I can't attach the spreadsheet here but the numbers come out to $145,400,000,000.00 ($145.4B) for 2011. For 2012 it is $159,900,000,000.00 ($159.9B).

And again this is less than 5% of the budget.

I will gladly give up my paltry less than > $1k interest income at the same time that they the rest of the credits:

Casualty & Theft Losses
Earned Income Credit
Tuition & Fees Deduction

not to mention the "rest"

I'll give up my credits and deductions when everyone else is sacrificing.

Most home sales profits are rolled into another home so don't use the exclusion. I wonder how much the exclusion for capitol gains on sales is actually used. I know of few cases (in all cases it is some downsizing when they retire). That values seems terribly high, but maybe it is correct considering how many people their actually are in the US.

Are you insane!?

"Uncollected taxes" are not funds to which government is entitled!

I bet you think a rebate is a GIFT from the manufacturer, too!

Get your brain out of the habit of categorizing taxes, fees, surcharges, etc., and recognize what they are: COST.

The cost of doing government business. The public has just looked the other way or agree with some smiling thief who has used tax money to buy votes.

Just like life doesn't owe you anything, GOVERNMENT IS NOT ENTITLED TO YOUR MONEY.

Correction to TFB above:

Under old law, up until about a decade ago, it was true that you could roll the gain into a new home.

But now, there is no such thing as a rollover of gain for tax purposes. Every time you sell a house, you have a gain or loss on the sale. The gain is excluded up to the dollar limits, if you have owned and occupied the house for at least two years in the five years before you sell. Otherwise, you pay tax on the gain.

You make the error of assuming collecting more money from people will not change their habits. Interestingly, you've blogged on that very phenomenon when states raise taxes and are surprised when people move out of state. Why would this be different? "Income" taxes need to be done away with. Tax what people spend. It has the added bonus of encouraging the green activity of reuse instead of throwing away and buying new.

Did you take all the deductions you were entitled to, Amy? If so, why shouldn't we get ours? Put up or shut up, eliminate all your deductions and then you can tell the rest of us to get rid of ours.

Oh, and this:

TAKING LESS OF MY MONEY IS NOT GIVING ME WELFARE.

I'm for small government. And we'll all take all the deductions we can until the loopholes are shut. I take business deductions -- I don't get to deduct anything for where I live, save for the room in my house that is my office. If you're a homeowner, why should it be any different for you?

>> If you're a homeowner, why should it be any different for you?

Those were the rules that influenced my decision to purchase a house. In theory I agree with you though, it distorts the free market forces.

Amy, I gotta go with the crowd on this one; you can argue that a tax break tailored to a narrow interest group constitutes a form of welfare, but I don't think "homeowners" qualifies as a narrow interest group. A wide interest group, maybe. (And don't forget that a lot of the upper end of that group is not actually getting the deduction because it's wiped out by the AMT.)

Having said that: I would favor eliminating the deduction as part of a broad-based tax reform. Either a flat tax or a switch to a national sales tax; I don't know that I really have a preference. Either would be a lot better than what we have now. I'd also like to see an elimination of withholding, so that people become more conscious of how much tax they pay.

I take business deductions -- I don't get to deduct anything for where I live, save for the room in my house that is my office.

If your apartment owner is also a resident -- they get to take it off that way. If not -- they get to take it as a business expense. You would be paying more in rent if they didn't get to do that.

Fair or unfair isn't really the point. What is offensive here is the clearly expressed attitude that all of your money belongs to the government, and it is welfare if the government doesn't take it all.

Throw out that assumption, and ask the alternate question: why does the government penalize renters? Why should renters pay $gazillion in extra taxes?

Flat tax, no deductions, no difference between income and capital gains, no EIC. File your taxes on a postcard. Oh, and no withholding - make people know how much tax they pay.

I'd go even further then that. A straight consumption tax to be divided between state and federal as required. All other taxes can then be abolished. All of them.

No tax code, which is so convoluted and burdensome that it eats 100's of billions of dollars in lost productivity. No tax filing, no IRS, no write offs or shelters and property owners would actually own their property not rent it from the state. No criminal tax evaders because they couldn’t evade it at point of purchase. The government itself would have to pay the same tax as us, as would every tax exempt organization.

