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Homebuilders and electric car producers were hit hard today by GOP tax reform proposals.

The lead-in image above is from the CNN article Homebuilder Stocks Rocked by Tax Reform Plan.

Earlier today I posted the tax plan details: Tax Code Overhaul Details: Homebuilders, Tesla, and Those With Lots of Kids Come Out Worse.

Mortgage Interest Deduction Reduced

The bill preserves the mortgage deduction for existing mortgages. But going forward you can only claim a deduction for interest on mortgage debt up to $500,000, down from $1 million today.

The Tax Policy Center estimates the percent of filers who claim the mortgage interest deduction would fall to 4% from 21% because of the higher standard deduction.

Energy Tax Credits

The bill will repeal electric car credits. Shares of Tesla were hit with the biggest decline ever.

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Bloomberg reports Tesla plunged as much as 8.9 percent to $292.63, the lowest intraday since May 4. Mike Bishop, a Michigan Republican on the House Ways and Means Committee, told reporters his assumption was that the credits would be phased out immediately.

Those tax credits amount to as much as $7,500 per vehicle.

Flatter Tax

The tax overhaul is a step in the right direction. It would be better yet if the mortgage deduction vanished instead of being reduced.

I favor a small flat tax coupled with a consumption tax (not a VAT) on everything excluding food and medicine, and possibly cleaning supplies and clothing articles below a certain cost.

Everyone would be treated the same, and my proposal protects lower wage earners who tend to spend every penny on food and essential items.

Mike "Mish" Shedlock