Monday, March 23, 2009

My Idea For Today

Everyone has their opinion about the Stimulus Plan, and I am no exception. Here is a simple idea that will put more money into the hands of hard working people and families.

As you may or may not know, people that own a home and have equity in their home can get a Home Equity Loan from a bank. Home Equity Loans permit homeowners to borrow money, but more importantly, they permit homeowners to deduct their interest expense on the Home Equity Loan from their taxes. Just as mortgage interest is tax deductible, so too is the interest on a Home Equity Loan.

People that have Home Equity Loans do not have to carry a balance on their credit cards and pay a higher interest rate that is also not deductible from their Federal Income Tax. My proposal would be to permit the interest rate expense on credit cards to be deductible the same way that the interest rate charges on a mortgage or Home Equity Loan are deductible for homeowners.

There must be millions of people, young and old, that rent and do not have this option because they do not own property on which to get a Home Equity Loan. But, by giving anyone and everyone that pays interest on a credit card balance the opportunity to deduct their interest expense on their Federal Income Tax filing, would put money back in the hands of people that are almost certainly struggling to keep their heads above water. I have no exact number as to how much money this would put back in the hands of working families, but I would be willing to bet that conservatively speaking, it could amount to several billion dollars.

I think this would level the tax playing field a bit. As so many people are losing their homes and even more are on the edge of losing their homes, giving people the opportunity to deduct their interest expense on all their credit cards at the end of the year could amount to a big enough number that would certainly permit more money to get back in the hands of people and families that need it.

That is my idea for today. Simple. To the point. I think this idea is a good idea and would make for a better Stimulus Plan. What do you think?

Stay tuned.


winslow said...

If your plan is effective for a limited time, say 1 year, I would agree with your idea. I would hate to continue to encourage people to take on debt so they can "write-it off".
I would like to see a reduction of tax rates on savings, especially for the middle class. For example, CD's and Money Market accounts for anyone making under $200,00, would be taxed at 1/2 their nominal rate.
I would also like to see a limit on mortgage deductions. Any amount over an areas "average" home price, cannot be written off on interest expense (and only the primary residence is allowed). The wealthy can certianly afford an expensive house but why be subsidized. I'm sure the wealthy conservatives would be angry with this, even though this is the opposite of socialism!

My mantra for change is to always compare how this affects the middle class wage earner....if it helps, then enact. Once a certian level of wealth is attained, that individual does not need the help!

One more point on my bandwagon: Conservatives (I hate terms such as these) complain about creeping socialism (terrible term) but they want police protection, fire department readiness, postal service, traffic laws, etc etc. Well gang...that is socialism!

And conservatives tend to be against universal health care.....and I would imagine, most of them probably have health care insurance! Now, let's take away their insurance, especially if they have a disease. Are they singing the same song?

Robert said...

Glad to hear someone mention renters. Yes, leveling the playing field is a good idea especially for those who don't have enough money to qualify for a mortgage and become a homeowner. Renters often live in smaller spaces and have lighter footprints. Good for environment. Diane Rhems talk show on NPR (from WAMU Radio in Baltimore) has lots of good economic analysis, but while so many plans to help homeowners are discussed, renters are never mentioned. I've never used credit card debt, however. It's easy to save up for purchases under 2K. What would be improbable on a fairly low income is to qualify for a mortgage on a $300,000 home (starter homes in some areas). I hope Obama's plans include HUD as we'll need it if housing prices start to rise again. Better policies for savers are needed. Home ownership should not be the only lucrative way to save as it isn't available to lower income folks who must save using bank deposits, mutual funds and so forth.

Barbara said...

I seem to remember, not too very long ago,(maybe in the 80's) we were able to deduct credit card interest and every other kind of interest. Am I dreaming or is this true? If so I wonder if it was beneficial?

moneythoughts said...

Yes, this was true. Interest was deductible. Was that beneficial? I guess that depends what you think is fair. People that own a home and have equity in that property can get a Home Equity Loan to finance the purchase of many things, and that interest is deductible. Those that rent an apartment may buy the same items, but because they do not have a Home Equity Loan, can not deduct their interest expense. To me, it is just a matter of leveling the playing field.