The market takes care of itself, buy more pay more. This would apply to everyone, the poor, wealthy and everyone in between. If a business needs 100 million in raw materials that’s what they pay on. Government would then be forced to live within it’s budget. The gov would never be able to hide or add taxes to keep covering their ass.

Just imagine how much expendable money people would have to consume with. Food, clothing and primary residence (shelter) would be exempt.

Of course all of this or any other resonable idea will never get off the ground. Governments true power is derived from their ability to tax us. And they are never-ever going to give it up (sigh!!!)…..

OMG, Radwaste! I think I love you! Oh, and you, too a_random_guy....oh wait - I'm already married, and happily at that.

There are so few people in this world who understand that the government has no intrinsic right to MY PROPERTY - I get all aflutter when I see there are some of them out there....

Good thing my hubby is one of those :-)

Governments true power is derived from their ability to tax us.

Remember, it took a Constitutional amendment (the 16th) for the government to levy the income tax. So, we gave them that power. Well, grandma and grandpa did.

If you're a homeowner, why should it be any different for you?

While I'm with the crowd in favoring a national consumption tax (not a VAT!) or a flat tax, let's not forget that society as a whole benefits from broad home ownership.

People who live in one place for a longer time tend to care about things like crime rates, the quality of nearby schools, roads and drainage, and other things which have an effect on property values.

While long-term renters also care about these things, most renters are not long-term residents and all renters can move quickly once they decide to flee a deteriorating neighborhood.

The problem we had in the housing bust was that too many owners were, in reality, renters. With no-money-down and paperless lending (i.e., "liar" loans), many homeowners had little-to-no financial stake in their houses.

Others got ARMs and, expecting to flip quickly (1-2 years), invested little financially or emotionally in their houses or neighborhoods.

Still others, having essentially used their houses as ATMs for a number of years were, in effect, renters as well, having reduced their financial stake in their houses to almost nothing.

CpaBroker - thanks for the correction. I guess I will have to look into that. I had not heard about the change. I guess since I didn't work in housing I missed it.

I also see the deduction can be taken ever two years. That is pretty nice.

A rare "swing and a miss" from Amy...Where you stand on the issue often depends on where you sit..."as my FIL used to say.

"Because a lot of people get this break doesn't make it fair."

I would argue that it serves a social policy, which benefits everyone. However, it's a very minor point, one which I would happily concede for an overall tax reform.

Here's a bigger question for everyone, though. Should influencing social behavior be one of the purposes of taxation? Or should it be limited strictly to raising revenue for government operation? If we go to a flat tax, should it include some kind of break for married couples (assuming that any two consenting adults who want to get married can do so), or should it be marriage-neutral? (I think we can all agree that a tax policy that penalizes marriage serves no good purpose.) If we go to a national sales tax, should all goods and services be taxed at the same rate, or should certain things (medical services, groceries, prescription drugs) be tax exempt? If the latter, isn't that using the tax code for a social policy?

Why should you get to deduct business expenses? You chose to be a self employed writer, no? Why should you get to deduct your choice of career?

I support the idea of the FairTax and think it's patronizing and irritating the the government is trying to give us a pat on the head to encourage us to buy houses. All it accomplishes is to encourage people to take on more debt, and it inflates the value of real estate. The banks and realtors just love it.

Lots of people would love it if the government started giving people tax deductions on credit card interest, too - probably the same morons who paid way too much for their houses. Oh, and the banks. It could be in the name of encouraging spending and economic growth!

Regardless of how this affects you and your own little neighborhood, it doesn't hurt to take a step back and recognize that you are being manipulated in order to boost business for a bunch of mortgage bankers. How annoying to come to this blog that I enjoy so much and hear a chorus of "Don't take away my free shit!" Amy is spot on. This was no swing-and-miss.

Here's a bigger question for everyone, though. Should influencing social behavior be one of the purposes of taxation? Or should it be limited strictly to raising revenue for government operation?

