Paying Discount Points on a New Mortgage
That calculator is a very good starting point, but it does not take into account the tax implications of paying points. Your mortgage interest tax deduction will go down as you pay down points - of course, you'll also pay less interest each month.
Quote: rdw4potusLending Tree has a pretty good calculator
That calculator is a very good starting point, but it does not take into account the tax implications of paying points. Your mortgage interest tax deduction will go down as you pay down points - of course, you'll also pay less interest each month.
Which may be less of a consideration if the mortgage interest deduction is blown away, which the Demos, primarily (since only evil rich people own houses), but also, some Republicans, are considering as a way of reducing the federal deficit.
Quote: Rovithis13At what point should I be considering paying discount points? Is there a table for a breakeven analysis?
Best to take the lowest rate with no points. The Broker will be paid VIA the YSP, or rebate from the lender. The average loan is 7 years. Sure, you're going to live there forever...reality might preclude.
The YSP is soon to go away. Take advantage while you still can.
The average loan is already near 10 grand with points, why increase it. It will take many years to break even.
If you can handle 15 years do it. The small pain will produce a happy retirement, even if you sell.
Invest in property zoned for mobile homes in Arizona. That's where many home owners will end up due to their cash out serial refi's.
Liars loans, stated income, no verification, Barney Frank.
Where did the cash out go?
Bud
Quote: mkl654321Quote: rdw4potusLending Tree has a pretty good calculator
That calculator is a very good starting point, but it does not take into account the tax implications of paying points. Your mortgage interest tax deduction will go down as you pay down points - of course, you'll also pay less interest each month.
Which may be less of a consideration if the mortgage interest deduction is blown away, which the Demos, primarily (since only evil rich people own houses), but also, some Republicans, are considering as a way of reducing the federal deficit.
Only you can say whether I'm evil and rich, but I owe nothing on my house. I would love to see that loophole for the rich removed,
swept away, blown away, however they choose to get rid of it. A rich guy can deduct 100 grand in interest at a clear advantage over
us normal folks who get a standard deduction of a tenth of that. The rich guy gives lots of deductible cash to various charities and churches, as well. Unfortunately, they also give to the politicians who contemplate these changes, so that don't happen. What's that saying - money is thicker than water?
Quote: mkl654321
Which may be less of a consideration if the mortgage interest deduction is blown away, which the Demos, primarily (since only evil rich people own houses), but also, some Republicans, are considering as a way of reducing the federal deficit.
Obviously the government should be distorting the housing market with subsidized loans and mortgage interest payments that decrease mobility and disproportionally benefit the rich. Oh and all these deductions seem to only help accountants at the expense of real productivity since they're the ones who really make money on complex tax laws.
Quote: Rovithis13At what point should I be considering paying discount points? Is there a table for a breakeven analysis?
I deal in mortgages all day, every day. Believe me when I tell you, take the lowest rate you can get without paying points. Mortgage refis are actually hard to justify and I see people all the time that are so math-challenged they refi to save $100 a month and 10 years to break even. Unless you are >$200K the savings is hard to find. And most of us will move despite planning not to do so.
Quote: dmOnly you can say whether I'm evil and rich, but I owe nothing on my house. I would love to see that loophole for the rich removed,
swept away, blown away, however they choose to get rid of it. A rich guy can deduct 100 grand in interest at a clear advantage over
us normal folks who get a standard deduction of a tenth of that. The rich guy gives lots of deductible cash to various charities and churches, as well. Unfortunately, they also give to the politicians who contemplate these changes, so that don't happen. What's that saying - money is thicker than water?
"Loophole for the rich"? The mortgage interest deduction primarily benefits the middle class. Rich people generally don't take out mortgages--they mostly buy outright, because a mortgage is a terrible deal from their point of view. And since rich people almost always HAVE to itemize deductions anyway, they don't realize the benefits from switching to being a Schedule A filer.
Another reason that the mortgage interest deduction doesn't benefit the rich in the same proportion is that only the interest on a mortgage or mortgages totaling $1 million can be deducted.
