On Newt, Romney and the mortgage deduction question

Now that I’ve gotten that out of my system … a real debate of policy and principle in what’s left of the GOP presidential primary.

As the Political Insider already noted, Newt Gingrich is chiding Mitt Romney for his reported idea of limiting the tax deduction for second homes, based on income. Gingrich calls this a violation of “the classical American definition of fairness — that every American be treated equally under the law” and uses the occasion to highlight his proposal for an optional flat tax of 15 percent on individual income.

I agree with Gingrich in the broad sense and in the long run, but I think Romney is just fine in the short run.

The mortgage-interest tax deduction is nothing but a federal subsidy for homebuyers. Period. (Full disclosure: My wife and I are among the millions of tax filers who claim the deduction on our tax return each year.) In an ideal world, we would eliminate it and all other deductions, and offset the change by lowering tax rates — so that we’re not favoring the purchase of homes over other goods and services, but also not raising people’s taxes. The real economic potential lies not in incentivizing certain purchases, but in encouraging economic growth by lowering marginal tax rates.

Even if one argues there’s a compelling federal interest in encouraging homeownership, it is good public policy to stop subsidizing the purchase of second homes, and particularly for high earners — just as conservatives ought to favor the elimination of other government subsidies. If beginning the phase-out is part of how a President Romney would offset his plan to lower income-tax rates by 20 percent across the board, I think that’s very much an acceptable start. (For those who say we should cut spending to offset that plan: In my view, subsidizing the purchase of second homes through the tax code is spending by another name.)

I’m not sure Romney, who has already pivoted quite clearly to the general election as the presumptive Republican nominee, will want to respond to Gingrich directly — and signal there indeed is unfinished business in the primary. But it might behoove him to talk about this issue more generally as a way of both fleshing out his own thoughts and continuing to reach out to conservative voters, as some activists on the right believe he still needs to do.

– By Kyle Wingfield

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83 comments Add your comment

Sherlock

April 18th, 2012
12:11 pm

It’s elementary.

saywhat?

April 18th, 2012
12:15 pm

From arguments I remember in the past, the Grover Norquist Republicans don’t consider eliminating tax expenditures as cutting spending, but as raising taxes. You better be careful Kyle, or they will vote you off the ever shrinking island.

Jefferson

April 18th, 2012
12:21 pm

This is called a turn to the left, for those who won’t listen or didn’t see it coming.

md

April 18th, 2012
12:22 pm

I believe all that was in the Budget Commission proposal……and thrown out with the trash…..after wasting our tax dollars working on it.

Obama should write the reimbursement check out of his own pocket…………

stands for decibels

April 18th, 2012
12:40 pm

Just curious, since none of the linked stories mentioned it—would Romney’s proposed phaseout take place over several years (as had been the case when personal loan/credit card interest payment deductability was eliminated back in the 80s)?

Tiberius - Your lightning rod of hate!

April 18th, 2012
12:45 pm

“From arguments I remember in the past, the Grover Norquist Republicans don’t consider eliminating tax expenditures as cutting spending, but as raising taxes.”

As usual, you remember incorrectly, say what.

“This is called a turn to the left, for those who won’t listen or didn’t see it coming.”

And no, Jefferson, it is consistent with Romney’s stated policy of eliminating special deductions and flattening the tax rates. Nice try, though.

And just to the Gingrich issue, he’s irrelevant. He should just STFU and stay at home with Callista.

Kyle Wingfield

April 18th, 2012
1:01 pm

stands: I don’t think it’s a “proposal” as such. It was reported as something he said at a private fund-raiser over the weekend, and described later by the campaign as an idea he is tossing around.

carlosgvv

April 18th, 2012
1:16 pm

Kyle, at this point it’s not about who is actually right or wrong. It’s about Romney’s and Gingrich’s perception as to which stand will get the most votes.

@@

April 18th, 2012
1:21 pm

Went to Galloway’s place and saw this:

Speaking at a forum on green technology on Monday, Ford Motor Co. Chief Executive Alan Mulally indicated battery packs for the company’s Focus electric car costs between $12,000 and $15,000 apiece.