This. I'm annoyed by the people who just want their own little piece of the pie and ignore the fact that we're being manipulated by all this social engineering. It's such sheeple behavior.

I'd go with a flat 10% income tax, and bonus count as income - no stock options, you want stock, pay the taxes on your income and then buy all the stock you want. And a flat 5% property tax on property worth more than 25,000. No taxes on appreciation of value.

If I buy property or stock that tripples in value - well I would have already paid taxes on the money I used to buy it, the goevenment doesnt get to ride on my sound finacial planning.

No sales tax, no corperate tax, no subsidies or write offs.

Then the money get collected and put into one account - and doent get touched for a year. Everyone can see exacly how much was collected.

Taxes collected on April 15, 2015 go to the 2016 budget, no borrowing from other countries and no selling government bonds(except in cases of war) - anyone who wants to donate extra to fund government project feel free.

If we can fund it on taxes and charitable donations alone we shouldnt do it.

Skipped an entire parapgraph

Property taxes on homes and land to go 2% to your county, 3% to your city, all 5% to county if your in an unicorperated area. Propety tax on vehicles to go to your state

Income tax, 2% to the fed, 4% to the state, 1% to the county, and 2% to the county, and 2% to the city your business is located in.

People who live in one place for a longer time tend to care about things like crime rates, the quality of nearby schools, roads and drainage, and other things which have an effect on property values.

And in my experience, their properties are better-kept, making for cleaner, safer neighborhoods.

Why should businesses get to deduct their expenses? I have expenses too, why can't I deduct those. Either we all get to deduct our expenses, or none of us should.

"Why should your home payments be deductible if mine are not?"

Mortgage payments are not deductible. The interest on the payments are. Interest on business loans are deductible as well. Business owners can also amortize vehicle and equipment purchases from their taxes reducing their overall tax liability. Home/property owners cannot do that.

Comparing paying rent to a mortgage is apples and oranges. If you rent you have no responsibility to all the local, county, state or federal regulations or taxes. If you rent and your refrigerator stops working the landlord (owner) is responsible for the costs of repair or replacement. Any repair not due to the renters negligence is the responsibility of the landlord (owner) as is property maintenance and often times water, sewer and trash removal. A property owner who rents is running a business and should be accorded all the same tax’s breaks as any other business. Since he/she assumes all the risks, he/she should reap the benefits not the renter.

It is not welfare for any person to take advantage of (legally) any tax law that reduces their tax burden (as if we don’t pay enough already) any more than someone who owns a business (I own both). We the people didn’t write the laws but you’d be a damn fool not to take advantage of them. Complaining about law abiding citizens lawfully using every single deduction available to them to save their own hard earned money is non-sense. With all due respect Amy, this is a swing and a miss…..

Complaining about law abiding citizens lawfully using every single deduction available to them to save their own hard earned money is non-sense.

I thought the substance of the discussion was whether the deduction should exist in the first place.

However, I agree that if the deduction exists, you aren't benefitting anyone by not taking it. If you simply don't use it, it's not like the gov't is going to take every dollar in deductions you forego and faithfully apply it against the national debt.

momof4:

Why should you get to deduct your choice of career?

Amy:

If you, as a homeowner, get a deduction for your home costs, so should renters like me.

We had a bad bunt and an error, actually.

As Amy said, businesses deduct the cost of expenses. You should only be taxed on profit, which comes after expenses and interest.

But Amy's wrong, because she's not paying interest, the person who owns the property is (or has). THEY got the deduction. Because that interest is an expense.

At one point, you were able to deduct the interest on personal loans and credit cards too. Because they are expenses that eat at the bottom line and were dealt with out of pre-tax income.

The fact is that it's perfectly fair that renters don't get to deduct any of their living costs. Once my mortgage is paid off, neither will I.

momof4:

Why should businesses get to deduct their expenses? I have expenses too, why can't I deduct those. Either we all get to deduct our expenses, or none of us should.

Fly-out. End of inning.

You can deduct your expenses, if they total more than the standard deduction. You have to fill out Schedule A at that point, and chances are pretty good that your expenses don't exceed the standard deduction.

