Oooooh, Johnny – that’s gotta *sting*. But look on the bright side… maybe you can put in for another purple heart. Ya think? ELECTION 2004 FEC chairman defends Swift Boat ads Disagrees ‘only the politicians should be able to say what they want’ Posted: August 25, 2004 1:00 a.m. Eastern
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Brooks Gregory wrote : > The joke would be much funnier if American students were not falling behind > their counterparts in so many foreign countries in math achievement.
This may be true; but it’s certainly not because the schools have fallen behind. High School kids today have available much more mathematics opportunities, including many courses which were never taught or unavailable except at the university level. Parents, in many cases have lost interest in ensuring that their kids are on an education path that prepares them for the job market, especially concerning math & science skills.
Countdown to Ignorance We won’t know the answers if we don’t understand the questions By INGRID EISENSTADTER TEACHING MATH IN 1950: A logger sells a truckload of lumber for $100. His cost of production is four-fifths of the price. Assignment: What is his profit? Teaching Math in 2000: A logger sells a truckload of lumber for $1,000. Her cost of production is $800 and her profit is $200. Assignment: Underline the number 200. The joke would be much funnier if American students were not falling behind their counterparts in so many foreign countries in math achievement. We talk about what this means to our competitiveness, but there’s another price we pay for our ignorance of math. Not only do we fail to answer questions correctly that involve the interpretation of numbers; often, we don’t even know what questions to ask. When we lament the allocation of an additional $87 billion to support our efforts in Iraq and Afghanistan, we neglect to ask how our money is being spent and with whom: About $5.5 billion is allocated to the purchase of weapons, missiles, aircraft and military vehicles. That generates revenues for the companies manufacturing them. Another $18 billion of this sum is for salaries for our own troops. Military operations and maintenance get an additional $37 billion. What part of all that money will be returned to U.S. coffers, paid not just to our troops, but to U.S. service and manufacturing companies, to be spent at Wal-Mart and McDonald’s, distributed as stock dividends, deposited in banks to back home mortgages? The net cost to the American economy is far less than $87 billion. In fact, the entire appropriation, is just $13 billion more than the sum that federal and state governments spend on college scholarships and loans every year in the U.S.: That’s $74 billion a year. As with our spending for the rebuilding of Iraq, we ought to ask about our spending on building minds. Ticket to Ride Every year about half the government money spent on scholarships and loans goes to students who will not graduate. How much of that money is wasted? We don’t know because we continue to focus almost exclusively on who gets into college, not who graduates. A couple of years ago, the U.S. Senate Advisory Committee on Student Financial Assistance wrote "Access Denied", a report about the ruinous cost of college for the poor. The committee calculated, or rather it guessed, that $250 billion would be added to GDP annually by the increased participation of a (poorly defined) group of low-income students. To get there, however, the advisory committee had to assume that all such students would go to four-year colleges, that 100% would graduate, 100% would find employment, and land jobs that raised their income over high-school graduates by more than $30,000 a year, each, beginning immediately on graduation. Despite these silly assumptions, the Educational Testing Service in Princeton, N.J., got on board with "Crossing the Great Divide," assuming that the economy will rise to the occasion of creating jobs for 100% of low-income college grads (about 25% of whom now graduate) if they just get more scholarship money. Well, they ought to get the "Jobless Recovery" on the phone, and make some clear demands, because there are plenty of unemployed college grads, just in case you don’t have one in your house. "Access Denied" has other problems. At its heart are Department of Education statistics that say the lowest income students have annual "unmet need" of $3,200 at two-year public colleges and $3,800 at four-year public colleges. However, according to the College Board, a major purveyor of such numbers nationally, tuition at the average two-year public college is $1,700 a year and at four-year public college, it’s $4,000 a year. These are trivial sums considering the lifelong income-earning benefits of a higher education, and the grants and loans that reduce costs even further, loans which often accrue no interest until after graduation. Virtually nobody has asked why these "unmet need" figures are almost twice the full cost of tuition at a two-year college, and almost equal to it in a four-year college. It’s simple: They include the costs of dormitory room and board and the higher price of out-of-state tuition. Preposterously, these unmet-need numbers actually were compiled from low-income students who were in college full-time, having met their unmet needs. Should this sort of useless information be a major building block for higher education policy? Nor is there much evidence to support the basic notion that poor students do not complete college only for monetary reasons. They also drop out for lack of motivation, lack of ability, poor counseling or a crummy high-school education. Low-income students drop out of high school at twice the rate of middle-class students, although high school is free. Useless Misinformation If this is the quality of information going into Congress, what’s coming out of it? In the spring of last year, a report with another newsworthy name, "Slamming Shut the Doors to College," was issued by Senate and House Democrats, the cooperative effort of five separate committees. Within its 20 pages of statistics was this observation: "Even with financial aid, low-income students fall $3,200 short of being able to afford even community colleges." Alas. College is actually cheap, if a student can commute from home, but we forget that because a lot of people expounding on this subject, such as reporters and congressmen, had expensive educations that didn’t include much math. Sam Rankin at the American Mathematical Society says that three or four members of the House earned bachelor’s degrees in math. Don’t look for any advanced degrees in math anywhere in Congress. The results of their innumeracy, and ours, are all around us. The health field in particular is a playground for fuzzy math. For example, the National Institutes of Health says Americans spend $37 billion annually for "direct medical costs" in treating cancer patients, with tens of billions more in indirect costs. Cancer care, however, is an enormous, income-generating business for millions of doctors, nurses and other employees of hospitals, hospices, pharmaceutical companies, medical-equipment manufacturers, their distributors, their shareholders, and others. Most of them make a profit. We need a net number in order to make intelligent health-policy decisions. Statistical Confusion We also need to understand about numbers to make intelligent medical decisions for ourselves. Last year, 6 million post-menopausal American women woke up to the front-page news that their hormone replacement treatment was increasing their chances of getting breast cancer by 26%, stroke by 41% and heart attacks by 29%. What the percentage changes actually represented, though, was a change in a rate — an additional seven to eight women per 10,000 were diagnosed with these disorders, for a net change of eight ten-thousandths of 1%. Death rates had not increased at all. More headlines followed a recent American Cancer Society paper about breast cancer estimating that the incidence of tumors larger than 5 centimeters among white women had increased by 2.1% per year from 1992 to 2000. That figure, however, represented an increase from 5.6 cases per 100,000 to 6.3 cases per 100,000 — that would be 55 more women developing such tumors each year if the result were to be extrapolated to all American women over the age of 50. At the National Cancer Institute, statistician Milton Eisner notes that "it is arbitrary to consider only tumors greater than 5 centimeters." (It is especially arbitrary if you notice that for four years prior to 1992, the same study showed reduced occurrence, but those years were not averaged in.) The increase may actually derive from more women getting a mammogram for the first time which, this small increase in larger tumors notwithstanding, would be good news, not bad. The first time Americans believed that we had fallen behind in math was in 1957, when we woke up to the shock of the Russians’ sending Sputnik into orbit. Unfortunately, the main result was a few decades of "New Math" in elementary schools. Now we are sending at least our third generation of innumerates out for careers as politicians, teachers, lawyers, judges and journalists. Teaching Math in 2003: By cutting down a whole forest of beautiful trees, a lumber company makes $2 million. Assignment: How did the forest’s birds and animals feel? —- Ingrid Eisenstadter is a reporter who lives in New York City and enjoys math, up to a point.
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> I’d agree that it is too late to complain about the fees. Next time, > get it in writing before you make the deal. > An adjustable rate mortgage is not wise in my opinion. The average > ARM rate in houston for a loan like yours is under 4%. A fixed rate > is under 6%, both with no points.
<snip> OP said he had a JUMBO. Most jumbo rates are 1/2 to 1 point above normal rates.
Hello, I recently refinanced by 2 year old home mortgage from 7.65% 30yr Fixed Jumbo to 5.75% 5/1 Jumbo ARM. I know that I’m saving a lot in my monthly payments and for the life of the loan by doing this, but I don’t know if my closing costs were typical of a refinance. Can someone confirm for me whether I got a fair and reasonable deal in my closing costs below or did I get shafted? I can understand the county taxes and interest, but that leaves about 3K in fees that seem inflated to me. I want to get second opinions before I confront my mortgage broker. I live in a 3bed/2.5bath townhome in the SF Bay Area. Thanks all for your advice. -Drew Deposit 11/14/02 funds to close $2,891.28 Payoff Existing Loan $307,698.80 Interest from 11/01/02 to 11/21/02 $1,285.60 Statement Fee $60.00 Recording Fee $9.00 New Loan $312,000.00 Interest from 11/15/02 to 12/01/02 $786.40 Processing Fee to mortgage broker $450.00 Payment Processing Fee $200.00 Funding & Review Fee $400.00 Tax Service Fee $71.00 Flood Cert. Fee $13.00 Wire Fee $35.00 Appraisal Fee $400.00 Credit Report $42.00 Settlement $375.00 Title Insurance $858.00 Fedex $9.35 Recording Fee $123.00 1st installment 02/03 county taxes $1,912.36 Refund $162.77 TOTALS: $314,891.28 $314,891.28
>… you didn’t need to get title >insurance, since you already had that when you originally purchased the >property…
Uhh, nooo, he probably didn’t and doesn’t have title insurance at all. For himself, that is. The title insurance is for the lender. Unless the owner asks for and pays extra for his own coverage. If he went to a mortgage broker rather than his existing bank, likely he is with a new lender. New lender doesn’t give a shit about the previous title insurance which was for the old lender. Requires new policy. Brokers gotta get paid somewhere. This one charged fees. So what. You don’t wanna pay ‘em, don’t use a broker. However, OP did. So I agree with you that for OP a deal is a deal and it is over and so what if he coulda bought it cheaper somewhere else. I’m quite confident that the broker dod NOT offer any kind of price match guarantee!!!! -v.