I don't see, other than from an ideological "the rich are evil" point of view, why it's unfair to let the evil rich deduct all the mortgage interest they pay. After all, it's a DEDUCTION--which means taxable income is adjusted downward by that amount. Why shouldn't the amount of interest you pay on your primary residence be offset against taxable income, irrespective of home much that home cost, within reasonable limits? In many markets, a million-dollar home isn't a mansion by any means.
Quote: mkl654321Why shouldn't the amount of interest you pay on your primary residence be offset against taxable income, irrespective of home much that home cost, within reasonable limits?
Why should it? The deduction is aimed to be either the money you earn, but don't really receive or have to spend to generate more income (like the state tax or business expenses or child care expenses) or the money you spend in a way that benefits the society in some way (like a charitable donation). Mortgage interest is neither. It's just the price you pay for the luxury of owning a house. Why should it be deductible, while rent is not? I don't think there is a good reason, it seems pretty arbitrary.
Having said that, I actually think, it'll be terrible if they decide to do away with this deduction. If for nothing else, then for the simple reason, that people have been counting on it when buying their houses.
Quote: weaselmanThe deduction is aimed to be either the money you earn, but don't really receive or have to spend to generate more income (like the state tax or business expenses or child care expenses) or the money you spend in a way that benefits the society in some way (like a charitable donation).
You can also deduct qualified medical expenses, but they don't relate to money "spent to generate income" or "benefiting society". Deductions don't exist for only those 2 reasons. At least the mortgage interest deduction encourages people to invest their money into something worthwhile (real property).
Quote: weaselmanWhy should it? The deduction is aimed to be either the money you earn, but don't really receive or have to spend to generate more income (like the state tax or business expenses or child care expenses) or the money you spend in a way that benefits the society in some way (like a charitable donation). Mortgage interest is neither. It's just the price you pay for the luxury of owning a house. Why should it be deductible, while rent is not? I don't think there is a good reason, it seems pretty arbitrary.
Having said that, I actually think, it'll be terrible if they decide to do away with this deduction. If for nothing else, then for the simple reason, that people have been counting on it when buying their houses.
Not all deductions--not by a long shot--are deductions because they "benefit society". Theft and casualty losses, medical expenses, and a whole host of others don't fall into that category.
The common thread that DOES run through the list of itemized deductions is that of "normalizing" income: counteracting the skewing effect of one-time expenditures or losses. In similar fashion, the mortgage interest deduction "corrects" for the increased cost of housing when a household owns rather than rents. In most of the history of the mortgage interest deduction's existence, interest paid on mortgages was presumed to be a "sunk cost"; it's only recently that simple appreciation has enabled the owner to recoup that cost (and of course, even more recently, the situation has reverted). The housing market boom/bubble prompted the call for the repeal of the mortgage interest deduction because it was no longer "necessary"--rapid appreciation offset the cost of mortage interest. For a while.
I agree that a repeal of the MID would be a horrible idea--it would crush an already fragile housing market.
Quote: EnvyBonusYou can also deduct qualified medical expenses, but they don't relate to money "spent to generate income" or "benefiting society".
Letting you take care of your health does not benefit society?
Getting yourself healthy does not allow you to generate income?
What are you talking about?
Quote:Deductions don't exist for only those 2 reasons.
Of course not. I never said they existed for those two reasons. They exist because people up high wanted you to have them.
But their purpose in theory is one of those two.
Quote:At least the mortgage interest deduction encourages people to invest their money into something worthwhile (real property).
"Something worthwhile" from the economic perspective is business, not passive investment.
Quote: mkl654321Not all deductions--not by a long shot--are deductions because they "benefit society".
No, not all. I said, that was their general purpose, not the universal rule.
Quote:Theft and casualty losses, medical expenses, and a whole host of others don't fall into that category.
Well, there is the third category, which I was reluctant to name ... I'd call it "charity deductions". Not like "charitable contributions", but the opposite - when the government says "oh, poor guy, he was robbed, and all his money got stolen ... let's at least let him not pay taxes on the amount he lost!".
Medical expenses is actually a little bit of both - benefiting the society and generating income, so it's a bad example.
But I agree, that there is a bunch of other deductions that are akin to the mortgage interest in that their existence does not make very much sense, other than it's nice to have them.
Quote:The common thread that DOES run through the list of itemized deductions is that of "normalizing" income: counteracting the skewing effect of one-time expenditures or losses.
