Jason Gibbs: Mortgage tax interest proposal not such a bad idea

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As politicians and pundits are currently entrenched in a never-ending battle regarding federal health care law, purported Russian meddling in our election processes, and the shear audacity of President Trump taking two scoops of ice cream, the next political volcano set to erupt is Republican-introduced tax reform.

While pages could be spent discussing the seemingly never-ending “loopholes,” unfairness, and convoluted nature of our current tax system, a recent opinion piece by Mr. Brian Baker in The Signal caught my attention.

What he regards as the “elimination” of a federal tax deduction for mortgage interest and property taxes is, in my view, a step toward a fairer and simplified tax code for everyone.

Complicated tax laws are inherently designed to benefit specific groups of taxpayers and give an avenue for politicians to provide favors for special interests.

The plan is intended to decrease the overall number of tax brackets and increase the standard deduction to roughly double (e.g. from $12,600 to $24,000 for a married couple), but still allow for itemizing of interest payments and property taxes if deemed beneficial by the taxpayer.

However, the complaint from conservatives is with this increase in the standard deduction, unless you have a huge loan on a home and large property taxes, itemizing your loan will no longer be more beneficial than not itemizing it.

If the Republicans’ goal was to expand favor to more than just their base, this proposal would do just that. Everybody would be given the opportunity to double their deductions with no need to take on a huge home debt in the process.

Even if a homeowner can no longer write off mortgage interest, the increase in standard deduction would offset this “loss.” Therefore, homeowners are essentially in the same spot and the only real change is now all taxpayers get to keep more of their hard-earned money.

Home values will not drop with the standard deduction increase. With housing at an absolute premium, especially in Santa Clarita, potential purchasers will not pass up an opportunity to reside in the city.

With the larger standard deduction, individuals and families will now get to keep more of their money, allowing them to save faster for the down payment on a home, one of the biggest hurdles first-time buyers must get over.

With this increased buying power, we will see an increased demand, which will subsequently increase property values.

But for arguments sake, let’s assume Mr. Baker is correct in that we will lose hard-equity in our homes under the proposed tax revisions. As a homeowner myself, if I woke up tomorrow to find my house worth $50,000 less, it would be depressing, to say the least.

However, this tax deduction incentive acts as a subsidy for homeowners, making it more affordable for them to purchase a home since they have special access to this tax write-off.

Now, we as conservatives tend to frown upon government-mandated rent control. If subsidies for renters are bad, shouldn’t subsidies for homeowners be bad as well?

We should just be ecstatic that Republicans are talking about cutting taxes. Even if we do not see a unique benefit, more of us will see a universal one.

Mr. Baker attests that if property values decrease, so will rental values, having a negative effect on rental income. I would opine that a drop in property values would not directly correlate to a drop in rental income.

Since there is such a limited supply of rentals in Santa Clarita, and a high demand for living here, rental prices will not decline. Property values will only have a direct impact on the owner when he or she goes to sell, but not while the unit is rented. Overall, vacancy rates within the city have a far greater impact on rental incomes than tax policy does.

Renters are unlikely to find their landlord agreeable to lowering their rents because the owner’s property value has decreased.
While it is too early to tell just what tax reform plan will be unleashed, allowing a higher standard deduction is an excellent goal. It allows those who make less money to keep even more of it, and high-tax-bracket people will still retain the ability to itemize and pursue further tax relief for their families.

Middle-income Americans would not lose their tax write-offs; they would just get those write-offs now without itemizing their returns.

Jason Gibbs is a Santa Clarita resident and was among the 50 applicants for the vacant Santa Clarita City Council seat in January this year.

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