I’d agree that it is too late to complain about the fees. Next time, get it in writing before you make the deal. An adjustable rate mortgage is not wise in my opinion. The average ARM rate in houston for a loan like yours is under 4%. A fixed rate is under 6%, both with no points. If you plan on staying for 5 or more years then you need to refinance for a fixed rate again real soon now. Your payments could skyrocket in the next 10 years unless there are limits in your mortgage. As to the fees, I’d say you are about in the middle. Some are cheaper and some are higher. JimL – Hide quoted text — Show quoted text ->Hello, >I recently refinanced by 2 year old home mortgage from 7.65% 30yr Fixed >Jumbo to 5.75% 5/1 Jumbo ARM. I know that I’m saving a lot in my monthly >payments and for the life of the loan by doing this, but I don’t know if my >closing costs were typical of a refinance. >Can someone confirm for me whether I got a fair and reasonable deal in my >closing costs below or did I get shafted? I can understand the county taxes >and interest, but that leaves about 3K in fees that seem inflated to me. I >want to get second opinions before I confront my mortgage broker. >I live in a 3bed/2.5bath townhome in the SF Bay Area. Thanks all for your >advice. >-Drew > Deposit 11/14/02 funds to close $2,891.28 > Payoff Existing Loan $307,698.80 > Interest from 11/01/02 to 11/21/02 $1,285.60 > Statement Fee $60.00 > Recording Fee $9.00 > New Loan $312,000.00 > Interest from 11/15/02 to 12/01/02 $786.40 > Processing Fee to mortgage broker $450.00 > Payment Processing Fee $200.00 > Funding & Review Fee $400.00 > Tax Service Fee $71.00 > Flood Cert. Fee $13.00 > Wire Fee $35.00 > Appraisal Fee $400.00 > Credit Report $42.00 > Settlement $375.00 > Title Insurance $858.00 > Fedex $9.35 > Recording Fee $123.00 > 1st installment 02/03 county taxes $1,912.36 > Refund $162.77 > TOTALS: $314,891.28 $314,891.28
I would check here for information: http://www.bankrate.com/brm/default.asp
– Hide quoted text — Show quoted text -> Hello, > I recently refinanced by 2 year old home mortgage from 7.65% 30yr Fixed > Jumbo to 5.75% 5/1 Jumbo ARM. I know that I’m saving a lot in my monthly > payments and for the life of the loan by doing this, but I don’t know if my > closing costs were typical of a refinance. > Can someone confirm for me whether I got a fair and reasonable deal in my > closing costs below or did I get shafted? I can understand the county taxes > and interest, but that leaves about 3K in fees that seem inflated to me. I > want to get second opinions before I confront my mortgage broker. > I live in a 3bed/2.5bath townhome in the SF Bay Area. Thanks all for your > advice. > -Drew > Deposit 11/14/02 funds to close $2,891.28 > Payoff Existing Loan $307,698.80 > Interest from 11/01/02 to 11/21/02 $1,285.60 > Statement Fee $60.00 > Recording Fee $9.00 > New Loan $312,000.00 > Interest from 11/15/02 to 12/01/02 $786.40 > Processing Fee to mortgage broker $450.00 > Payment Processing Fee $200.00 > Funding & Review Fee $400.00 > Tax Service Fee $71.00 > Flood Cert. Fee $13.00 > Wire Fee $35.00 > Appraisal Fee $400.00 > Credit Report $42.00 > Settlement $375.00 > Title Insurance $858.00 > Fedex $9.35 > Recording Fee $123.00 > 1st installment 02/03 county taxes $1,912.36 > Refund $162.77 > TOTALS: $314,891.28 $314,891.28
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:Other than deductibility of interest, any gains when you sell are "tax :free" up to $250,000 for a single person or $500,000 for a married I agree. Buying a house was the wisest financial decision I’ve made. Besides the tax benefit, there are *many* other plusses to owning, including what Trip notes above. Another benefit: my rent went up $125-$200/month each year before I finally bought a place. My mortgage payment will stay the same for 30 years if I stay 30 years. Brian Kennedy
"Ghost Love" <ghost> is rumored to have said: > why do people say that a house is good for tax purpose? i dont > understand why. > thanks
because if you pull up the floorboards in an apartment to hide money in coffee cans you might lose your security deposit! Actually, with a home and a mortgage, you can write off the interest paid on your income taxes, so with the payments being equal (I know, not likely in most cases), you’ll actually get more for your money with a home, not to mention the equity you’ll build up.
"Ghost Love" <ghost> wrote … > why do people say that a house is good for tax purpose? > i dont understand why.
Others have already pointed out many of the benefits of home ownership including mortgage payments that are often no more, or even less, than rent. Having a payment that is now fixed for the next 30 years (assuming of course a 30 year fixed rate loan). Having part of your payment, which we already said might even be less than rent, be tax deductable. Another one that comes to mind that I don’t think anyone has mentioned yet is paying a mortgage often gives you the deductions needed to itemize. Meaning, you take all the things you can deduct from your taxes like the value of donated clothing, charitable donations, giving a few bucks at church each week, etc. etc. But what often happens is that after adding all those up, it might not be more than the standard deduction, so it isn’t worth it to itemize and you take the standard deduction. With a house payment, the interest on the load is almost always enough to make it worth your while to itemize and now you can tack on all those other things you were not able to take advantage of in the past. So having a house payment may allow you to not only take the tax break on the interest, but also a tax break on many other things that were not enough on their own to itemize. Of course the downside of home ownership is you are responsible for everything. So no more claling the landlord when the roof leaks, a pipe busts, the heater is on the fritz, etc. Those problems and associated expenses are all yours. But for many of us, we wouldn’t have it any other way. <smile> Patrick
why do people say that a house is good for tax purpose? i dont understand why. thanks
Interest paid on your mortgage loan is tax deductible if you itemize deductions. – Hide quoted text — Show quoted text – >why do people say that a house is good for tax purpose? >i dont understand why. >thanks
is this good? i really dont understand how this works thanks – Hide quoted text — Show quoted text – > Interest paid on your mortgage loan is tax deductible if you itemize > deductions. >why do people say that a house is good for tax purpose? >i dont understand why. >thanks
> is this good? i really dont understand how this works > thanks
It’s "good", if you think paying $1.00, and getting a few cents back, is a "good deal." :-) Well, OK, that’s a bit of an oversimplification. There do seem to be an excessive number of people who seem to rely entirely on the deduction to be able to afford their houses. Personally, my opinion is that people who do so, can’t really afford their mortgages, but that’s just me. – Rich – Hide quoted text — Show quoted text -> Interest paid on your mortgage loan is tax deductible if you itemize > deductions. > >why do people say that a house is good for tax purpose? > >i dont understand why. > >thanks
- Hide quoted text — Show quoted text ->is this good? i really dont understand how this works >thanks > It’s "good", if you think paying $1.00, and getting a few cents > back, is a "good deal." :-) > Well, OK, that’s a bit of an oversimplification. There do seem to > be an excessive number of people who seem to rely entirely on the > deduction to be able to afford their houses. Personally, my > opinion is that people who do so, can’t really afford their > mortgages, but that’s just me. > – Rich
Anytime you can deduct something it’s very good. Usually people will end up paying more interest than the standardized deduction amount allowing them to itemize. Once you itemize, you can not only deduct mortgage interest, but property taxes, and personal property taxes, charity deductions, even state and local income taxes. What a deal!
so gennerally how much do you get in return? – Hide quoted text — Show quoted text ->>is this good? i really dont understand how this works >>thanks > It’s "good", if you think paying $1.00, and getting a few cents > back, is a "good deal." :-) > Well, OK, that’s a bit of an oversimplification. There do seem to > be an excessive number of people who seem to rely entirely on the > deduction to be able to afford their houses. Personally, my > opinion is that people who do so, can’t really afford their > mortgages, but that’s just me. > – Rich > Anytime you can deduct something it’s very good. > Usually people will end up paying more interest than the standardized > deduction amount allowing them to itemize. Once you itemize, you can > not only deduct mortgage interest, but property taxes, and personal > property taxes, charity deductions, even state and local income taxes. > What a deal!
That depends on your federal tax bracket. If you are in the 20% bracket, you get 20% off your taxes in the form of either less taxes you have to pay come April 15th, or a larger refund. When paying rent, you get nothing and that is the contrast here. – Hide quoted text — Show quoted text – > so gennerally how much do you get in return?
> That depends on your federal tax bracket. If you are in the 20% > bracket, you get 20% off your taxes in the form of either less > taxes you have to pay come April 15th, or a larger refund. > When paying rent, you get nothing and that is the contrast here. > so gennerally how much do you get in return?
That sounds a bit like my local grocery supermarket check out clerks. They never forget to tell me how much I saved as they tell me the amount of my purchase. IOWs I spend $XXX and "saved" $6.31. How much do you have to pay to save that 20%? When I pay my rent, other than my gas and mower etc., I have nothing more to pay but my income taxes. What do you have to pay over and above the mortgage and interest to own your place that I don’t have to?
I write off about 20K in deductions, at 30% bracket that’s $6000 tax savings, about 6 mortgage payments for me. Return would be the 30% tax rate. – Hide quoted text — Show quoted text – > so gennerally how much do you get in return? >>>is this good? i really dont understand how this works >>>thanks >> It’s "good", if you think paying $1.00, and getting a few cents >>back, is a "good deal." :-) >> Well, OK, that’s a bit of an oversimplification. There do seem to >>be an excessive number of people who seem to rely entirely on the >>deduction to be able to afford their houses. Personally, my >>opinion is that people who do so, can’t really afford their >>mortgages, but that’s just me. >>- Rich >Anytime you can deduct something it’s very good. >Usually people will end up paying more interest than the standardized >deduction amount allowing them to itemize. Once you itemize, you can >not only deduct mortgage interest, but property taxes, and personal >property taxes, charity deductions, even state and local income taxes. >What a deal!
>Anytime you can deduct something it’s very good.
Unless you paid a dollar to deduct 20 cents. If you can deduct something you would pay out anyway, that is fine. When people start buying things under the justification that there is a deduction, they are usually coming out behind (like buying thousands of dollars worth of clothes because you ’saved’ so much because they were "on sale", similar principle). The deduction lowers the net after-tax cost of owning housing for most people. But they are still spending more in the first place. If you are going to have a $2000 mortgage vs. $2000 rent then you are probably better off buying. But if the choice is (as it more usually is) between $1250 rent and $2000 mortgage then it is not so clear. Yes you can buy the house foe "not much more", but not really for less…. -v.