One time? Mortgage interest isn't one time. Neither are charitable donations, child-care expenses, commuter expenses etc.
Buying a car on the other hand is (for a long time). Shouldn't the car cost be deductible then by your logic?
Quote:In similar fashion, the mortgage interest deduction "corrects" for the increased cost of housing when a household owns rather than rents.
But why does it make any sense to "correct" for it? If I want to only drink 20-year-old wine, should the increased cost of that be "corrected for" too? Or if I drive a BMW, that's more expensive than Hyindai, why no correction there?
Similarly, if I choose to own a house, it's my decision, that buys me some benefits, compared to renting, and costs me some additional money.
The only reason the government would want to "correct" for the additional costs would be if it wanted to encourage this decision as opposed to the alternative - like a tax credit for buying a hybrid car for example. Otherwise, if the government does not care whether I buy or rent, there is no reason for it to "correct" for my additional cost.
Quote:In most of the history of the mortgage interest deduction's existence, interest paid on mortgages was presumed to be a "sunk cost";
I disagree, but it's a different topic. Let's say, it was a sunk cost. So what? Isn't rent a sunk cost? Why is it not deductible then?
In fact, most of the stuff you buy is sunk cost. You buy a car, it's sunk 10% by the time you drive off the dealership. Should that be deductible?
Quote: weaselmanWell, there is the third category, which I was reluctant to name ... I'd call it "charity deductions". Not like "charitable contributions", but the opposite - when the government says "oh, poor guy, he was robbed, and all his money got stolen ... let's at least let him not pay taxes on the amount he lost!".
The rather astounding fact that you ask this question at all shows me that your opinions are skewed to a rather strange ideology. You sound exactly like all those dead-broke students at Berkeley in the 70s---TAX 'EM ALL!!!! TWO HUNDRED PERCENT!!! RICH BASTARDS!!! SCREW 'EM! CAPITALIST PIGS!!!! etc. etc.
The government taxes NET income, not GROSS income. You seem to be advocating taxing gross income--no deductions whatsoever--which is, well, grossly unfair. But if you have a preset philosophy/ideology, that trumps fairness--just as it did for those long-ago hippies who weren't satisfied with a top marginal income tax rate of 70%. TAKE ALL THEM RICH BASTARDS' MONEY! They'll just go out and make some more so we can take it again! Right? RIGHT??????
For example, why would someone paying rent of $2,000 / month not be subject to a personal deduction while a home owner making the same payment (and paying $1,600 in interest a month) be able to. Essentially, because renters are typically those in transit, with low income, or with bad credit, they are penalized because they can't afford or have the credit score to buy their own home.
In Canada, you get a personal tax credit of something like $10,000 meaning that your first 10,000 of income is not taxable. Some provinces offer a housing credit based on either rent or property taxes which reduces as your taxable income goes up.
It makes more sense to me to up the standard deduction and to remove the mortgage interest deduction.
Also, is home ownership so great for society that we should subsidize (30 year mortgages, deductions etc) it and therefore, push up housing cost? Switzerland seems to do fine with a home ownership rate.
Lets get government out of distorting markets or at least help out all.
Quote: crazyiamWhat gets me is tax deductions are worth more so those who make more. Why should the government subsidize home purchases, charity and other things for the rich at 35% and not at all for me (I rent and don't have anywhere near enough deductions to itemize)?
For mortgage interest deductions, I don't think it's a subsidize issue, I think it's a double-tax issue.
The interest you pay on your mortgage is income to the Mortgagee, who pays taxes on it. If you don't get to deduct it from your income, then you're paying taxes on it, too. Double-taxation.
Once upon a time, you could deduct ALL interest payments (credit cards, etc.) for the same reason. I don't know when they took that out, but it was before I started paying taxes.
For charity deductions, I think it's that ... IN THEORY ... provide a service to the public that the government believes is better provided by the private sector but can't (religious ties) or shouldn't (save the whales) be done by government. I think the pure, original purpose has since been prostituted somewhat, but I think that was the original intent.