Oh my! And it weighs 600 to 700 pounds!!??!! Gone are the days of installing your own.

Gingrich calls this a violation of “the classical American definition of fairness — that every American be treated equally under the law” and uses the occasion to highlight his proposal for an optional flat tax of 15 percent on individual income.

As do I. I’m an everybody or nobody kinda girl. Fair’s fair across the populace. Anything short of that and it’s the left’s class warfare.

I refuse to engage in such nonsense.

Just gimme the FLAT TAX!

Romney’s too cautious though I understand why.

I’m really gonna hate touching the box next to his name.

Hillbilly D

April 18th, 2012
1:26 pm

it is good public policy to stop subsidizing the purchase of second homes,

I’d agree with that. I also agree that you’d have to phase it in over a few years. Since people made decisions according to current rules of the game, it’s only fair to give them a little time to make adjustments.

Tom

April 18th, 2012
1:38 pm

Jack

April 18th, 2012
1:43 pm

Taxing the 50% of people that pay no income tax would balance the budget quicker than eliminating an interest deduction.

Hillbilly D

April 18th, 2012
1:45 pm

Tom

Did the law go into effect the day it was signed? Sometimes they do and sometimes they don’t; just asking. (and don’t take to indicate I’m in support of Ford)

Tiberius - Your lightning rod of hate!

April 18th, 2012
1:45 pm

Tom, why do you post something that has absolutely nothing to do with Kyle’s topic?

Focus, son. :roll:

Aquagirl

April 18th, 2012
1:45 pm

It would behoove Romney to keep quiet about this issue, He dominated in the voters most likely to use this deduction (over $100,000 income) during the primaries, Shuffling back to the economic center will dry up his core support.

md

April 18th, 2012
1:48 pm

“Shuffling back to the economic center will dry up his core support.”

Hardly……it’s not like they will suddenly jump over to obama, it’s an either or election.

Tom

April 18th, 2012
1:55 pm

Hillbilly D, yes….the law took effect the same day.

Tiberius, I have no problem with my foc-….Hey! Look!…a puppy!

Aquagirl

April 18th, 2012
1:58 pm

If 100% of the population voted it would be an either-or election. Some people choose “neither” by default.

You have to get your core voters to the polls, and you have to get donations out of their pockets.

md

April 18th, 2012
2:23 pm

“Some people choose “neither” by default. ”

Except a vote/choice of neither is a vote for the winner. His base decides not to vote, they are voting for Obama…….so if they planned to vote at all, they still will.

Just saying..

April 18th, 2012
2:39 pm

Anticipating:

A) Our Senator Isakson, opposed to the national debt, and representing all us good Georgians, curiously disagreeing with you, Kyle.

B) The outrage from middle class Republican voters when deductions for ANY mortgage interest is eliminated, within 10 years.

Tiberius - Your lightning rod of hate!

April 18th, 2012
2:48 pm

“It would behoove Romney to keep quiet about this issue”

I loves it when liberals try to give Republicans campaign advice, as if they are concerned about them doing something wrong . . . :roll:

jconservative

April 18th, 2012
2:51 pm

“Gingrich calls this a violation of “the classical American definition of fairness — that every American be treated equally under the law”…”

That every American be treated equally under the law. Interesting statement by Newt.

US Constitution, Amendment 14, Section 1:”No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

“…nor deny to any person within its jurisdiction the equal protection of the laws.”

Is Newt saying that this should apply across the board with no exceptions?

Jefferson

April 18th, 2012
2:55 pm

Still the image problem remains.

AngryRedMarsWoman

April 18th, 2012
3:26 pm

There should be no deductions except for other income-based taxes paid. All of the rest simply amounts to social engineering and manipulation – subsidizing whatever the gov’t thinks is a “good idea” at the time. Lower tax rates for everyone. No need for the silly AMT – which was instituted to “catch” 155 taxpayers that Congress thought were abusing deductions and not paying their “fair share” and now “catches” about 25% of families making between $75k-$100k, 36% between $100k-$200k and 60% of those making between $200k-$500k. No more Earned Income Tax Credit – have it run like every other welfare program, not by the IRS….that way total income (including things like child support) can be factored in when determining how much help someone needs.

jms

April 18th, 2012
3:33 pm

“I’d agree with that. I also agree that you’d have to phase it in over a few years. Since people made decisions according to current rules of the game, it’s only fair to give them a little time to make adjustments.”