> why do people say that a house is good for tax purpose? > i dont understand why. > thanks
Because home mortgage interest and property taxes are itemized deductions on schedule A, and the sale of a house is generally exempt from capital gains. There are exceptions to most tax rules, but things generally work as stated above. JK
Other than deductibility of interest, any gains when you sell are "tax free" up to $250,000 for a single person or $500,000 for a married person. Not a Trip – Hide quoted text — Show quoted text ->why do people say that a house is good for tax purpose? >i dont understand why. >thanks
[snip!] >The deduction lowers the net after-tax cost of owning housing for most >people. But they are still spending more in the first place. If you >are going to have a $2000 mortgage vs. $2000 rent then you are >probably better off buying. But if the choice is (as it more usually >is) between $1250 rent and $2000 mortgage then it is not so clear. >Yes you can buy the house foe "not much more", but not really for >less….
In expensive real estate areas like California, buying almost always costs more than renting. However, like you said, the interest deduction can make it "not much more" and there are the advantages that the mortgage payment is fixed and one starts to builds equity. So, that "extra" money goes to work for the owner of the property. Why that may be better than investing that extra money as a renter is that: 1) One often doesn’t have to pay capital gains taxes on the sale of their primary residence and 2) The real estate investment is highly leveraged. In a cheap real estate area it makes even more sense to buy, of course. I can’t think of many scenarios that it makes sense to rent, unless property values are way out of agreement with rents. Dimitri
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Yes we have FHA home mortgage programs that banks will not or do not offer, each loan request on an individual basis. Even if your credit history is less than perfect, we will visit with you by phone or you can come into our office. Take the first step the we will do the rest the sooner you complete the on-line application the faster we can approve your financing for jumbo, fha, veterans, rural, reverse financing, mortgage requirements are application, credit report, appraisal. see: houston Home Loan www.houstonhomeloan.com
> Yes we have FHA home mortgage programs that banks will not or do not > offer, each loan request on an individual basis. Even if your credit > history is less than perfect,
Be careful of this hook phrase "less than perfect." Less than perfect can pertain to things other than payment history (where "less than perfect" can be one 30 day late entry 6 years ago), including income and debt ratio. Before you plunk down several hundred dollars (non-refundable) for a mortgage application, ask the lender/agent to define "less than perfect."
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I was involved in an interesting conversation with a coworker the other day that got me thinking. Basically he found out that I was making extra payments in order to pay off my loan earlier. He thought the idea was screwy, "Why would you want to pay off your loan earlier and miss out on all the Uncle Sam tax benefits?". Thoughts on this [predicament. Would like to hear your opinion too V. -- Emmanuel http://www.osifeso.com/emmanuel
Emmanuel> I was involved in an interesting conversation with a Emmanuel> coworker the other day that got me thinking. Basically he Emmanuel> found out that I was making extra payments in order to pay Emmanuel> off my loan earlier. He thought the idea was screwy, "Why Emmanuel> would you want to pay off your loan earlier and miss out on Emmanuel> all the Uncle Sam tax benefits?". Emmanuel> Thoughts on this [predicament. Would like to hear your Emmanuel> opinion too V. It's really very simple: You are better off keeping the mortgage if and only if you can invest the money in something that will pay better than the mortgage's interest rate. The trouble, of course, is that there is unlikely to be any investment that will certainly pay more than the mortgage's rate. That means that it's a gamble. By keeping the mortgage, you hope that the investment will do better. By choosing appropriate investments, you can make it likely that you will win over the length of the mortgage, but there are no guarantees. --
It all depends on the rate you are paying, your tax rate, what rate of return you can make on the additional payment if you didn't pay it off early, etc. In other words, there are many factors, many not known precisely until years down the road. Like how much your house will appreciate, what interest rates you can get in a savings account/stock account, etc. You need someone who can run a proforma for you with several scenarios. You may come out better saving on the side for 15 years and making 8% on your savings, then paying the house off and having some left over. Ask someone who has an MBA or is a Finance person at a local bank to run the proforma for you. Even if it costs you $100 for their time it'll be well worth it. I have an MBA and just did the same with myself in November when deciding how much new house to buy and whether or not to pay it off early (over 15 years on a 30 year amortization). Trip says... - Hide quoted text -- Show quoted text ->I was involved in an interesting conversation with a coworker the other day >that got me thinking. Basically he found out that I was making extra >payments in order to pay off my loan earlier. He thought the idea was >screwy, "Why would you want to pay off your loan earlier and miss out on all >the Uncle Sam tax benefits?". >Thoughts on this [predicament. Would like to hear your opinion too V. >-- >Emmanuel >http://www.osifeso.com/emmanuel
> I was involved in an interesting conversation with a coworker the > other day that got me thinking. Basically he found out that I was > making extra payments in order to pay off my loan earlier. He thought > the idea was screwy, "Why would you want to pay off your loan earlier > and miss out on all the Uncle Sam tax benefits?".
The idea that you pay more interest to "buy" an increased tax benefit is so loony it is beneath contempt. The tax benefit does not equal the extra interest paid! If you have some extra money, you can invest it or you can pay off the mortgage. If you invest it, you have to pay tax on the gains. (Or you could keep your money in a checking account---since you don't make any money on it, this has fantastic tax benefits, following your loony friend's logic. I'll assume you will invest your savings.) If your mortgage is 7% and your investments also make 7%, then you will save taxes because of your mortgage interest, but you will pay taxes on your investment earnings. Or you could use the money to pay off your mortgage, in which case you decrease your tax deductions, but also you decrease your taxable investment gains. So it's a wash. Of course the above is oversimplified. For example, if your investment growth is in capital gains, that's taxed at a lower rate. If your deductions excluding the mortgage don't add up to more than the standard deduction, then it may be best to pay off the mortgage as soon as possible, because you're paying taxes from the first dollar on investments but you are not getting a tax benefit from the first dollar for your mortgage interest. But the most important thing is whether you can invest and make more than 7% every year. Investments are not guaranteed; you can make less than 7% or even lose money. So, as others have already said in this thread, paying off your mortgage is like a guaranteed 7% investment. For me, paying off my mortage is not a good option because my investments have made 15-20% annually (on the average) over the last 10 years, some of it in less-taxed capital gains. I hope this will continue; it may or may not. But if you don't have the stomach for stock investing, go for the guaranteed return by paying off your mortgage.
>For me, paying off my mortage is not a good option because my investments >have made 15-20% annually (on the average) over the last 10 years, some >of it in less-taxed capital gains. I hope this will continue; it may or >may not. But if you don't have the stomach for stock investing, go for >the guaranteed return by paying off your mortgage.
Bragging a little aren't we? I think this is a lie or you'd be sought after for investment advice from the BIG BOYS. We all made 20-30% over the '96-'00 time period but over the past 10 years? Well, I guess you could call investing in your own business a "return" and you'd be right and since you say some of it is in the capital gains territory then maybe that is what you are doing.......investing in your own company. If so, I'll back off my statement. If not, and you're implying that you have made 15-20% over the past 10 years in the staock market, then I stick with my first statement. Trip
With mortgages around 7%, just about any good index fund should kick the crap out of the mortgage rate (most years, anyway). That doesn't mean I'd advise NOT paying off the mortgage, though. -Dave -- On hotmail dot com, I am user "junknothankyou". - Hide quoted text -- Show quoted text - > It's really very simple: You are better off keeping the mortgage > if and only if you can invest the money in something that will pay > better than the mortgage's interest rate. > The trouble, of course, is that there is unlikely to be any investment > that will certainly pay more than the mortgage's rate. That means that > it's a gamble. By keeping the mortgage, you hope that the investment > will do better. By choosing appropriate investments, you can make > it likely that you will win over the length of the mortgage, but there > are no guarantees. > --
- Hide quoted text -- Show quoted text ->For me, paying off my mortage is not a good option because my investments >have made 15-20% annually (on the average) over the last 10 years, some >of it in less-taxed capital gains. I hope this will continue; it may or >may not. But if you don't have the stomach for stock investing, go for >the guaranteed return by paying off your mortgage. > Bragging a little aren't we? I think this is a lie or you'd be sought after > for investment advice from the BIG BOYS. We all made 20-30% over the '96-'00 > time period but over the past 10 years? Well, I guess you could call > investing in your own business a "return" and you'd be right and since you say > some of it is in the capital gains territory then maybe that is what you are > doing.......investing in your own company. If so, I'll back off my > statement. If not, and you're implying that you have made 15-20% over the past > 10 years in the staock market, then I stick with my first statement.
I don't think it's that far fetched. Looking at the Vanguard 500 index fund, it's returned 12.84% over the past ten years. Depending on if he was in a fund that did a little better thatn the index, 15% is probable. If he timed the market right and got out a year ago or two, then 20% is even likely. - Hide quoted text -- Show quoted text -> Trip
>>For me, paying off my mortage is not a good option because my investments >have made 15-20% annually (on the average) over the last 10 years, ... > Bragging a little aren't we? I think this is a lie or you'd be sought after > for investment advice from the BIG BOYS. We all made 20-30% over the '96-'00 > time period but over the past 10 years? Well, I guess you could call > investing in your own business a "return" and you'd be right and since you say > some of it is in the capital gains territory then maybe that is what you are > doing.......investing in your own company. If so, I'll back off my > statement. If not, and you're implying that you have made 15-20% over the past > 10 years in the staock market, then I stick with my first statement.
Heh. I thought we'd seen the last of the "borrow all you can and invest! invest! invest!" guys as of last year. Historically over the long term you can by investing very broadly make 9-10% a year. Anyone who claims 15-20% got lucky, period. What you want to do is BOTH pay down your debt AND invest (and save, too). The amount of each that you do depends on your situation in life and your acceptance of risk.
> Bragging a little aren't we? I think this is a lie or you'd be sought > after for investment advice from the BIG BOYS. We all made 20-30% > over the '96-'00 time period but over the past 10 years?