As for "not enough deductions to itemize," you still get a $5,700 standard deduction on 1040 Line 40 (which is not the same as the $3,650 exemption on 1040 Line 42). If your itemized deductions are less than the standard deduction, then it's to your benefit.
Quote: crazyiamAlso, is home ownership so great for society that we should subsidize (30 year mortgages, deductions etc) it and therefore, push up housing cost? Switzerland seems to do fine with a home ownership rate.
I thought that this merited a separate answer.
It's true that home values (and subsequently prices) would go down if the mortgage interest tax deduction goes away. But that does not mean that your ability to buy a home would go up.
When buying a home, people figure in the interest deduction's effect on their taxes (or at least they should). Assuming their gross income stays the same, if their taxes go down, their keep-able income goes up. They use this increment in keep-able income to, among other things, make their house payment.
If people don't get the tax benefit, then they have less keep-able income to make house payments with, which, ceteris paribus, lowers market values for the exact same piece of property. So, the house price is down, but so is your ability to pay, meaning, if a house was too expensive before the deduction was taken away, it will be too expensive afterwards as well.
Quote: mkl654321The rather astounding fact that you ask this question at all
What question?
Quote:shows me that your opinions are skewed to a rather strange ideology. You sound exactly like all those dead-broke students at Berkeley in the 70s---TAX 'EM ALL!!!! TWO HUNDRED PERCENT!!! RICH BASTARDS!!! SCREW 'EM! CAPITALIST PIGS!!!! etc. etc.
Do not put words in my mouth. You are dead wrong on this.
I am all for smaller taxes. Any measure that would decrease the effective tax rate has my complete support.
Like I said earlier, I think that canceling the mortgage interest deduction now is a terrible idea.
Whether this particular piece of the tax code is logical or makes sense is a completely different question. I believe that it is neither. But how does that in your mind translates into the "rich bastards ..." rants you mention, I can't even begin to imagine.
Quote:The government taxes NET income, not GROSS income.
What exactly do you call "NET income"? Income after deductions? Then yes, this is correct.
Quote:You seem to be advocating taxing gross income--no deductions whatsoever--
WTF? Are you being serious?! If so, I can only tell you that your method of argumentation (that was never particularly brilliant to begin with) has regressed rapidly. In fact, this seems like a new low of all times.
Quote: crazyiamWhat gets me is tax deductions are worth more so those who make more.
Why should the government subsidize home purchases, charity and other things for the rich at 35%
For the same reason their effective tax rate should be higher than yours. This is what progressive tax.
I am not saying it necessarily makes sense, but the two things - progressive tax, and deductions being "worth" more to "the rich" - either make sense or do not make sense simultaneously.
The most fair and sensible practice would be flat 15% tax for everyone above the minimum threshold and that's it. But it will never happen unfortunately.
Quote: weaselmanWhat question?
What exactly do you call "NET income"? Income after deductions? Then yes, this is correct..
Your thought processes are compromised to the point where you can't even understand me any more. Too bad.
Quote: mkl654321Your thought processes are compromised to the point where you can't even understand me any more. Too bad.
When you try to make a point, and it is not understood, it is, of course, a fault of the "compromised thought process" of your opponent.
Great reasoning! Congrats, you are really progressing (backwards)!
Quote: weaselmanLetting you take care of your health does not benefit society?
Getting yourself healthy does not allow you to generate income?
What are you talking about?
Eating food keeps you from dying, keeps you healthy, and allows you to have the energy to work. Thus, buying food benefits society and allows you to generate income. But you can't deduct money spent on groceries. Medical expenses are closer to casualty and theft losses; just the tax code taking pity on unfortunate circumstances beyond the taxpayer's control.
Quote: weaselmanOf course not. I never said they existed for those two reasons. They exist because people up high wanted you to have them.
But their purpose in theory is one of those two.
Fair enough, you did not say that.
Quote: weaselman"Something worthwhile" from the economic perspective is business, not passive investment.
Imagine one person who rented his whole life, and another identically situated person who bought a home (paying mortgage interest). They both become too ill to take care of themselves, and both have no savings. The homeowner can sell (or rent) out the home and generate income, whereas the renter has nothing, and is a burden (financially) to the rest of society.