I’ve seen support grow for eliminating the second home mortgage in last few years so we’ve already made our adjustments. Our second home will be paid off by the end of this year.

Ayn Rant

April 18th, 2012
3:37 pm

Here we go again! Piecemeal “fixes” to the 80,000 page tax code; not enough brains or guts enough to propose a simple replacement that will bring in enough revenue and will not subsidize any particular financial activity.

Dusty

April 18th, 2012
3:47 pm

Well, I guess I’ve ” no dog in this fight”. Two houses. No mortgages.

How does the constitution get involved in every nitty gritty thing that comes up? If you are buying a second home, you pay the mortgage like it was set up, interest and all.

So you want a litle tax kickback for your achievement of buying two homes. NO. Just pay for ‘em and stop asking for icing on your cake.

When are we going to start paying for what we buy and then say the constitution says so and so and so.? The constitution was meant for justice, liberty and the big things that hit citizens. It was not meant to be your baby sitter, tax consultant or diet plan.

We need more grownups in this world.

Just saying..

April 18th, 2012
4:13 pm

“We need more grownups in this world.”

True. And today’s political arena offers slim pickens…

Tiberius - Your lightning rod of hate!

April 18th, 2012
4:13 pm

“Here we go again! Piecemeal “fixes” to the 80,000 page tax code; not enough brains or guts enough to propose a simple replacement that will bring in enough revenue and will not subsidize any particular financial activity.”

I’m still waiting to see ANY proposal by your candidate, Ayn, that will address this very issue you complain about.

Aquagirl

April 18th, 2012
4:18 pm

The constitution was meant for justice, liberty and the big things that hit citizens. It was not meant to be your baby sitter, tax consultant or diet plan.

Actually the Constitution came about more for taxation than for lack of “justice” or “liberty.” So it’s perfectly appropriate to look there when discussing who should be taxed for what.

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Dusty

April 18th, 2012
4:30 pm

And off & far away from the subject:

I’m sorry but I wish our president would stop spreading the “karma” around and get down to the business of decreasing the dead weight of our national debt.

Instead, I just read that he had made a speech at a college and sat around with students afterwards, who were formerly workers, and commiserated with them. The old “I know how you feel!” bit. But he doesn’t know. If he did, he’d be in Washington talking with legislators and working on ways to cut, clean and economize this government of ours.

I suggest he clam-up the Karma, trim the travel and get to work where it’s needed. .

.

Dusty

April 18th, 2012
4:37 pm

Aquagirl,

I looked all over the Constitution and did not find the words mortgage, interest rate or deduction.

Our founding fathers were smart enough to let us figure out a few things for ourselves. They called it independence. You know. Such as, think for yourself sometimes.

MarkV

April 18th, 2012
4:41 pm

Dusty @4:30 pm

Dusty,

Is that really an important subject to worry about and criticize the President? I would call it petty to an extreme.

Aquagirl

April 18th, 2012
4:44 pm

I looked all over the Constitution and did not find the words mortgage, interest rate or deduction.

I tried, folks. But this is Dusty. There’s only so much we can do for her.

Darwin

April 18th, 2012
4:56 pm

“Taxing the 50% of people that pay no income tax would balance the budget quicker than eliminating an interest deduction.”

It’s the deductions and exemptions that allow many people not to pay taxes.

Hillbilly D

April 18th, 2012
4:59 pm

Actually the writing of the Constitution wasn’t the high minded, love-fest that some folks seem to think it was. They were charged with amending the Articles of the Confederation but they overstepped that and wrote a new constitution, in secret, with guards posted at the door, no less. Then the Federalists and the Anti-Federalists resorted to all sorts of mischief to try to insure that their side prevailed. Some scholars (not sure if they’d qualify as Major Historians ;-) ) even say you could liken it to a bloodless coup.