About 10 years ago I put most of my money in Fidelity Low-Priced Stock, and left it alone. It still has the same manager (Tillinghast), and the ten- year annualized return is about 16.5%. (It made something like 20% in 2001.) FLPSX is not some undiscovered little fund making fluke profits with half a million dollars. Kobren's newsletter first recommended it maybe 13-14 years ago. Did you do as well? Probably not. I'm sorry. Will the original poster do as well in future? Probably not. So he should pay off his mortgage. Will I do as well in future? Probably not. But I won't complain. 16% for 10 years means I more than quadrupled the original investment.
> Will I do as well in future? Probably not.
A key point. Just this past week they were talking about looking at mutual funds on Sound Money on NPR. It turns out that previous performance is not a great indicator of future performance.
> "Why would you want to pay off your loan earlier and miss out on all >the Uncle Sam tax benefits?".
Please have him post his name and address here, I for one would be glad to have him pay me $100 for which I will give him $28 or $35 or whatever his tax bracket is back. In fact, he can get a bigger benefir from me by sending in $100k in which case I will send him $35k. If you wanna borrow money from one source because you think you can invest it for greater return someplace else, fine, that's classic 'leverage'. (Problem being you still have to pay back the loan even if your investments tank.) And yes, the tax deduction incrementally lowers your effective interest rate on your home mortgage, by a degree depending on your overall tax/income situation. But the idea that you automatically *should* pay more interest because you the get a greater deduction, is NUTS. Your friend may be confusing a deduction from INCOME with a tax CREDIT. The mortgage 'deduction' merely acts to reduce you taxable income; it does NOT lower your tax by the amount deducted. Since you only pay % of your income in tax, the savings in tax must always be less than the interest paid. You just can't come out ahead from a purely tax viewpoint. -v.
Paying off a common 7 % mortgage will save you the that 7 % LESS the effect the interest you paid has on your Federal and State income taxes... That's a given... Lets say you should save about 5% Not paying off the mortgage and investing the money will generate Income OR Loss.. you are never sure, but historically the markets have averaged about 10% each year. BUT that income is also taxed... The trick is to end each year with more money in your wallet. I did not pay down my mortgage I invested the money..and over the last 20 years I came out way way ahead...BUT it is a crap shoot the next 5 10 or 20 years may not produce any returns..and you can loose big time... A lot of people hate owning money and they get great satisfaction and can sleep at night much better if they paid off their mortgage and that is fine. However if they only knew how much that peace of mind cost them by not investing over the last 20 years they would be sick...In 1929 I would have been very happy knowing I paid off the mortgage rather then have my money in the stock market If anyone knew what the future would bring questions like these would never pop up... Roll the dice....pick a number... and be prepared to win or loose... Bob Griffiths - Hide quoted text -- Show quoted text - > I was involved in an interesting conversation with a coworker the other day > that got me thinking. Basically he found out that I was making extra > payments in order to pay off my loan earlier. He thought the idea was > screwy, "Why would you want to pay off your loan earlier and miss out on all > the Uncle Sam tax benefits?". > Thoughts on this [predicament. Would like to hear your opinion too V. > -- > Emmanuel > http://www.osifeso.com/emmanuel
Bob> Paying off a common 7 % mortgage will save you the that 7 % LESS Bob> the effect the interest you paid has on your Federal and State Bob> income taxes... That's a given... Lets say you should save Bob> about 5% Bob> Not paying off the mortgage and investing the money will generate Bob> Income OR Loss.. you are never sure, but historically the Bob> markets have averaged about 10% each year. BUT that income is Bob> also taxed... Right. But the mortgage tax deduction balances that. Bob> The trick is to end each year with more money in your wallet. I Bob> did not pay down my mortgage I invested the money..and over the Bob> last 20 years I came out way way ahead...BUT it is a crap shoot Bob> the next 5 10 or 20 years may not produce any returns..and you Bob> can loose big time... You sure can. But if you can afford to wait long enough, you probably won't. The real question is whether you can afford the ``probably.'' --
Ultimately, I think it's best to either invest or save any extra money you may have in a money market fund. I do both. What good is paying down your mortgage early if you don't have a safety fund? Some may rest easier thinking they'll own their homes outright sooner, but I sleep better--nowadays, anyway--with a big chunk of ready change stashed away. Yes, the interest is piddling, and yes, that bites...but there's no guarantee I'll have my job next month. If I should find myself in the bread line, at least I'll be able to continue paying the mortgage for several months while looking for work. If, before (theoretically) losing my job, I'd put extra money into prepaying the mortgage instead of my slush fund, I would be completely SOL. No safety net--and no house, either. And this isn't such a farfetched scenario. As I write this, my sister- and brother-in-law are staring my worst nightmare in the face. BIL is going to be jobless in less than two weeks and hasn't been able to land another position. They have a three-year-old, a two-year-old, and an infant less than three weeks old. They have no savings and significant debt. Looks like they're going to lose their house and move in with my in-laws. *shiver* And with all those small children! It can happen to anyone. So don't prepay your mortgage unless you've got at least six months of living expenses socked away.
> Bob> Paying off a common 7 % mortgage will save you the that 7 % LESS > Bob> the effect the interest you paid has on your Federal and State > Bob> income taxes... That's a given... Lets say you should save > Bob> about 5% > Bob> Not paying off the mortgage and investing the money will generate > Bob> Income OR Loss.. you are never sure, but historically the > Bob> markets have averaged about 10% each year. BUT that income is > Bob> also taxed... > Right. But the mortgage tax deduction balances that.
Let's say you've already paid off the mortgage but want to use the best financial strategy. How about taking a, say, 10-15K home equity loan against your house. I've heard some banks call it a "line of credit"? Use this to purchase everyday things like food, clothes, toys, vet bills. But pay it all off at the end of the year. Can the mortgage tax deduction then be taken? Is this more strategic than just sitting there with a paid mortgage and/or investing in stock? Thanks, pearlz
Pearlz> How about taking a, say, 10-15K home equity loan against your Pearlz> house. I've heard some banks call it a "line of credit"? Pearlz> Use this to purchase everyday things like food, clothes, toys, Pearlz> vet bills. But pay it all off at the end of the year. Pearlz> Can the mortgage tax deduction then be taken? Nope. The answer used to be yes, but the rules changed. Now, the only way you can deduct mortgage interest is if you took out the mortgage to buy the house in the first place, or if you use the money to improve the house. --
> Pearlz> How about taking a, say, 10-15K home equity loan against > your Pearlz> house. I've heard some banks call it a "line of > credit"? Pearlz> Use this to purchase everyday things like food, > clothes, toys, Pearlz> vet bills. But pay it all off at the end of > the year. > Pearlz> Can the mortgage tax deduction then be taken? > Nope. The answer used to be yes, but the rules changed. > Now, the only way you can deduct mortgage interest is if you > took out the mortgage to buy the house in the first place, > or if you use the money to improve the house.
I'm not aware of any such change. So far as I know, interest on a new home equity loan is deductable, regardless of what you use the money for. Can you direct me to a source for your information? --
The in terest is tax deductible if it's money borrowed against your house, up to certain limits. Doesn't matter what you spend it on. It could be a car, groceries, an airplane, etc. Trip says... - Hide quoted text -- Show quoted text ->Pearlz> How about taking a, say, 10-15K home equity loan against your >Pearlz> house. I've heard some banks call it a "line of credit"? >Pearlz> Use this to purchase everyday things like food, clothes, toys, >Pearlz> vet bills. But pay it all off at the end of the year. >Pearlz> Can the mortgage tax deduction then be taken? >Nope. The answer used to be yes, but the rules changed. >Now, the only way you can deduct mortgage interest is if you >took out the mortgage to buy the house in the first place, >or if you use the money to improve the house. >--
Trip> The in terest is tax deductible if it's money borrowed against Trip> your house, up to certain limits. Doesn't matter what you spend Trip> it on. It could be a car, groceries, an airplane, etc. This statement was once true, but no longer. For more information, see http://www.irs.gov/formspubs/display/0,,i1%3D50%26genericId%3D12832,0... --
>The in terest is tax deductible if it's money borrowed against your house, up >to certain limits. Doesn't matter what you spend it on. It could be a car, >groceries, an airplane, etc.
That's not entirely true. If you purchase a tax-preferential investment with the loan, it's not deductible. I haven't looked at the rules for a while, but IIRC, there are some other tests to be met for deductibility. SteveR
>> Nope. The answer used to be yes, but the rules changed. > Now, the only way you can deduct mortgage interest is if you > took out the mortgage to buy the house in the first place, > or if you use the money to improve the house.
Bert> I'm not aware of any such change. So far as I know, interest on a new Bert> home equity loan is deductable, regardless of what you use the money Bert> for. Bert> Can you direct me to a source for your information? http://www.irs.gov/formspubs/display/0,,i1%3D50%26genericId%3D12832,0... --
>>> Nope. The answer used to be yes, but the rules changed. >> Now, the only way you can deduct mortgage interest is if you >> took out the mortgage to buy the house in the first place, >> or if you use the money to improve the house. > Bert> I'm not aware of any such change. So far as I know, interest > on a new Bert> home equity loan is deductable, regardless of what > you use the money Bert> for. > Bert> Can you direct me to a source for your information? > http://www.irs.gov/formspubs/display/0,,i1%3D50%26genericId%3D12832, > 00.html
I see limits on the ->amount of aquisition or equity debt for which interest can be deducted, but not on the ->type of debt. Can you show me the section? --
> Trip> The in terest is tax deductible if it's money borrowed against > Trip> your house, up to certain limits. Doesn't matter what you spend > Trip> it on. It could be a car, groceries, an airplane, etc. > This statement was once true, but no longer. > For more information, see > http://www.irs.gov/formspubs/display/0,,i1%3D50%26genericId%3D12832,0...
