President Obama’s fiscal year 2015 budget proposes to increase taxes on individuals by over $820 billion and on businesses by about $500 billion, for a total of over $1.3 trillion in new taxes over the next ten years....
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- Rep. Halvorson Wants To Extend the Standard Deduction For Property ...
Rep. Halvorson Wants To Extend the Standard Deduction For Property Taxes
US House Representative Deborah Halvorson has introduced a bill, HR 2146, that would extend the standard deduction for state and local property taxes paid through 2011. The deduction was originally available only for tax years 2008 and 2009. The bill is currently with the Ways and Means Committee.
The standard deduction for property taxes (which strikes me as a bit of an oxymoron, as the standard deduction is in theory designed to already include the standard expenses that should be deductable from income) is another example of a “temporary” tax subsidy that benefits special interests but ends up being anything but temporary. As is often the case with these provisions, once the legislation gets passed as a temporary measure lawmakers and lobbyists will start to complain of the immanent and devastating tax hike that will occur when the provision expires, and the measure gets extended.
We’ve written many times before about how the tax code overly subsidizes the housing industry, so I won’t spend too much time on this, except to say that in general sound tax policy would dictate that all housing be treated equally. As it is, a deduction for property taxes paid, taken either through itemized deductions or through this newer standard deduction, and coupled with all the other tax benefits for homeowners, favors homeowners over renters and subsidizes owners at the expense of everyone else in the tax system. Tax Foundation economist Gerald Prante puts it into perspective:
The tax code is already littered with special tax provisions that favor housing, and public finance economists all along the political spectrum agree that they are excessive, to say the least. From the mortgage interest deduction to the deduction for real estate taxes paid to the capital gains exclusion for primary residences, the federal tax code funnels more than $100 billion dollars annually into the housing sector. That's nearly 10 percent of total federal income tax collections, enough so that if the subsidies were repealed, we could cut every personal income tax rate by 14 percent. And that's without counting the billions spent directly by the Department of Housing and Urban Development (HUD) and the government-created entities known as Freddie Mac and Fannie Mae.
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