Quote: EnvyBonusEating food keeps you from dying, keeps you healthy, and allows you to have the energy to work. Thus, buying food benefits society and allows you to generate income. But you can't deduct money spent on groceries.
Absolutely. But did I ever say that everything that benefits society is supposed to be tax deductible? It is the other way around.
Quote:Medical expenses are closer to casualty and theft losses; just the tax code taking pity on unfortunate circumstances beyond the taxpayer's control.
Yeah, that makes sense too.
Quote:
Imagine one person who rented his whole life, and another identically situated person who bought a home (paying mortgage interest). They both become too ill to take care of themselves, and both have no savings. The homeowner can sell (or rent) out the home and generate income, whereas the renter has nothing, and is a burden (financially) to the rest of society.
This is unfair comparison. Why do "they both have no savings"? One guy invested into his house, what did the other do with his money?
I would think, he chose some other way of investing, not just spent it all on hookers and booze?
Quote: weaselmanThis is unfair comparison. Why do "they both have no savings"? One guy invested into his house, what did the other do with his money?
I would think, he chose some other way of investing, not just spent it all on hookers and booze?
They both have no savings because I made up the scenario. :)
But more seriously, the deduction encourages investment in the home. Without it, the money may go to booze and hookers. Or it may get invested in a retirement plan, which of course would be dedcutible. So these deductions reward saving/investing the money, which is something I believe the tax code should encourage.
Quote: EnvyBonus
But more seriously, the deduction encourages investment in the home. Without it, the money may go to booze and hookers. Or it may get invested in a retirement plan, which of course would be deductible. So these deductions reward saving/investing the money, which is something I believe the tax code should encourage.
Well, actually, globally for the economy, it is better that people spend as much as they can, not save (that is one of the reasons most economists are opposed to the idea of replacing income tax with federal sales tax - people who spend more get punished).
But, suppose, you are right, and the government wants to encourage savings/investing, and for that reason makes morgage interest deductible ... But still, why is it only mortgage interest then? Why not stock purchases? Why not savings accounts? Why only primary residence? How is it different if I wanted to invest by buying a vacation home? Etc.
Quote: weaselmanWell, actually, globally for the economy, it is better that people spend as much as they can, not save (that is one of the reasons most economists are opposed to the idea of replacing income tax with federal sales tax - people who spend more get punished).
But, suppose, you are right, and the government wants to encourage savings/investing, and for that reason makes morgage interest deductible ... But still, why is it only mortgage interest then? Why not stock purchases? Why not savings accounts? Why only primary residence? How is it different if I wanted to invest by buying a vacation home? Etc.
The confusion may come from the idea that the mortgage interest deduction is meant to be a government incentive. Don't think of it that way and the apparent inconsistency goes away. (Not that the government is known for its consistencty, but still ...)
I think the mortgage tax deduction is a double-tax issue rather than a government incentive issue. The interest you pay on your mortgage is income to the Mortgagee, who then pays taxes on that income. If you're not allowed to deduct it, then you're paying taxes on it, too. The flip side of this same issue is, you pay taxes on the interest you collect in your savings and investment accounts, but the banks that pays you the interest deduct it as a business expense.
Once upon a time, ALL interest paid (credit card, car, etc.) was deductible in that way, but it was before I started paying taxes ...
The deduction extends only to a primary residence because you have the benefit of living there. You also get property tax exemptions like homestead, etc. For second residences, you don't get those things. While it's not consistent with the double-tax thing from above, it makes sense to me that tax benefits don't extend to secondary (and on down) residences.
Quote: ItsCalledSoccerThe confusion may come from the idea that the mortgage interest deduction is meant to be a government incentive. Don't think of it that way and the apparent inconsistency goes away. (Not that the government is known for its consistencty, but still ...)
That's exactly the point I started with. I said that the interest deduction doesn't make very much sense, because, unlike most other deductions, it does not look like a government incentive (and doesn't seem to fall into any other common category either).
Quote:I think the mortgage tax deduction is a double-tax issue rather than a government incentive issue. The interest you pay on your mortgage is income to the Mortgagee, who then pays taxes on that income. If you're not allowed to deduct it, then you're paying taxes on it, too.