Sounds like it's still deductible "up to certain limits" (current equity or $100K, whichever is smaller). From the above link: Example. You own one home that you bought in 1998. Its FMV now is $110,000, and the current balance on your original mortgage (home acquisition debt) is $95,000. Bank M offers you a home mortgage loan of 125% of the FMV of the home less any outstanding mortgages or other liens. To consolidate some of your other debts, you take out a $42,500 home mortgage loan [(125% ? $110,000) - $95,000] with Bank M. Your home equity debt is limited to $15,000. This is the smaller of: 1.$100,000, the maximum limit, or 2.$15,000, the amount that the FMV of $110,000 exceeds the amount of home acquisition debt of $95,000. Ok, what’s changed? —- Keith (thinking about a home-equity to pay off auto loan)
I see nothing that says it isn’t deductible, except for certain limits, which I have already noted. Paste the appropriate section that says interest on a home equity loan isn’t deductible. Trip says… – Hide quoted text — Show quoted text ->Trip> The in terest is tax deductible if it’s money borrowed against >Trip> your house, up to certain limits. Doesn’t matter what you spend >Trip> it on. It could be a car, groceries, an airplane, etc. >This statement was once true, but no longer. >For more information, see >http://www.irs.gov/formspubs/display/0,,i1%3D50%26genericId%3D12832,0… >–
Well, gee Steve. one doesn’t have an umlimited time to explain ALL situations on here. There are always exceptions. I agree with what you said. Trip – Hide quoted text — Show quoted text ->The in terest is tax deductible if it’s money borrowed against your house, up >to certain limits. Doesn’t matter what you spend it on. It could be a car, >groceries, an airplane, etc. >That’s not entirely true. If you purchase a tax-preferential >investment with the loan, it’s not deductible. I haven’t looked at >the rules for a while, but IIRC, there are some other tests to be met >for deductibility. >SteveR
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> My issue is the inequity of taxation: The last time I checked, we all > have the same Bill of Rights, the same freedoms, and the same > responsibilities. The burden of supporting our society should be > balanced accordingly. Essentially, there should be no tax deductions > or exemptions for anything. No "special cases" or exceptions. No > credits. Your tax form would fit on a 3×5 card. (For the home mortgage > deduction; housing prices would adjust accordingly to offset the > artificially high prices due to the deduction ’subsidy’).
: : : : : I bet if you worked and shopped in Portland, Oregon (no sales tax) and lived across the whatyoucallit river in Kamas, Washington (no income tax) you would not be complaining 
You make a choice to live where you live, you get to pay for the consequences. It all boils down to not how much you pay for property taxes, but what you get for the money spent. If the unfortunate guy in NY who pays 10 grand a year in property taxes has a NY belly dancer on weekends, or can attend SUNY for free, then it’s money well spent if he can take advantage on it. My adopted hometown here in the Midwest spent $25M on a town library (whereas a comparable sized library was $5M elsewhere). In our little card we get every year I spent $700/year for library taxes (i.e. the library gets $700 or so per year). The schools got maybe $2500. But then, they have an amazing selection of books, A/V material, etc. and we really get our money’s worth out of it. The same for schools. Olympic sized pool, great teachers, great salaries, extra programs, curriculums, etc. At the same time, a few years back they were able to spend a massive amount of money on high school expansions, build a new school every few years, and property taxes in 2001 were less than I paid in 1993. People vote with their wallets. Now if the mayor could pass a law or something about soccer mom SUV road rage… ST
Previously, st1960 wrote in misc.consumers.house: – Hide quoted text — Show quoted text -> My issue is the inequity of taxation: The last time I checked, we all > have the same Bill of Rights, the same freedoms, and the same > responsibilities. The burden of supporting our society should be > balanced accordingly. Essentially, there should be no tax deductions > or exemptions for anything. No "special cases" or exceptions. No > credits. Your tax form would fit on a 3×5 card. (For the home mortgage > deduction; housing prices would adjust accordingly to offset the > artificially high prices due to the deduction ’subsidy’). > : : : : : > I bet if you worked and shopped in Portland, Oregon (no sales tax) and lived > across the whatyoucallit river in Kamas, Washington (no income tax) you > would not be complaining You make a choice to live where you live, you > get to pay for the consequences.
Yeah, but the rip-off is that if you live in Camas and work in Portland you have to pay Oregon income tax but you don’t even get to vote. So much for "No taxation without representation". [...]
> I bet if you worked and shopped in Portland, Oregon (no sales tax) and lived > across the whatyoucallit river in Kamas, Washington (no income tax) you > would not be complaining You make a choice to live where you live, you > get to pay for the consequences. > It all boils down to not how much you pay for property taxes, but what you > get for the money spent. If the unfortunate guy in NY who pays 10 grand a > year in property taxes has a NY belly dancer on weekends, or can attend SUNY > for free, then it’s money well spent if he can take advantage on it. > ST
You pay income tax based upon the rules of the state in which you earned the money. For example, MA has about a 5% income tax, and ME has a 6%. If you lived im ME and worked exclusively in MA, you would first pay 5% to MA, and then 1% (there is reciprocity) to ME. So if either the state you reside in or the state you earn money in has an income tax, you pay.
Yup. I knew that tax rate seemed a bit high. I’d believe Pembroke is 7. -Dave — On hotmail dot com, I am user "junknothankyou".
– Hide quoted text — Show quoted text -> Nope…Pembroke, NH. We were the 7th highest in the state before town/school > meetings. I think we’re shooting for #1.
> Let me guess . . . you live in Brookline, NH, right? Last I checked, they > were one of the highest tax rates not just in the area, but in the entire > state. -Dave > — > On hotmail dot com, I am user "junknothankyou". > Currently paying $3900 on a $100,000 house in NH. > Next year property taxes are going up 4-5% here
Nope…Pembroke, NH. We were the 7th highest in the state before town/school meetings. I think we’re shooting for #1.
> My current property taxes for my home are around $2600. This is Southern > CT, market value of home is about $180K.
Currently paying $3900 on a $100,000 house in NH. Next year property taxes are going up 4-5% here
Let me guess . . . you live in Brookline, NH, right? Last I checked, they were one of the highest tax rates not just in the area, but in the entire state. -Dave — On hotmail dot com, I am user "junknothankyou". – Hide quoted text — Show quoted text -> Currently paying $3900 on a $100,000 house in NH. > Next year property taxes are going up 4-5% here
$1,400 on $230K That pays for garbage pick up twice a week, too…….:) Trip says… – Hide quoted text — Show quoted text ->> My current property taxes for my home are around $2600. This is Southern >> CT, market value of home is about $180K. >$4800 for the same valuation here in Vermont. Three bedroom >contemporary cape 1800 sq. ft. with 2 1/2 baths on 1/2 acre. >School taxes are the real bitch (and getting far worse). They >amount to 80% of the bill, even though we have some wicked snow >removal and street repairs. >—- > Keith >Hmm. This thread is making me realize how bad we have it. We pay >about $2600 on a $86000 home. >Dave
> how much do you guys pay for home property tax? for a 300K house, the taxes > are around $6000 in NJ/long island and $2000 in NYC.
For El Paso County, CO – My property taxes for this year is $1950 for a house with an appraised value of $280,000. In addition a new program just started this year where homeowners over 65 pay only half of their tax bill. I know my parents will be paying about $700 for an appraised value of $240,000 on their home. Mark.
Now we are getting off topic: Don’t get me started, this is a sore issue…. As a resident of NH, there is no state income tax (actually there is, on interest/dividends earned over a fairly low threshold, but that is a well-kept state secret), so we pay for the ‘necessities’ with property tax (my current situation runs to the tune of $1K/month), of which 70% goes to pay for the local school system. The only services from the town that we utilize are police, fire and roads. Since I work in MA, I of course pay MA income tax (about 5.9%). If this were a bad enough issue for me, I would just move (there is some great unincorporated land up north in NH). My issue is the inequity of taxation: The last time I checked, we all have the same Bill of Rights, the same freedoms, and the same responsibilities. The burden of supporting our society should be balanced accordingly. Essentially, there should be no tax deductions or exemptions for anything. No "special cases" or exceptions. No credits. Your tax form would fit on a 3×5 card. (For the home mortgage deduction; housing prices would adjust accordingly to offset the artificially high prices due to the deduction ’subsidy’). When growing up, I was taught ‘if you are looking for a hand, the best place to find it is at the end of your own arm.’ If you want something, then learn /develop skills /earn it. Please do not ask others to subsidize you; don’t ask others to pay for things you are either unwilling or unable to pay for, or at least expect special treatment. You may think it is appropriate for others to feed, clothe or educate your children. Using that ‘logic’, I think I want a Ferrari (similar costs, over the long run), and would like society to help me pay for it. Instead of school taxes, let’s call them ’sports car taxes’. Entitlement makes my stomach turn. (Rant mode off). – Hide quoted text — Show quoted text – > You are right about the individual nature of how taxes affect people. > "Everything’s a situation." In my own situation, I think I have a > larger amount of "property" than most people with my income (trying to > afford a 140k house, on a 40k income; still not a *lot* of > property–basic house on tiny lot.) So there is a fair chance that I > might do better taxed on my income vs. taxed on property. Of course > other people such as yourself are in different circumstances. My > point is, I consider it fundamentally unfair that an entry-level house > has such a large tax burden. The tax structure ought to encourage and > enable home ownership for medium income people. In Austin, Texas it > does the opposite. I’m not saying I should have a mansion and pay no > property tax, but an entry-level house and accompanying taxes ought to > be reasonably affordable by a single college-grad person with a > reasonably good job and several years experience. > The current property tax system might work if people actually had a > choice to buy reasonably priced housing (say $100k). But around here, > property values are high so anyone wanting a decent house is forced > into high property taxes as well. > Another aspect of property taxes are retirees, who have nice property > they acquired over a lifetime, but after retiring, can’t afford the > taxes. Another whole issue is school taxes. Why does a single person > with no kids pay the same rate as a married breeder couple with 4 > kids, etc…but that’s another topic. >>>….. Property taxes are criminally regressive. >Dunno, don’t higher value properties tend to be owned by people of >greater means? Yes it is inexact in individual cases, but any less so >than all the complexity of what is taxable "income"? >>> I’d be WAY better off with progressive income-based state >>>taxes instead of property tax. >I’ll bet *you* would. So does that make it "right" for everyone? I >don’t like how much I pay in income tax. Maybe *I* would be better >off the other way…. >cheers, >-v.
how much do you guys pay for home property tax? for a 300K house, the taxes are around $6000 in NJ/long island and $2000 in NYC.
