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.
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
Mntgoat – Prop 13 protects a home owner from run away assessment value. Without that amendment to the Cal. constitution we would be paying 3 times the current assessed value. How can you want that?
@ Carl_R Daniel Webster said, “The power to tax is the power to destroy.” Webster, in arguing McCulloch v. Maryland, said: “An unlimited power to tax involves, necessarily, a power to destroy,” 17 U.S. 327 (1819).
In his decision, Chief Justice Marshall said: “That the power of taxing it [the bank] by the States may be exercised so as to destroy it, is too obvious to be denied” (p. 427), and “That the power to tax involves the power to destroy … [is] not to be denied” (p. 431).
SUBJECTS: Taxation
Any type of consumption tax or VAT is grossly unfair to retired people that have already paid heavy income tax to scrape together some savings and now would have to have that heavily taxed money taxed again to buy things.
I’m very pleased to see the BEV subsidy go away. Those of us that don’t want BEVs should not have to help buy them for others that do.
Taxation policy is simple. You tax what you want less of. If you want people to focus less on earning money and save less, you tax income, but not consumption. If you want people to build the economy, and save more, you tax consumption rather than income. Since I think a growing economy and savings are important to the long term health of the country, I’m with Mish, and support a consumption tax rather than an income tax. Note that a consumption tax can be progressive, if you exclude things like basic food items from the consumption tax, and add extra taxes on luxury items.
I believe in a flat and simple wealth tax. Add up the value of your assets and write a check for 2% of that. It protects poor people who have no assets and pushes capital owners to maximize the return on their assets.
The tax code already discriminates against citizens from donar states – and their higher costs of living – with the arbitrary income cut offs for tax credits & brackets- which aren’t adjusted for costs of living. Restricting SALT & mortgage deductions doubled down on this. Red States are already, effectively, welfare-queen states masquerading ading as Conservative. If they manage to squeeze this through, look forward to Speaker Pelosi in 2019 & a huge backlash from net revenue payer states like NY, NJ & California.
500K mortgages are NOT common in the vast remaining parts of AMerica. Not even close. A drop from 21% of filers to 4% of filers is complete BS.
500K+ mortgages are pretty common in the NYC metro area, LA area and a few others such as Chicago, parts of south Fla, Massachussets.
Keeping the mortgage deduction also helps to keep home prices artificially inflated in California….along with Prop 13 and artificially low interest rates. Take away prop 13, mortgage deduction and low rates….and CA home prices would come down nicely.
I meant to say the only reason the mortgage and property tax DEDUCTION exists is because of the Realtor lobby.
The ONLY reason the mortgage and property tax exists at ALL is because of the extremely well funded and powerful National Association of Realtors lobby and home builders lobby. The mortgage deduction is complete garbage. Does not do any good for the vast majority of people in the US. Just subsidizes a few high income people on the coasts and makes a few Realtors rich selling high end homes.
No tax plan is able to fund an out of control government spending system. Stop making silly tax proposals and start curtailing the spending. Half the government employees don’t add any value what-so-ever. The remaining half should be required to fund their own 401(k) just like the people they work for. Supposedly US citizens believe everyone is equal under the law– so why do we have this separate and NOT EQUAL garbage when it comes to our insubordinate employees? Why is there one law for citizenry, and a different law (often not enforced) for our employees? Stop “reforming” taxes and start fixing the corporate culture of government — the attitude of our employees sucks, and they need to be put in their place.