This is a surprisingly common misconception. Double-taxation is an issue when the same person (or entity) ends up paying tax twice on the same money. What you are describing is not double-taxation at all, and it happens all the time everywhere. When you buy something in the store, the money you pay for it is profit to the merchant, who will have to pay tax. When you lose in a casino, that's casino's profit, etc.
When you pay someone (the bank, in case of the mortgage) for service, you generally do that with post-tax money, and then the merchant's income is taxed "again". This is a perfectly common situation, nothing special about home mortgages, compared to any other service or merchandise.
Quote:
The flip side of this same issue is, you pay taxes on the interest you collect in your savings and investment accounts, but the banks that pays you the interest deduct it as a business expense.
Right, but that is different. Business expenses are deductible because that is money you spend to generate income.
Quote: weaselmanThis is a surprisingly common misconception. Double-taxation is an issue when the same person (or entity) ends up paying tax twice on the same money. What you are describing is not double-taxation at all, and it happens all the time everywhere. When you buy something in the store, the money you pay for it is profit to the merchant, who will have to pay tax. When you lose in a casino, that's casino's profit, etc.
When you pay someone (the bank, in case of the mortgage) for service, you generally do that with post-tax money, and then the merchant's income is taxed "again". This is a perfectly common situation, nothing special about home mortgages, compared to any other service or merchandise.
Double-taxation is when the same money is taxed twice, but it can happen to the same person. It's a broader definition that what you're saying. It's the whole concept behind "should dividends be taxable" or "should inheritances be taxable". In neither of these cases, nor in the mortgage interest case, are we talking about the same person paying taxes twice, but they're all examples of double-taxation.
Companies give out dividends after taxes, but shareholders receiving those dividends are also taxed ... same income, different parties.
Inheritances are bequeathed after the income has already been earned, but the heir is taxed ... same income, different parties.
Income earned by Apple, Inc. is taxed in both the United States and the United Kingdom ... same income, same entity.
Income earned by Brad Pitt is taxed in both the Unisted States and France ... same income, same person.
The tax codes spend a lot of time and paper in trying to eliminated double taxes, but it's nowhere close to being consistent across-the-board. That's one of the main points behind the "flat-tax" reasoning.
I guess I could spend some time going into why there's a difference between mortgage interest deduction and the regular commerce as you give an example, but something tells me it would be lost on you ... if you don't know what "double-taxing" is, there's not much common ground to start from. I don't think the "government incentive" part can be removed from the equation, but I think it's a "side-effect" and not at the center of the reasoning.
But the difference is clear and apparent, and it actually makes sense ... not that all the government does in business and tax regulations makes sense ...
Quote: ItsCalledSoccer
Double-taxation is when the same money is taxed twice, but it can happen to the same person.
Semantically, you may be correct (that is, if the term did not yet exist, and you were inventing it, this meaning could be assigned to it without contradiction). But the term "double-taxation", that is used in the economics and politics context is reserved for the same income being taxed twice.
The same money is routinely being taxed way more than just twice as it travels up the consumer-producer chain. Unlike taxing the same individual more than once, this is perfectly normal and expected situation.
Quote:It's the whole concept behind "should dividends be taxable" or "should inheritances be taxable". In neither of these cases, nor in the mortgage interest case, are we talking about the same person paying taxes twice, but they're all examples of double-taxation.
No, they aren't. If they were, they would not be taxable.
Quote:Companies give out dividends after taxes, but shareholders receiving those dividends are also taxed ... same income, different parties.
Consumers buy milk after taxes, but the stores selling that milk are also taxed ... same income (not), different parties.
This is not double-taxation, it's just how taxation is supposed to work.
And no, it is not "same income". Income is the consumption and savings opportunity gained by an entity within a specified time frame. The entities (and time frames) are different in these cases, and so are the incomes.
Quote:Income earned by Apple, Inc. is taxed in both the United States and the United Kingdom ... same income, same entity.
Income earned by Brad Pitt is taxed in both the Unisted States and France ... same income, same person.
Yes, this is double taxation. US has treaties with most countries to avoid this (normally, you only have to pay the higher of the two taxes, and are off the hook for the other one).
Quote:The tax codes spend a lot of time and paper in trying to eliminated double taxes, but it's nowhere close to being consistent across-the-board. That's one of the main points behind the "flat-tax" reasoning.