>how much do you guys pay for home property tax? for a 300K house, the taxes >are around $6000 in NJ/long island and $2000 in NYC.
Los Angeles County is 1% and each particular city usually takes about another .25% on top of that. Dimitri
>>are around $6000 in NJ/long island and $2000 in NYC.
Where in Long Island is that? I moved from East Northport 3 years ago. I was paying 8600 for a 300000 home. In Nesconset, my daugther is paying 12000 for a 350000 home and my brother in Plainview is paying 14000 for a 400000 home.
Only thing I can say is that I will STOP bitching when I pay my property taxes… I am retired home only worth a little over 200K and I pay about 1900 a year which for me is a hell of a lot since the county does not have a police or fire departments, no sidewalks, no water no sewer, no trash collection we do however have schools anda road department however… just seems like a lot to pay to live in your own home.. I have absolutely no problem with supporting the school system however I do think they are over loaded with highly paid administrators but I think that complaint would be universal… Sheeze 14K in property taxes…???? Time to buy a Blue Bird motor home and park it at K-Marts parking lot on even numbered days and at Montgomery Wards parking lot on odd days..(lots of room on the wards lot now..K Mart may be as wide open in the future..) Bob Griffiths – Hide quoted text — Show quoted text ->>are around $6000 in NJ/long island and $2000 in NYC. > Where in Long Island is that? I moved from East Northport 3 years ago. I was > paying 8600 for a 300000 home. In Nesconset, my daugther is paying 12000 for a > 350000 home and my brother in Plainview is paying 14000 for a 400000 home.
wantagh area
– Hide quoted text — Show quoted text ->>are around $6000 in NJ/long island and $2000 in NYC. > Where in Long Island is that? I moved from East Northport 3 years ago. I was > paying 8600 for a 300000 home. In Nesconset, my daugther is paying 12000 for a > 350000 home and my brother in Plainview is paying 14000 for a 400000 home.
My current property taxes for my home are around $2600. This is Southern CT, market value of home is about $180K.
– Hide quoted text — Show quoted text -> how much do you guys pay for home property tax? for a 300K house, the taxes > are around $6000 in NJ/long island and $2000 in NYC.
> My current property taxes for my home are around $2600. This is Southern > CT, market value of home is about $180K.
$4800 for the same valuation here in Vermont. Three bedroom contemporary cape 1800 sq. ft. with 2 1/2 baths on 1/2 acre. School taxes are the real bitch (and getting far worse). They amount to 80% of the bill, even though we have some wicked snow removal and street repairs. —- Keith
> $4800 for the same valuation here in Vermont. Three bedroom > contemporary cape 1800 sq. ft. with 2 1/2 baths on 1/2 acre.
Ouch. Here in Carmel, Indiana (the Beverly Hills of Indianapolis ) property taxes are about 1% of the house price, give or take. My last house sold for $300K and paid around $3400/year, the new one is twice the cost and is expected to pay around $5500/year. Most of the money goes for schools (which are, admittedly, pretty good) and the library (which is extremely good). ST
In Austin Texas, on a $140k house (pretty basic for around here) taxes are about $3400-3500 per year. Whoever thinks Texas has low taxes is insane or misinformed. The taxes alone increase the monthly housing cost of a basic house from an easily-affordable $750 or 800, to $1100 or so. No wonder so many people rent. Property taxes are criminally regressive. I’d be WAY better off with progressive income-based state taxes instead of property tax. Here for some tax purposes you can claim a homestead exemption of a certain amount or fractional value, typically around 20,000 dollars (so that a 140k house is taxed on a 120k basis). Doesn’t help much. Do other areas get a "reasonable" exemption? Why isn’t a reasonable exemption provided so basic small houses dont get killed with taxes? (E.g. First $ 80,000 in home value not taxed sounds good to me.) Let the mansion-owners make up the difference. – Hide quoted text — Show quoted text – >how much do you guys pay for home property tax? for a 300K house, the taxes >are around $6000 in NJ/long island and $2000 in NYC.
I live on Long Island, Central Suffolk. Rge tax roll has my house assessed at 145K. They tax man says they assess 100% but two apprasials show the property for over $190k. Of course I am not going to say anything :} We have the STAR Program which I believe is throughout the entire NY State. Don’t know if it is elswhere. The have a basic exemption which supposedly every home owner qualifies for *IF* you submit the paperwork on time. I believe in my town it;s due by March 1st and will start counting the next tax bill for the following year. I am not any sort of public assistance and am only 33 years old. The first year STAR saved me a little over $300. The second year it saved me almost $600 and this year it saved me almost $900. They show it right on the bill. We have a private ower held mortgage sp we get the bill directly from the town. So this year my taxes would have been almost $4900, but instead they are $4035. WHat concerns me is this BASIC exemption is only good for 3 years and this is my third year. Don’t have a clue if they are going to continue the program. Better call the town on MOnday Joe – Hide quoted text — Show quoted text ->My current property taxes for my home are around $2600. This is Southern >CT, market value of home is about $180K.
Unfortunately even the Renters are paying…. The rent payments have to cover the owners costs…mortgage and taxes..PLUS a profit… NOT many landlords are renting out property at a loss.. Honestly My taxes are only about 2000 a year on a house values at 200K. I do bitch about them BUT after seeing what others are paying all I can do is be thankful….(for the low rate..of course I do not get many services either…no police no fire no water no sewage no Libraries DO get schools…(yep new high school under construction up the road opens in 2003 and the expect it to open at 120% of compacity…. makes no sense to me to be building it undersized .. Oh well the county commissioners know what they are doing…Yea Right ! Bob Griffiths – Hide quoted text — Show quoted text – > In Austin Texas, on a $140k house (pretty basic for around here) taxes > are about $3400-3500 per year. Whoever thinks Texas has low taxes is > insane or misinformed. The taxes alone increase the monthly housing > cost of a basic house from an easily-affordable $750 or 800, to $1100 > or so. No wonder so many people rent. Property taxes are criminally > regressive. I’d be WAY better off with progressive income-based state > taxes instead of property tax. > Here for some tax purposes you can claim a homestead exemption of a > certain amount or fractional value, typically around 20,000 dollars > (so that a 140k house is taxed on a 120k basis). Doesn’t help much. > Do other areas get a "reasonable" exemption? Why isn’t a reasonable > exemption provided so basic small houses dont get killed with taxes? > (E.g. First $ 80,000 in home value not taxed sounds good to me.) Let > the mansion-owners make up the difference. >how much do you guys pay for home property tax? for a 300K house, the taxes >are around $6000 in NJ/long island and $2000 in NYC.
>In Austin Texas, on a $140k house (pretty basic for around here) taxes >are about $3400-3500 per year. Whoever thinks Texas has low taxes is >insane or misinformed. The taxes alone increase the monthly housing >cost of a basic house from an easily-affordable $750 or 800, to $1100 >or so. No wonder so many people rent. Property taxes are criminally >regressive. I’d be WAY better off with progressive income-based state >taxes instead of property tax.
Not sure about that. Depends on how often they reasess. Taxes on income adjust every year as your income does. >Here for some tax purposes you can claim a homestead exemption of a >certain amount or fractional value, typically around 20,000 dollars >(so that a 140k house is taxed on a 120k basis). Doesn’t help much. >Do other areas get a "reasonable" exemption?
The exemption in Los Angeles County is $7,000. It makes all the difference in the world! 
Dimitri
>> My current property taxes for my home are around $2600. This is Southern > CT, market value of home is about $180K. >$4800 for the same valuation here in Vermont. Three bedroom >contemporary cape 1800 sq. ft. with 2 1/2 baths on 1/2 acre. >School taxes are the real bitch (and getting far worse). They >amount to 80% of the bill, even though we have some wicked snow >removal and street repairs. >—- > Keith
Hmm. This thread is making me realize how bad we have it. We pay about $2600 on a $86000 home. Dave
>>….. Property taxes are criminally regressive.
Dunno, don’t higher value properties tend to be owned by people of greater means? Yes it is inexact in individual cases, but any less so than all the complexity of what is taxable "income"? > I’d be WAY better off with progressive income-based state >taxes instead of property tax.
I’ll bet *you* would. So does that make it "right" for everyone? I don’t like how much I pay in income tax. Maybe *I* would be better off the other way…. cheers, -v.
You are right about the individual nature of how taxes affect people. "Everything’s a situation." In my own situation, I think I have a larger amount of "property" than most people with my income (trying to afford a 140k house, on a 40k income; still not a *lot* of property–basic house on tiny lot.) So there is a fair chance that I might do better taxed on my income vs. taxed on property. Of course other people such as yourself are in different circumstances. My point is, I consider it fundamentally unfair that an entry-level house has such a large tax burden. The tax structure ought to encourage and enable home ownership for medium income people. In Austin, Texas it does the opposite. I’m not saying I should have a mansion and pay no property tax, but an entry-level house and accompanying taxes ought to be reasonably affordable by a single college-grad person with a reasonably good job and several years experience. The current property tax system might work if people actually had a choice to buy reasonably priced housing (say $100k). But around here, property values are high so anyone wanting a decent house is forced into high property taxes as well. Another aspect of property taxes are retirees, who have nice property they acquired over a lifetime, but after retiring, can’t afford the taxes. Another whole issue is school taxes. Why does a single person with no kids pay the same rate as a married breeder couple with 4 kids, etc…but that’s another topic. – Hide quoted text — Show quoted text ->>….. Property taxes are criminally regressive. >Dunno, don’t higher value properties tend to be owned by people of >greater means? Yes it is inexact in individual cases, but any less so >than all the complexity of what is taxable "income"? >> I’d be WAY better off with progressive income-based state >>taxes instead of property tax. >I’ll bet *you* would. So does that make it "right" for everyone? I >don’t like how much I pay in income tax. Maybe *I* would be better >off the other way…. >cheers, >-v.