My company is a single-member LLC. I file all my taxes on a single 1040 with a few schedules for business expenses and such.

I bought a computer monitor last year for my workstation. I can expense that.

I bought a television two years ago for the living room. I cannot expense that.

“I thought the substance of the discussion was whether the deduction should exist in the first place.”

PJ, I was responding to what Amy had said;
"Why should your home payments be deductible if mine are not?"

However, Should you be able to deduct mortgage interest, given all the burdensome regulations and taxes (county and state property taxes not to mention school taxes which in my state are far higher for owners than renters) already levied on home/property owners that renters do not have to pay, then yes you should. If the county does a property reassessment and refigures my home and property for far more than I paid my taxes go up conversely if my property value goes down my taxes do not. Renters never have to pay these taxes. Remove them and I’m sure home/property owners will be glad to give up the mortgage interest deduction.

For the record I own my home and property, I have no mortgage but I still get to pay all those other taxes that renters don't.

There seem to be very few people on this board who do their own taxes or know the code well enough to understand that it WAS unfair that only homeowners got a mortgage interest deduction. In addition anyone who had interest from a car loan or a credit card got to deduct that also. THAT UNFAIRNESS WAS WRITTEN OUT OF THE TAX CODE OVER 20 YEARS AGO.
In the interest of fairness, the IRS created the standard deduction in the 1990's (although it could have been the late 1980's.) What this did was put renters on the same footing as homeowners by giving them a "standard deduction" that was the average of the deductions that a homeowner got( a misnomer, by the way since a better term for those with a large mortgage and very little equity is "renting your home from the bank")
My husband and I have "never" been able to itemize out taxes profitably since the 1980's. Why? Because the standard deduction for married filing jointly is almost 11 thousand right now and we don't pay that kind of interest.
For those of you who also think having lots of kids makes it more profitable to itemize, you would be wrong. Children are exemptions NOT deductions.
And Amy, for the third time in as many years. There is NO TAX BREAK FOR BEING MARRIED. Married couples pay MORE taxes than they would if they each were single and filed accordingly. As soon as the gay couples learn to do math and figure this one out, I predict a sudden drop in the desire to be "married"

Isabel: Thanks for clarifying the issue. I had no idea that the point of the standard deduction was to level the playing field.

Renters never have to pay these taxes.... I have no mortgage but I still get to pay all those other taxes that renters don't.

Renters do pay property taxes, but do so through their rents.

It should be pointed out that those who own rental properties pay higher property taxes on them than those who only the home of their primary residence. (At least, this is true in my state/county.)

But this is all squabbling, something the system itself is designed to inspire us to do. Keep everyone bickering amongst themselves like a bunch of geese, fighting over the last bread crumb. This keeps them from recognizing that the system itself is what should be fought.

Fairtax.

"Renters do pay property taxes, but do so through their rents."

All expenses are obviously figured into what renters pay, taxes, water, sewage, trash etc... depending on what the rentors lease requires. All business does this. Their is no risk to the renter. For example: What if one unit in a 4 unit building goes unrented for a year. Who picks up the bill, not only for the taxes but the trash, water, sewer, insurance etc... you the renter. Of course not all risk resides on the shoulder of the owner. Renters assume zero risk for anything other then their own negligence. Saying the renter (consumer) pays the taxes is a gross oversimplification of any business model.

PJ, agree completely I'd go with a consumption tax but any tax that effects everyone equally works for me.....

You also get to deduct your state income taxes, medical expenses, donations to charity, etc. on your federal taxes. But as Isabel pointed out, this is all combined into the minimum standard deduction for anyone. So I guess that we're all on welfare.

As I recall, Amy drives a Honda Insight, and I'm sure that she qualified for the Federal Hybrid tax rebate. How is that fair ... and aren't you ashamed for being on welfare?

At the end of the day this is all just a form of wealth redistribution. Let's go to a flat tax with no deductions or loop holes. Dump the IRS and contract out the administration of it to a private contractor.

Just don't miss the point. You're not being paid because government has failed to take something from you.

You'd be certifiably insane to insist on that.