax Cut Extension – Atlanta Journal Constitution (blog) | financialsurvivalnews.com
December 18th, 2011
10:05 pm
[...] Paying for the Payroll Tax Cut ExtensionAtlanta Journal Constitution (blog)It sounds simple enough – the Senate on Saturday morning approved a two-month extension of a payroll tax cut that is due to expire at the end of December. But did you know that the cost will fall on people who buy a house or refinance their mortgage …and more » [...]
Auntie Christ
December 18th, 2011
10:21 pm
I guess Dupree didn’t feel that the following statements were worth mentioning:
Sen. Mitch McConnell said that tax cuts not being offset is the belief of “virtually every Republican.”
Sen. Judd Gregg (R-NH): “I tend to think that tax cuts should not have to be offset.”
Sen. Jon Kyl: “[Y]ou should never raise taxes in order to cut taxes,”
It is certainly odd that a tax cut and other benefits that work to the advantage of the 99% have to be compensated by offsets to other programs benefiting the middle class. The hypocrisy of the republic party would be shameful, if that bunch of thugs had any sense of shame.
Shine
December 18th, 2011
10:23 pm
Why do payroll tax cuts have “to be paid for” and the Bush tax cuts just added to the deficit along with the two Bush wars and the Bush Medicare Part D and the Bush created Dept of Homeland Security which has over 177,000 employees?
Paying for the Payroll Tax Cut Extension – Atlanta Journal Constitution (blog) | Online Mortgage Today
December 18th, 2011
10:32 pm
[...] webmaster@technorati.com wrote an interesting post today onHere’s a quick excerpt [...]
Don
December 18th, 2011
11:14 pm
Because idiotic conservatives think that millionaires are “job creators” and would stop hiring if their taxes went up. Of course, they aren’t hiring now, and haven’t been hiring in the 12 years since Bush cut taxes because — THEY AREN’T JOB CREATORS. They are the taskmasters for republicans.
a;lsdkjf
December 18th, 2011
11:23 pm
Hey Don,
You are an IDIOT! Where are all of the jobs going dumb a$$? They are going over seas b/c it is less expensive to hire and do business in foreign countries. I am a business owner. You people think that if someone owns a small business or any business for that matter that they must be rich beyond your means and can afford any taxes that you would like to impose. You don’t understand the expenses that are incurred by the owner of the business. Let me ask you a question. If doing business in country A cost 10000 and doing business in country B costs 1000 then where will you take your business? Dumb a$$
Cherokee
December 18th, 2011
11:51 pm
I’m a business owner too. Anyone who thinks that cutting taxes on business or ‘the rich’ will yield improved hiring is the ‘IDIOT.’
Businesses want to sell their product. They can’t do that now, because of the huge transfer of wealth to the very rich in America. When the middle class thrives, so will business.
Don is absolutely correct.
ld
December 18th, 2011
11:59 pm
There are things that would help the housing market but increasing the cost of financing is not one of them.
New housing starts might improve if there were more of the ‘50-’60’s three br w/1 1/2 bath with 4&12 roof rather than the McMansions w/mega-pointed roof that substantially increase cost relative to minimal additional space–space where most of the heat ends up, substantially increasing those costs.
So many people bought so much more house than they could afford because that was what was being built in anything resembling desirable neighborhoods.
The US Gov’t needs to shut down fannie mae and freddie mac or at least substantially decrease the size/cost house those entities will aid families in purchasing.
The US Gov’t needs to get out of the insurance business altogether, including FDIC, etc., as well as those disaster insurance policies (beaches, flood zones, etc.–rebuilding time and again) that the private-for-mega-profit insurance companies will not insure.
Hopefully, when BANKS can once again LOSE–they will be more careful how they lend, and when builders can no longer sell McMansions, they will build affordable housing. When the price of home ownership begins to realign w/the actual market, then there is a chance for a sustained recovery.
Diversify the USPO to get the taxpayer out of the business of insuring financial instutitiions (especially those now ‘too big too fail’) –those buildings could become the United States Public Offices with ATM’s and postal clerks being the bank tellers for the United States Federal Treasury Bank (cash, debit card, money order only–no checking, savings, loans, etc.)
Paying for the Payroll Tax Cut Extension – Atlanta Journal Constitution (blog) | Today Mortgage Blog
December 19th, 2011
12:03 am
[...] webmaster@technorati.com wrote an interesting post today onHere’s a quick excerpt [...]
ld
December 19th, 2011
12:06 am
It was when the financial companies and insurance companies were allowed to comingle, this set the stage for those credit default swaps–the checks&balance of ‘competitors’ (w/regard to risk) failed. Severing these two industries is a must to avoid a repeat of a manipulated failure such as the credit default swaps where those investor class in control of those morally bankrupt transactions made $$ to the detriment of practically everyone else.