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This will be the first year that I would be filing as a home owner. What is the recommendations from the elders here on best approach, go to a tax guy or use a tax software. I am more inclined to use software and if this is agreeable what software really works well with homeowner type deductions. Also, I understand that part of my closing costs and interests are deductible. — Emmanuel do you have a techie guy? www.myTechieGuy.Com
Other than mortgage interest and real estate taxes, there aren’t any homeowner deductions that do not also apply to the non homeowner. If previously you were using the standard deduction rather than itemizing, you now may find more of a tax savings (because of mortgage and real estate taxes) to use itemized deductions (long form). You then may be able to include other deductions which previously were not large enough to warrant the long form. If you do not have a complicated situation and have a booklet that describes deductions and other tax issues (free from IRS or at a book store), the manual method is probably OK. For my situation I have used both methods and found that the manual method takes less time. However, if you are not familiar with IRS regulations and deductions, using software will lead you through the process. Generally, if you have prepared your taxes yourself in the past, there probably is little need to go to a commercial tax preparer. Other considerations are if you want to submit your form online and want to get a quicker refund. If that is the case and do not know how to do it, then a commercial preparer may be justified. Or, if you are not knowledgeable about eligible deductions and would rather not read tax booklets, then a commercial preparer or software program is the way to go. — Herb Meyers Boulder, Colorado – Hide quoted text — Show quoted text – >This will be the first year that I would be filing as a home owner. What is >the recommendations from the elders here on best approach, go to a tax guy >or use a tax software. I am more inclined to use software and if this is >agreeable what software really works well with homeowner type deductions. >Also, I understand that part of my closing costs and interests are >deductible. >– >Emmanuel >do you have a techie guy? >www.myTechieGuy.Com
>This will be the first year that I would be filing as a home owner. What is >the recommendations from the elders here on best approach, go to a tax guy >or use a tax software. I am more inclined to use software and if this is >agreeable what software really works well with homeowner type deductions.
easiest way is to go get some tax software and see. you will have to wait for the slow bank to send the info to you. myself it never made a difference on mine. Knight-Toolworks & Custom Planes +Galoot Made Products- Custom made wooden planes at reasonable prices See http://www.knight-toolworks.com For prices and ordering instructions.
>This will be the first year that I would be filing as a home owner. What is >the recommendations from the elders here on best approach, go to a tax guy >or use a tax software. I am more inclined to use software and if this is >agreeable what software really works well with homeowner type deductions.
"Homeowner" type tax deductions are the most common ones. Any tax software should be able to handle it. By now you should have the necessary statement from your mortgage lender, so spend $29.95 for the software. What kind of "tax guy" are you comparing to? You wouldn’t need a CPA for just a plain vanilla return, just because you are a ‘homeowner’. And a lot of the seasonal tax preparers are just people with no particular tax background who were minimally trained in how to use their company’s tax software. You can easily train yourself the same way. IMHO, unless you have an accountant doing your books all year long (as my wife does every month for her business, for example) it is of questionable value to go to a "tax guy" at the end of the year, who has never seen your stuff before, and just dump it on him and expect to get cost effective results. just mho. -v.
>This will be the first year that I would be filing as a home owner. What is >the recommendations from the elders here on best approach, go to a tax guy >or use a tax software. I am more inclined to use software and if this is >agreeable what software really works well with homeowner type deductions. >Also, I understand that part of my closing costs and interests are >deductible.
I strongly suggest that for the first year or so you go to a good tax preparer (ask friends for recommendations; don’t just pick from the yellow pages). Reason is that they can tell you tax breaks you wouldn’t think of. Impersonal software isn’t going to read your mind. I now have a pretty simple return, since I sold rental property and house is paid off. But I keep on using my tax guy because he’s found me so many breaks, for example on my HUGE (I wish!) market portfolio. After you get the hang of it, you can go off on your own if you prefer. But since the cost of tax prep is itself deductible, I wouldn’t begrudge a few bux which could possibly yield me much bigger returns. Also, I bet you have better things to do with your time! I know I do. If you organize your receipts during the year, you’ll find it’s a piece of cake to present them, along with your Ws, to your tax preparer. I have a binder with manila envelopes marked Credit Cards, Utilities, etc. and file receipts (fairly!) promptly. Some people use folders. Whatever. Just don’t throw everything in a drawer and then make yourself crazy at the end of the year. My former housemate, a lawyer who makes a very reasonable buck, used to do that, and it would take him 3-4 days to sort through. Penny-wise…!! Last but not least: You presumably know that you should save all receipts on permanent changes, work, additions, whatever, to your house, as they will affect the tax base when you sell. This is very important! It doesn’t apply to a paint job, e.g., but it does to a new deck, windows, other permanent modifications. — Polar
> This will be the first year that I would be filing as a home owner. What is > the recommendations from the elders here on best approach, go to a tax guy > or use a tax software. I am more inclined to use software and if this is > agreeable what software really works well with homeowner type
deductions. Go to the store and pick up a copy of TurboTax. It’s the best tax software available. You don’t even have to fill out a tax form. The program ask you questions and you provide the answers. When finished it prints the forms ready to mail. I have been using TurboTax for years. — Tom J http://homepages.go.com/~aviontravelcade/ http://homepages.go.com/~tomjanis/ Be nice to your kids, The will select your nursing home.
Try doing them manually. Using software doesn’t leave you any more knowledgable about what/why something should be somewhere. Assuming you are moving from using a standard deduction for the first time, and don’t have any business filing requirements, you should be able to find all you need in IRS publications. Start with Pub 17, it will probably address all your needs and questions. Craig – Hide quoted text — Show quoted text – > This will be the first year that I would be filing as a home owner. What is > the recommendations from the elders here on best approach, go to a tax guy > or use a tax software. I am more inclined to use software and if this is > agreeable what software really works well with homeowner type deductions. > Also, I understand that part of my closing costs and interests are > deductible. > — > Emmanuel > do you have a techie guy? > www.myTechieGuy.Com
Well, for the first year, there are items like points, which may or may not be deductible, and lots of one-time taxes like mortgage taxes and title transfer taxes. One might need some help in order to understand which are deductible on the Schedule A form, and which are not. – Hide quoted text — Show quoted text – > Other than mortgage interest and real estate taxes, there aren’t any > homeowner deductions that do not also apply to the non homeowner.
You need to look at IRS Publication 530 – Info for First Time Homeowners, to see what, if any, closing costs are deductible. You also need Publication 936 – Home Mortgage Interest Deduction. Both are available for free at www.irs.gov I would check them out before spending a chunk of change on tax software programs.
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It’s not necessarily a tax-free return. If you itemize your deductions, then you are taking a deduction for the interest portion of your loan payments. The interest saved as a result of prepayment is that much less that you can deduct, so the effect is the same as paying tax on the "return" on the investment. btw: If you make a prepayment on an ARM, they will stretch the loan out to its full term the next time they change your interest rate, so your prepayment will result in a smaller required payment rather than just a shorter term. — Ray – Hide quoted text — Show quoted text – > My 15-year payments are about $100/month more than 30-year payments. > The difference is ALL INTEREST. What a waste of money that would be. > I think people often misunderstand pre-payment. You’re paying interest > on the entire amount of remaining principal. If you have less remaining > principal, you are paying a lot less to interest. It’s a tax-free > return of, say, 8%, over, say, 20 years. That’s a really good return, > and it’s guaranteed. > Ilene B > I’m no expert on home mortgage but when I bought my home, the 15 year > loan payments were very little more than the 30 year payments.
> Is this analysis correct, or am I missing something?
I’m no expert on home mortgage but when I bought my home, the 15 year loan payments were very little more than the 30 year payments. — http://homepages.go.com/~tomjanis/ http://homepages.go.com/~aviontravelcade/ Before you buy.
My 15-year payments are about $100/month more than 30-year payments. The difference is ALL INTEREST. What a waste of money that would be. I think people often misunderstand pre-payment. You’re paying interest on the entire amount of remaining principal. If you have less remaining principal, you are paying a lot less to interest. It’s a tax-free return of, say, 8%, over, say, 20 years. That’s a really good return, and it’s guaranteed. Ilene B – Hide quoted text — Show quoted text -> I’m no expert on home mortgage but when I bought my home, the 15 year > loan payments were very little more than the 30 year payments.
– Hide quoted text — Show quoted text -> I’m about to buy my first house, and so I’m trying to find a good > mortgage. Most lenders allow making extra payments, which will be > applied to the principal. The idea is that if you have the extra cash, > you can make extra principal payments and reduce the overall size of > your loan, and thereby reduce the amount of interest you end up paying. > There seems to be a problem with this idea, however. > When I get a loan, I’ll be making monthly payments for about 30 years, > unless I sell the house before then. The amounts of these payments have > been calculated in advance. In the beginning, the bulk (about 90%) of > each payment goes toward the interest. Over time, the ratio changes so > that at the end of the 30 years, you’re paying mostly principal. > One would think that if I make an extra payment, that it would reduce > the prinicipal up front, and hence reduce the amount of interest I pay. > Not so. As far as I can tell, all lenders use the same policy, which I > consider a scam. Instead of applying the extra payment to the beginning > of the mortgage, they apply it to the end. So instead of paying less > interest early in the loan, all I end up doing is shortening the life of > the loan. My monthly payments will not change until the last day.
No lender I know of calculates mortgage payments that way. The interest you pay each month is calculated on the principal as of that month (there are some technical differences for "in advance" vs. "in arrears" loans); if you have paid down principal, your interest for the next month is reduced by the interest on the paid-down principal. Because your monthly payment stays the same, the amount of principal paid down each subsequent month increases. – Hide quoted text — Show quoted text -> So it appears that the only value in making extra payments is if I > expect to live in the house after I’ve paid it all off. Not only that, > but it appears that it’s smarter to save all the extra money and pay off > the remaining principal in one shot. > Here’s my reasoning: say the value of the house goes up, and by the time > I want to sell the house (in 10 years), it’s worth $20,000 more than > what I paid for. So I buy the house for $150K and sell it for $170K. > Normally, 25% of the principal is paid half-way through the mortgage > (the 25/50 "rule" that lenders don’t want you to know). So after 10 > years, I’ll probably have paid about 20% of the loan, or about $30K, > plus probably about $100K-$150K in interest. That means that I owe > $120,000 in principal. If I sell the house for $170K, I get to keep > $50K. > Now lets say I made extra payments of about $2,000 every year. Since > those payments don’t affect the payment schedule, all that means is that > after 10 years, I’ll have paid an extra $20K in principal, so all I owe > the lender is $100K. My interest payments have not changed, so I’ve > still paid the same $100K-$150K in interest. When I sell the house for > $170K, I get to keep $70K. But that’s just the $20K I’ve already paid, > plus the $50K I would have already gotten. In other words, those extra > $2,000 in payments are just like investing $2,000/year in a fund that > makes zero interest.
