mortgage talk: Jordan vs. Liu, and much more.

[Henry C.K. Liu]

True.  That is why Congress imposed the US$1.1 million mortgage principal cut
off on deductable interest.
But interest deduction does not stand alone in the US tax structure.  It is part
of a total package that includes other equalizing measures, such as Alternative
Minimum Tax, various other deduction phaseouts tied to income levels, as well as
tax exemption on resale profit tied to age and income levels.
Your point that the US tax structure favors the rich generally is definitely
true.  The US tax approach has always been that for the lower income groups to
get any tax breaks, such breaks have to be balanced by richer breaks for the
rich, if not in percentage terms at least in absolute dollar terms.
I have never understood why the average income American supports capitalism and
its tax structure.
Again, all consumer credit: home mortgages, car loans or leasing, credit card
purchases, serve to increase the final cost of the product to the consumer.
They should be assumed only if the consumer has no other option.
Attempts to rationalize the use of consumer credit as smart money management are
all illusionary and dangerous.
It seems obvious that a market neutral strategy of keeping one's home should be
fundalmental in personal finance management.
To risk default on one's home mortgage because Amazon.com takes a 50% dive in
market value is foolhardy and irresponsible.
Consumer credit reduces the ability of the borrower to take risk on the earning
side by exposing him to risk on the payment side. Opportunity cost is ultimately
is the highest cost.
Being more than clever by half in finance is the quickest way to the poor house
on a personal level.  And encouraging the average wage earner to risk his/her
home to speculate in the stock market is both immoral and criminal.
America and the world need greater income equalization, but the 30-yr fixed rate
mortgage is not the proper vehicle for achieving it.

It would be more effective to alter the 4% unemployment tolerance in
Humphrey-Hawkins.  Any meaningful shift of income distribution will come only
from a labor shortage, which under current policy, is prevented from emerging,
in the name of fighting inflation.
Without a labor shotage in the economy, no wage increase can take place, as
recent data indicates.
I remember in my first job, the low pay ($100/week) forced me to spend hours
trying to figure out how I needed to reduce my basic living expenses just to
make ends meet.  Then one morning, I threw in the towel and went in to demand a
raise that would allow me to live or I would be forced to quit.  To my surprise,
I got the raise ($115/week) within 5 minutes.
I have since adopted the approach with much success.
When is Amercian and global labor going to do the same?

Henry C.K. Liu

Enrique Diaz-Alvarez wrote:


> Henry C.K. Liu wrote:
> >
> > Not only that; the income from alternative investment is subject to income
> > tax, so it becomes a wash with mortgage interest deduction for tax
> > purposes.
>
> Unless you are a millionaire. Then
>
> 1) your tax subsidy is 45%+, and if you can take your investment
> proceeds as capital gains (easy), you only pay 20%, so it is no longer a
> wash
>
> 2) The $7,500 loss becomes much smaller relative to the amount of
> interest you can deduct; at any rate, if you are rich you probably have
> many additional deductions you can take that more than offset the
> $7,500.
>
> The mortgage interest tax scam is one of the most effective means of
> redistributing income towards the top quintile. That many of those it
> hurts the most (non-rich homeowners) still regard it as a good thing is
> an impressive feat of public relations and mass deception, ranking up
> there with the fake SS "crisis". Repealing it should be at the top of
> any progressive agenda.
>
> --
> Enrique Diaz-Alvarez            Office # (607) 255 5034
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