One of the reasons they did meet in the first place was because they basically were having trouble collecting taxes. And when the Whiskey Rebellion came along, George Washington sounded an awful lot like King George talking about the Stamp Act.

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...

April 18th, 2012
5:04 pm

Romney Campaign Notes that Obama Ate Dog Meat

You are what you eat, just sayin…

Dusty

April 18th, 2012
5:22 pm

MarkV 4:41

I do not consider the national debt a petty subject. I also stated exactly what I felt. I want the president to act like and talk like it is a big big subject important to him and the nation.

I don’t know what your priorities are for this country, but my main concern is the debt and its influence on the prosperity and permanence of this country.

I do not see the president showing any great concern about indebtness or any failing efforts to decrease the problem. If you say he tried with the stimulus, he did. He failed. It did not work. What do you want me to say? The stimulus was successful? No.

The president has neither stimulated nor supplemented this country and its economy.

Dusty

April 18th, 2012
5:29 pm

Hillbilly D @4:49

There you go throwing cold water all over my Constitution. If you don’t hush, I’m gong to Boston and throw all the alcoholic beverages over board! Right into the harbor! I might even get Paul Revere’s horse all bridled up.

Don’t mess with my Constitution. It written in marble (somewhere) and I’m not gonna change it!!

MarkV

April 18th, 2012
5:35 pm

Dusty @5:22 pm

Dusty,

I would start with “shame on you,” if I were not used to your tactics of misdirection in face of any criticism. I referred to your complaint “that he had made a speech at a college and sat around with students afterwards, who were formerly workers, and commiserated with them. The old “I know how you feel!” bit.”

That was a very petty complaint, and not only that, it showed such a lack of objectivity and proportion. I very much doubt that when your precious G.W. Bush was President and the war in Iraq went badly, that you complained each time he went mountain biking or on any of his many vacations that you complained that he should have sat in the White House and work on the war, just to give one example out of hundreds possible.

Hillbilly D

April 18th, 2012
5:38 pm

Dusty

You do know that the Regulator movement in the Carolinas predated the Boston Tea Party but a few of years? IT’d be a much shorter trip. ;-)

Hillbilly D

April 18th, 2012
5:39 pm

That should say “by a few years”. Too bad this blog don’t have an edit feature like the baseball blogs.

MarkV

April 18th, 2012
5:39 pm

Dusty @5:22 pm

The stimulus was successful. It worked. You can always make something look successful or unsuccessful by choosing your criteria of success.

Dusty

April 18th, 2012
5:40 pm

Aquagirl 4;44

Don’t get your waterwings aflutter. If I need help, I’ll get someone with their feet on the ground.

Keep treading water, Bubbles. That’s where your talent lies.

I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...

April 18th, 2012
5:40 pm

obozo lets his food, er, I mean dog, ride in the car.

MarkV

April 18th, 2012
5:42 pm

MarkV @5:35 pm
A little mangled post, Dusty, but I think you get the gist.

Dusty

April 18th, 2012
5:54 pm

MarkV

My main criteria is honesty. If I look at the economy, it is in a desperate struggle. The president is the CIC of the economy besides the armed forces.

I don’t know what you call successful but we obviously have different definitions.

As you have made references to Prez Bush, he is no longer president. I’m disappointed that you fall into the “Bush did it!” category. But you did, obviously forgetting the historical efforts of slander aimed at President Bush almost hourly by liberals. It was disgraceful.

I do not refer to Prez. Obama’s “vacations” as numerous as they are. I am talking about his almost constant appearance in the news “chatting” with someone in a casual situation far from Washinton.

I want him worried, in action, and working with Congress. The citizen chats can wait until later.

Dusty

April 18th, 2012
6:08 pm

HillBilly D 5:38

I grew up in the great state of the Regulators. Ah South Carolina, my luv! They treasure independence above all.

In the good ol’ days of yore, the “Swamp Fox” gave ‘em a rough time right there in the palmettos, the Spanish moss and the sand gnats. I kinda doubt he paid his taxes! I think those “sand-lappers” still celebrate his birthday in Charleston!

I am now off to eat Southern fried chicken!! And celebrate!! THE BRAVES WON AGAIN!! Go Braves!