You ignored the reduction in interest from the paid-down principal. Your interest payments have changed quite a bit. You will get back quite a bit more than $20K additional, something closer to $35K, depending on the interest rate of your loan. > Now, let’s say I win the lottery nine years from now. I have enough > money to pay off the loan completely. Only then do I save myself any > money, because with the loan paid off, I don’t have to make any more > interest payments. > Is this analysis correct, or am I missing something?
You’re confusing the return on your investment with its liquidity, and you’ve ignored the effect of reducing the principal on the interest you pay. If I have $2,000 sitting in a checking account, I have a completely liquid "investment"; I can spend it on whatever I please at any time. But I earn either no return or a trivial return on it. If I make an extra principal payment, say, $2,000 on a loan at 7.5%, that $2,000 earns me $12.50 a month, because it has reduced the interest on each subsequent payment by that much. And because it increases the amount of each remaining payment that goes to principal, it compounds and also reduces the length of my loan. But it is highly illiquid; I cannot take that money, or my earnings on it, and spend it unless I sell my house or take out a second mortgage. > — > Timur "too sexy for my code" Tabi > Remove "nospam_" from my email address when replying > Before you buy.
– Chris Green Before you buy.
I’m about to buy my first house, and so I’m trying to find a good mortgage. Most lenders allow making extra payments, which will be applied to the principal. The idea is that if you have the extra cash, you can make extra principal payments and reduce the overall size of your loan, and thereby reduce the amount of interest you end up paying. There seems to be a problem with this idea, however. When I get a loan, I’ll be making monthly payments for about 30 years, unless I sell the house before then. The amounts of these payments have been calculated in advance. In the beginning, the bulk (about 90%) of each payment goes toward the interest. Over time, the ratio changes so that at the end of the 30 years, you’re paying mostly principal. One would think that if I make an extra payment, that it would reduce the prinicipal up front, and hence reduce the amount of interest I pay. Not so. As far as I can tell, all lenders use the same policy, which I consider a scam. Instead of applying the extra payment to the beginning of the mortgage, they apply it to the end. So instead of paying less interest early in the loan, all I end up doing is shortening the life of the loan. My monthly payments will not change until the last day. So it appears that the only value in making extra payments is if I expect to live in the house after I’ve paid it all off. Not only that, but it appears that it’s smarter to save all the extra money and pay off the remaining principal in one shot. Here’s my reasoning: say the value of the house goes up, and by the time I want to sell the house (in 10 years), it’s worth $20,000 more than what I paid for. So I buy the house for $150K and sell it for $170K. Normally, 25% of the principal is paid half-way through the mortgage (the 25/50 "rule" that lenders don’t want you to know). So after 10 years, I’ll probably have paid about 20% of the loan, or about $30K, plus probably about $100K-$150K in interest. That means that I owe $120,000 in principal. If I sell the house for $170K, I get to keep $50K. Now lets say I made extra payments of about $2,000 every year. Since those payments don’t affect the payment schedule, all that means is that after 10 years, I’ll have paid an extra $20K in principal, so all I owe the lender is $100K. My interest payments have not changed, so I’ve still paid the same $100K-$150K in interest. When I sell the house for $170K, I get to keep $70K. But that’s just the $20K I’ve already paid, plus the $50K I would have already gotten. In other words, those extra $2,000 in payments are just like investing $2,000/year in a fund that makes zero interest. Now, let’s say I win the lottery nine years from now. I have enough money to pay off the loan completely. Only then do I save myself any money, because with the loan paid off, I don’t have to make any more interest payments. Is this analysis correct, or am I missing something? — Timur "too sexy for my code" Tabi Remove "nospam_" from my email address when replying Before you buy.
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ANY TAX CUT MEANS WE ALL LOSE, PERIOD! BUSH is counting the eggs before they’re hatched.
Oh sure – we have the largest surplus in history according to this morning’s news, and yet my payroll taxes are going UP. I’ll be voting for Bush. – Hide quoted text — Show quoted text – > ANY TAX CUT MEANS WE ALL LOSE, PERIOD! BUSH is counting the eggs before > they’re hatched.
We need to pay down the debt, first. – Hide quoted text — Show quoted text – > Oh sure – we have the largest surplus in history according to this > morning’s news, and yet my payroll taxes are going UP. > I’ll be voting for Bush. > ANY TAX CUT MEANS WE ALL LOSE, PERIOD! BUSH is counting the eggs before > they’re hatched.
- Hide quoted text — Show quoted text -> This article appeared in Wall Street Journal September 5, 2000 > TRUTH ON TAX CUTS – > Can we agree that nothing is fair in love and war and taxes? Good. > Now we can turn to the matter at hand — the tax cut proposals from > George W. Bush and Al Gore. > If fairness means the most number of people ought to get their own money > back, then Governor Bush’s proposal wins. > If fairness means that the lowest income people ought to get the biggest > tax cut, then Mr. Bush’s proposal wins. > If fairness means that the highest income people ought to get the > smallest tax cut, then Mr. Bush’s proposal wins. > And if fairness means that people should NOT have to jump through > government-approved hoops to receive any tax cut at all, then Mr. Bush’s > proposal wins. > If you trust us, you can stop reading. If you’re suspicious, then > consider each of those statements in turn. > * The Bush tax cut goes to the most people. First, it is > across-the-board. It would replace the current 15-28-31-36-39.6% system > of rates with a 10-15-25-33% structure. That means every single one of > the 94 million taxpayers in the country will get relief. But that’s not > all. The very lowest earners — those who make enough money to file, but > not enough money to pay — will also get tax relief. How so? Simple
. . > . > * About 30 million people file income tax returns, but do not earn > enough money to pay taxes. They do however pay Social Security payroll > taxes. These lowest earners will also receive a cut. Mr. Bush’s
idea to – Hide quoted text — Show quoted text -> return perhaps |2-to-3 percentage points of payroll taxes for individual > investment accounts represents a tax cut because that money will become > real and private property. In fact, the release of 2-to-3 percentage > points of the 12.4% Social Security payroll tax represents a tax cut of > 16-to-24% for those 30 million return-filing, nonpaying earners. So the > final total for tax relief under the Bush proposal is 124 million people. > That’s 80 million more than under Vice President Gore’s plan. > * The Bush tax cut favors lower income people, even without considering > the advantages of his Social Security proposals. That is, the percentage > reduction in income tax is largest for lower income people. > How so? Simple . . . > The Bush plan offers a reduction in the bottom rate to 10% from 15% and > doubles the child credit to $1,000 from $500. This translates into relief > with capital letters. It means, according to John Cogan, economist at > the Hoover Institution and adviser to the Bush campaign, that the six > million two-parent, two-children families earning less that $35,000 a > year would have zero tax liability; that’s a 100% reduction. Those > families earning between $40,000 and $50,000 a year would see an average > reduction of 55%. > * The Bush tax cut does not favor the rich. This is not a flat tax or > even a proportional cut, though such cuts would be more efficient in > economic terms. Rather, higher income families get lower percentage > reductions. > * – Those earning $50,000-$75,000 a year would see an average cut of > 30% - families earning $75,000-$100,000 would see an average cut of 18%; > and - those earning more than $100,000 would have an average reduction > of 10%. > * The Bush tax cut, finally, does not require people to jump through > government-approved hoops to get relief. Anyone who earns income gets a > tax cut. Ipso facto. > Under Mr. Gore’s plan however it’s not so simple. For starters, > taxpayers must engage in certain Gore-approved behavior to earn the right > to even be considered. A taxpayer must either have a child in day care, > have a child in college, be a beneficiary of an estate, have an ailing > parent or be married. > Taxpayers in each of these anointed categories then must satisfy > additional requirements. For example, their child must be in > government-approved > day care — no relief for stay-at-home moms or dads or those who drop > their child at grandma’s house — and, as the parents of a college > student, they cannot earn above $120,000 a year (or, as a single parent, > make more than $60,000 a year). > As for estate tax relief, the Gore plan is so complicated and restrictive > that less than 1% of current heirs would qualify. Essentially, the > estate has to qualify as a small business in which the decedent has to > have "materially participated" in the business in five out of eight years > preceding death, and the beneficiary must "materially participate" in the > business five out of eight years following the owner’s death for the next > 10 years or the IRS could demand tax payment. Ditto for taxpayers with > an ailing parent. Under Mr. Gore’s plan, the parent has to be certified > by a doctor as unable to perform "one or more activities of daily > living." > This requirement specifies — believe it or not — "activities of daily > living" as those prescribed by the Secretary of the Treasury in > consultation with the Secretary of Health and Human Services. This is a > level of bureaucratic oversight that even a New Democrat might find > uncomfy. > Married couples also encounter maddening restraints. Tax credits are > given only if the couple does not itemize deductions; unfortunately > however > 54% of married couples do indeed itemize (home mortgages and all that). > At any rate, fail one of these tests and Mr. Gore will not give you tax > relief. > In fact, more than 50 million taxpayers fail these tests and thus more > than half of the current 94 million taxpayers do not qualify for Mr. > Gore’s tax cuts. If the devil is in the details, Mr. Gore’s tax > proposals were crafted with a pitchfork. > Indeed, the Gore tax plan is really no tax plan at all; it’s a mishmash > of entitlement programs deploying the IRS to micromanage the American > household. Under the Bush plan, by contrast, 123 million taxpayers would > have their marginal rates lowered, with low-to-moderate income wage > earners the biggest beneficiaries. > Mr. Bush has offered a tax reform plan worth the name.
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