Re: Mortgage deductions - Again you miss the point. People buy homes versus renting for two reasons: mortgage interest tax deduction versus no break for paying rent, and to be able to do with it what they want. You shouldn't sacrifice the sacred cow, but cap it and also offer a deduction for renters (also capped at the same level).

@Draug,
I'd go for that. It might even be nice to have some objective measure of investment activity that could automatically trigger rebalancing of the capital gains rate.

@ Draug,
I don't know... my wife and I own a fairly modest home, and even with the mortgage interest, charitable contributions, etc, the standard deduction is still almost always a better deal for us. The home mortgage interest deduction encourages people to overbuy. People who live within their means rarely get to take advantage of it. Why not just remove the deduction and use the saving to reduce overall rates, even if only slightly?

I'm not in any way married to the idea of eliminating the mortgage interest deduction. I just thought you'd welcome it as a way to simplify and flatten the tax code.

"@krellin - What about social security for the infirm amongst us?"

OK - I spoke in unnecessarily broad terms. The able-bodied, right-minded should be working. Yes, I believe a compassionate society has safety nets (thus means testing for S.S, etc). I get your point and agree.

Mortgage deduction should stay in place because of this: A mortgage is a business transaction between you and the lender. They pay taxes on the interest you pay - it is their income.

If you don't get to deduct it from your own income, then that income is effectively double taxed.

And....as the nitpicking and "well *I* love *this* little program" continues in this thread, the whole compromise will unravel, and we will become what we despise - ineffective and unable to come up with a deal.

Just wait and see.

"Mortgage deduction should stay in place because of this: A mortgage is a business transaction between you and the lender. They pay taxes on the interest you pay - it is their income."

That's taking it a little far. I paid sales tax on my car, and they paid taxes on the income, and I paid income tax on the money with which I bought it. If you take the idea of "no double taxation" that far, then the only people who would pay tax would be the government, when they print it.

That is true. All I'm saying is that welfare reform and education reform should maybe whats up for discussion before we just scrap the whole thing.

Hecks - the idea of a standard deduction, in theory, is to account for the sales tax on your car, etc....so yes, you do get a deduction for your car purchase.

A home, though, is a huge and unique financial transaction, which can not be easily or rationally incorporated in to a "standard" deduction.

Better woudl be to eliminate the standard deduction go a flat tax, etc etc etc....which destroy the compromise.

the idea of the thread is a reasonable, acceptable compromise. Eliminating mortgage deduction is Dead on arrival.

YJ - we've had education and welfare refrom *continuously* sense the ineffective institutions were put in place. They are just money siphons. States send money to feds, feds siphon money off the top, issue a basic set of educational rule (meet these standards) and then send money back to states. States set their own rules on top of these.

It is a complete waste of money. Let states set their own standards and keep their own money. The Federal government adds **zero** value to education. Zero. None. Zip. Nadda. Nothing.

In fact, if you look at education spending, versus education outcome, there is *zero* corellation to suggest that spending more = better education. Likewise, there is *zero* indication that Federal standards improve education, as, when the standards are not met, there is no true reform instituted. Thus, it is a completely and utterly useless wing of the government.

Do you not trust your state and local authorities to put in place effective education? Isn't that enough bureaucracy to put a good teacher in a class room? If you eliminate the Federal Education Siphon...then you have MORE money to pay teachers better, buy better equipment, etc.

Question - who is going to print off this entire thread when it has wound down and send it to the Congressional leadership?

"the idea of the thread is a reasonable, acceptable compromise. Eliminating mortgage deduction is Dead on arrival. "

Fair enough. I thought it would be a crowd-pleaser on both sides, but if people don't like it, I'll scrap it.

If you eliminated my mortgage deduction it would kill me. You can't eliminate $10K+ of people's deductions on the fly without there being any impact.

If it has to be done, it is done gradually and intelligently...but again, it is there for a purpose, just like the standard deduction. If you eliminate my mortgage deduction, then I demand you eliminate the standard deduction...that's how I see it.

All deductions *should* be elminated - they were all instituted to give one group/industry favorable treatment...but like it or not, the economy is now built around these things. You kill housing industry for 2-3 years if you eliminate it until the industry learns to adapt, and even then it would still be sluggish - because I just won't move unless I have to if moving means a massive tax increase.

@Hecks - That was why I said cap it. That way those who wish to make very charitable contributions to churches and other organizations could still itemize (if we are keeping itemized deductions) and take a modest interest deduction.

But as far as overbuying - please define that. A person who makes 100K plus per year (like myself) buying a 250K home is not overbuying yet their interest early on would beat the standard deduction right now. My own doesn't because I chose to be an older home for half that as I am a hand on DIYer with a workshop. But if the wife and I wanted new and wanted the amenities I have been adding to our house (finishing the basement into a mancave, turning a spare bedroom into a massive walkin closet and dressing room connected to our bedroom instead of the hall, etc) then we would probably have to spend 250-300K here. Remember that homes cost different in different parts of the country. Try to buy my 50 year old house *before* modifications in LA and it will still cost way more than I can afford to pay.

So the cap would also need to be regionalized to be a typical mortgage payment for a modest house in that area.

i.e. put it in political terms: Eliminating the mortgage interest deduction is a tax increase that would be wholly targeted at the Middle Class. The rich absorb the hit...many middle-class people who have taken income reductions in recent years and are still struggling to keep their homes would lose their homes. It would be as bad as the housing crisis of a few years ago.