Latest Refinance Mortgage News | Refinancing For Every Need
December 19th, 2011
12:10 am
[...] Paying for the Payroll Tax Cut Extension But did you know that the cost will fall on people who buy a house or refinance their mortgage starting in 2012? Title IV of the bill is called "Mortgage Fees and Premiums," and what it does is to raise the fee that Fannie Mae and Freddie Mac charge to … Read more on Atlanta Journal Constitution (blog) [...]
ld
December 19th, 2011
12:11 am
All members of Congress of both parties should be ASHAMED of what Congress has done and what Congress has not done for at least most of the last decade and a half, but the Members clearly lack the moral capacity to recognize that.
If you want to understand what has been happening w/the tax code, see the article (in the November 24 issue of Rolling Stone, I think), “How the GOP Became the Party of the Rich”. If you have enough interest in the truth to slog through it, you will be grinding your teeth by the time you finish it.
Paying for the Payroll Tax Cut Extension – Atlanta Journal Constitution (blog) | Mortgage World Site
December 19th, 2011
2:04 am
[...] webmaster@technorati.com wrote an interesting post today onHere’s a quick excerpt [...]
Paying for the Payroll Tax Cut Extension – Atlanta Journal Constitution (blog) | Mortgage Today Site
December 19th, 2011
4:03 am
[...] webmaster@technorati.com wrote an interesting post today onHere’s a quick excerpt [...]
Ayn Rant
December 19th, 2011
6:07 am
Political silliness, so long as there is even one Republican politician left in Congress! The way forward is simple: extend the payroll tax cuts and unemployment benefits, pay with a 2% income tax increase on incomes greater than $1 million, and put aside the utterly irrelevant pipeline issue.
Now, what’s so complicated about being honest and straight-forward?
DeborahinAthens
December 19th, 2011
6:53 am
Id, if Fannie and Freddie were shut down, the housing market would hit a brick wall. Why? Because the banks–gutless, greedy recipients of TARP money, master lobbyists against any rational bank regulations– will not loan money without a “guarantee” backing from the government .
12/19: Obama kills Kim Jog Il, mindreading judge uses Democrat racism to strike down immigration and Boehner say “no”…law « The Attack Machine.com
December 19th, 2011
7:00 am
[...] How did they want to pay for it? It sounds simple enough – the Senate on Saturday morning approved a two-month extension of a payroll tax cut that is due to expire at the end of December. But did you know that the cost will fall on people who buy a house or refinance their mortgage starting in 2012? [...]
Mad Max
December 19th, 2011
7:43 am
Ayn,
Glad to see you are still railing against the pipeline. We sure don’t need jobs that aren’t created with confiscated wealth now do we. I mean if the private sector created jobs, who would get credit for it. Much better to pay local employees with federal dollars. That way you get the people beholden to you.
And Ayn, when do those Democrats propose a way to pay for everything they want that is not some CBO projection. I won’t be around when this house of cards comes collapsing down on this country and if you think things are bad now, you ain’t seen nothing yet. At some point we will have to pay for our excesses and it’s not too far off.
Amonteosha
December 19th, 2011
10:33 am
Not only should the Social Security trust fund not be defunded by this gimmicky temporary 2% tax reduction, the tax base should be spread to include EVERY wage earner regardless of how little they make. Even a token $10 income tax payment would give them a little skin in the game and help them feel like productive citizens rather than leeches.
nelson
December 19th, 2011
11:00 am
Why have tax cuts? The national deficit does not get paid off with tax cuts. And why cannot President Obama help? His plane alone cost $3,271,611 to fly to Hawaii, althought that sounds a bit high and he had two planes going. It reminds me of Marie Antonette the French queen some time ago when she was told the people had no bread for food and she replied, “let them eat cake”.
j nes
December 19th, 2011
1:02 pm
Even if one decides to buy a home or refinance–would he rather have 80% of $1,000 or 0% of $1,000? I know which I would pick.
arrongray
December 20th, 2011
12:26 am
Refinancing to a shorter mortgage term may allow you to build your home equity and pay off your mortgage faster. You can easily find your rates from websites like 123 Refinance in secs
Paying for the Payroll Tax Cut Extension
December 26th, 2011
12:31 am
[...] Paying fοr thе Payroll Tax Cυt Extension [...]