The point behind flat tax reasoning is that it is (a) fair, and (b) simple. It is in no way related to double-taxation.
Quote:I guess I could spend some time going into why there's a difference between mortgage interest deduction and the regular commerce as you give an example, but something tells me it would be lost on you ...
Something tells me, it would not be very hard to lose :)
Quote:if you don't know what "double-taxing" is
Oh, but I do. And now you do too, because I just explained it to you. If you wanted to, you could also try and see how IRS uses this term, or look it up on wikipedia or use some other source ... or just your common sense ...
But as long as you are content with your own internal (mis-)concepts, and are not really interested in knowing how the real world actually works, this is all in vain.
So, the double-taxation argument does not apply; otherwise you would be able to deduct rent on your tax return. The government has given people an incentive to buy houses, plain and simple. Renters are penalized.
Quote: weaselmanWell, actually, globally for the economy, it is better that people spend as much as they can, not save (that is one of the reasons most economists are opposed to the idea of replacing income tax with federal sales tax - people who spend more get punished).
Umm most economists would say you want to tax things you don't want and encourage things you do want by not taking them. You want people to work, save and invest so lower income taxes on these things if you need an artcle I just read one about this yesterday I can go find. You don't want people to drive too much since every car on the road imposes costs on others so tax gas, cars or tolls.
What economists don't always like about sales tax (though this depends on the economist) is it hits the poor disproportionally. There are of course ways around this. Many states and countries tax food and other necessitates lower or rebate a certain amount.
Politicians and constituents though are not economists and ours tend to look after themselves not the best things for the country. Getting rid of the mortgage tax deduction though the most expensive cost of the tax code is a political third rail now.
Quote: crazyiamUmm most economists would say you want to tax things you don't want and encourage things you do want by not taking them. You want people to work, save and invest so lower income taxes on these things if you need an artcle I just read one about this yesterday I can go find. You don't want people to drive too much since every car on the road imposes costs on others so tax gas, cars or tolls.
Well, yes, that's more or less the same thing I was saying (I am not sure what your "Umm" was about).
Quote:What economists don't always like about sales tax (though this depends on the economist) is it hits the poor disproportionally.
This is the same thing I said too. It hits the poor disproportionally, because they spend a larger portion of their income than the rich do, and thus would end up being taxed more - the more you spend the more you are taxed, spenders are being punished. That's just what I said.
Quote: weaselmanWell, yes, that's more or less the same thing I was saying (I am not sure what your "Umm" was about).
You said economists want to tax income not sales I said the opposite. Of course they could disagree and we read different ones, but we said the completely opposite thing.
Quote: crazyiam
You said economists want to tax income not sales I said the opposite.
I am sorry, I did not see where you said the opposite (or where I said that for that matter).
I said economists were opposed to replacing income tax with sales tax because the latter punishes the spenders
You said that economists say you should tax things you want to discourage and lower taxes on things you want to encourage.
I think, these two statements are more or less orthogonal (i.e., they neither confirm nor contradict each other). I happen to agree with both. And I also think that the first one is true precisely because of the second (since you want to encourage spending, the tax system that penalizes it would not be wise).
Quote: thecesspitI'm pretty sure the UK and US don't have a tax treaty on income... least I've heard tales about people working for US corps in the UK being taxed by Her Majesty's Tax collectors and the IRS.
There are a few. I didn't' bother to read them but they are on the IRS site. I'm about to move to Norway and there the treaty only excludes a certain amount of income and depends on whether you are moving or working temporarily.
Quote: weaselmanYeah, they do: link
There we go then... however :
"Exclusion amount. The maximum foreign earned income exclusion is now adjusted annually for inflation. For 2010, the maximum exclusion has increased to $91,500. See Limit on Excludable Amount under Foreign Earned Income Exclusion"
I couldn't quickly see what happens if you earn over this amount in the UK... some of the UK deductions may not count as income taxes in the US.
I do know the tax treaty works the other way as well, and UK bettors who win large amounts in the US don't have to pay taxes on their gambling winnings to the UK treasury and thus not to the US treasury as well. When it comes to income taxes, I have no idea. I pay tax up here just fine :)