@krellin - Re: Education... I trust my state because my state has proven time andtime again to be pro education and want to grow as a leader in tech jobs and such. I do not trust states like Kentucky and West Virginia and Arkansas. The people in power there care about staying in power. They use education to keep their people under thumb (a stupid public is an easily manipulated public) and the Southern States woudl totally pervert education into Christian indoctrination if the Federal government weren't ther to enforce standards (mind, I'm a Christian, but they take it to extemres).

The real solution is to scrap the Dept. of Edu as it currently resides, let the states run their own education, but with Federal oversite that comes with penalties for violating standards - penalties ranging from billion dollar fines to possibly include federal incarceration under Rico statutes if it is found that a governor or state Sec of Edu or other elected official willfully attempted to pervert the educational process. Sort of an FBI of Education. In fact, make it be a branch of the FBI in each state.

I think the most important thing we can do is to help prevent this situation from happening again.

- As such I would suggest we enact a policy that caps government spending at 90 or 95% of revenue, the remaining 5-10% has to be invested and the government can siphon off a percentage of the interest each year for the budget.
-Furthermore I would suggest we pass a bill eliminating contributions of all kinds to members of political office, or their campaigns. To offset the cost of campaigns I would suggest that during a campaign each politician gets a set amount of space on TV & Radio, at no cost. (To allow anyone to run), and that aside from those ads no other ads may be run.

With these measures in place, to open up elections, prevent lobbying except by signed petitions, and to prevent government overspending we can now begin to tackle the problem of how we're going to reduce government spending/increase revenue.

Which I will address in a later post.

I like using campaign reform via the ads to help fix things. I would additionally say that pay for politicians should be cut to eliminate the career politician. When our country was founded, public service was just that, a service. You didn't get into politics to get rich, but to make the country a better place. Most politicians still had their legal practices or other businesses and the stipend they got was mostly to cover their expenses of travel and time away from their business. Now, politics *is* their business. Eliminate the money, and you eliminate a big incentive. There are still those who are power hungry and that will never go away. But by eliminating that part of the incetive, many of the power hungry will look for their need to be fulfilled where they can also make money and those interested in serving their community/country will be able to do so with less obstruction from those interested in politics for the sake of politics.

I completely agree Draugnar. I was actually about to amend my earlier post by adding something of that exact nature, when I saw your post.

We should return to the stipend system, with meetings occurring once or twice a week to vote on and discuss policy. This has the added benefit of allowing the argument a few days to cool off before people return to the table.

Yes, exactly, damian. But how do you use politics to reform itself? As long as Congress is full of career politicians, it will never vote to return to the days of service in the public good.

@Draug -
Article V Convention!

http://en.wikipedia.org/wiki/Convention_to_propose_amendments_to_the_United_States_Constitution

@hecks - But state politicians are just as much career politicians and have aspirations to become Federal politicians. It is possible in theory, but not in practice. Hell, at the state level, many judges are politicians, they just don't run under a political party's banner.

I think the first step to getting political reform, is opening up the race to more people. By cutting the cost of running for office.

That and a solid social movement to break down the belief that voting for independents is throwing away your vote.

New people, new ideas....and then, maybe, change?

yes, Southern States are usually at the lower end of things on the eudcationscale, but what about california? Has anyone actually looked at their disaster?

lets look at this. Educatino Input ($$ used) Tennesse ranked 37th. They rank 31st, so they rank better than the amount of money they are putting into it

New jersey spent the 4th most per student, but ranks only 30th on the list. One higher than tennessee. Are we really lagging behind, or simply get less money from the Feds?

New Jersey was ranked 50th in Education efficeincy ($$ input for results) Tennessee was ranked 3rd.

i would blast Ohio, but on this report, they did not put enough data into it, to even get on the chart.

Actually, the Top 5 states were all liberal strongholds, and all 5 were near the bottom of the list for efficiency.

Arkansas was 6th on the 'efficiency list',. Kentucky 19th. West virginia was 28th.

So you dont trust the states getting better results with less money. Gotcha.

Damian has it right on. cap the amount you can spend per state. Would open things up a lot.

@Stressed,
Where are you getting your stats? I want to know how Maine did. My understanding is we're pretty low in results, but I don't know how our per-student spending is. Similarly low, I would imagine...

@Stressed _ It probably wasn;t fair of me to lump Kenticky in with WV and Ark, but the simple fact is, when you have 3 people graduate but spent $3, then your cost per student and therefore your efficiency os very low/high. In States where many schools and teahcers are getting awards and recognition from the Federal Government and other states for their excellence in education, but their cost is higher per student, then yeah, I rate those states who are "less efficient" as better than the "more efficient" ones. By what standard is that efficiency being met? Is it just graduates? Or graduates who go onto further education? And if just graduates (which is bad to begin with) at what educational level do they truly graduate? The minimum reading proficiency to graduate as set by the DoEd is an 8th grade level. Do those stats take into account the states whose typical grad can read far beyond that and give them a bonus for that?

Lies, damn lies, and statistics. Nuff said.

I think the federal government still ranks efficiency on test scores. Can we scrap "No Child Left Behind"?