Tag Archive | "class warfare"

Obama Wants To End Mortgage Tax Break

The White House is urging Congress to limit, or cut, the once untouchable tax break for mortgage interest. In traditional class warfare parlance, the White House cap on mortgage interest deductions will fall only upon the “wealthy.” Let’s not drink the Obama Kool-Aid – the effects of this legislative move will impact everyone.

The Obama administration is proposing reducing deductions for homeowners who earn more than $250,000 pear year. Since I’m a southern California Realtor®, I’ll bring up an example from my local market – the South Bay; in particular, Manhattan Beach, CA.

Chart from LA Times Local Neighborhoods.

Manhattan Beach is a wealthy southern California city, nestled along a prime beach-front location. With 38% of Manhattan Beach residents earning over $125,000 per year, we expect this legislative change will materially impact our local market.

When many home buyers calculate the amount of home they can afford, mortgage interest deductions on income factor heavily into capital service capacity, i.e. how much mortgage they can comfortably afford to pay every month. If a high income earner is in the 34% income tax bracket and has a $5,000 per month mortgage, of which, say, roughly $4,000 is comprised of interest payments, the net annual benefit of the tax break is $16,320, or $1,360 per month.

with a simple 5% mortgage rate, the effect of removing the tax break amounts to reducing home values by $326,400, or 34%, the marginal tax rate. These are very simple assumptions; the reality of this legislative change will likely not be as severe. Higher end properties will likely be impacted the most, with falling price levels manifesting in some way throughout the entire housing market.

President Bush attempted to eliminate the mortgage tax break in 2005, but was stopped by Congress. The Obama administration tried this same legislative change with last year’s budget, but met similar obstacles. Given that the real estate market is in such turmoil, and that so many people gain advantage from perpetuating this tax break, it is unlikely the White House proposal will be accepted by Congress.

What Does The Mortgage Tax Break Mean For The Economy?

There is no free lunch in economics – we’ve all heard that term, right? The same is true for tax breaks, or any legislative market manipulation. Enabling borrowers to write off interest payments from their income tax liability increases incentives to borrow money to buy real estate. This ultimately skews capital structures in that less equity investment is made with purchases relative to debt assumption. Increasing debt levels simultaneously increases prices and risk. In essence, the mortgage tax break causes housing to be “over-capitalized,” siphoning disproportionate capital resources from other parts of the economy.

Eliminating the tax break makes good economic sense; however, the result will inevitably be a deflation in housing prices. The magnitude of the deflation is uncertain. Given that real estate markets are already on shaky grounds, reducing, or eliminating, policies that support home prices can potentially lead to a market route.

All things considered, it is too bad President Bush was not able to repeal this tax break in 2005. That was probably the best time to moderate an over-heated market, and realign national capital resources in a relatively stable environment. We may have missed that opportunity for some time.

Posted in Investing, Politics, Real EstateComments Off

Top 10 Signs You Are A Socialist And…Challenged

Top 10 Signs You Are A Socialist And…Challenged

After extensive research we’ve concluded that these are the Top 10 Signs you just might be a Socialist:

1. You advocate for equality for all and yet you want to raise taxes on certain social classes.
2. You support the troops but do not support the war and you did not support the war in Iraq but now you support the war in Afghanistan. So… do you want war or not?
3. You believe in bigger Government and yet you advocate for the government not to run your life.
4. You think that we shouldn’t outsource labor and yet you complain about the rising cost of consumer goods.
5. You want the Government to take control and regulate all private businesses and yet you work for or own a privately owned business.
6. You want to get paid the same as everybody else, but the average income in the US is probably less than what you are making.
7. You think that the Government should spend more money to stimulate the economy when the Government has no money.
8. You think that the tax increase will not affect you.
9. You sit around and wait for the Government to “help” you.
10. You blame the economy for putting you in the situation that you are in even though you’ve been in the same situation for years.

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New Zealanders Can't Stop The Global Recession

New Zealanders Can't Stop The Global Recession

New Zealand Prime Minister John Key speaks a strange language. It’s English, all right, even with an accent, but he is one of the only world leaders who is speaking of relaxing regulations, cutting taxes, spending within budget, and focusing on making his country more productive.

Rather than jumping on the tax, borrow, spend, print, populist bandwagon with nearly every other world leader, John Key’s solution to the tough times is to “use this time to transform the economy to make us stronger so that when the world starts growing again we can be running faster than other countries we compete with.”

Key’s idea is to grow the country out of recession by improving productivity, not simply catering to populist calls for wealth redistribution, stifling regulation, and growth-inhibiting class warfare taxes. He calls attempts to use debt and money printing to “prop up growth” risky, saying that saddling future generations with debt could be counterproductive. He is one of the only politicians who states “There is actually a limit to what governments can do.”

At a time when governments are growing by leaps and bounds, and everyone seems convinced that Big Brother holds the keys to economic prosperity, it is refreshing to see a world leader (actually an ex-currency trader) embrace sound economic principals.

Key admits that New Zealand will not pull the world out of recession; it’s too bad other leaders lack such humility!

Here’s a link to the Wall Street Journal interview with Key.

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The Federal Reserve is creating tens of trillions of new dollars, debasing our currency, and silently taxing us all through inflation. With tens of trillions in federal budget deficits on the horizon there is nowhere for the US dollar to go, but down.
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Civil Disobedience: Hit Them in the Wallet

Civil Disobedience: Hit Them in the Wallet

Like you, I am upset at the egregious pace of government spending without restraint.  I am upset more and more people are using the force of government to take from the responsible, productive, and tax paying American people in order to re-distribute wealth.  Wealth, gained through honest, industrial, and capitalistic work.  Wealth gained by free market exchange of materials, services, and ideas.  Wealth, the reward for sacrifice, hard work, planning, and thrifty living.

We learned at young age thriftiness means: working to pay one’s way and to help others, saving for unforeseen needs, and protecting and conserving natural resources.  Thriftiness is a virtue absolutely lost on large populations today.  The loss of virtue is evident in the reward for people who extended beyond their own means.  People who knowingly agreed to contract to repay for a dwelling they had no means to pay for are without virtue.  Virtue is gone as a growing populace continuously uses government to forcefully take from those of responsible means and give to those who have not earned it. Virtue is found in the entrepreneurs, the inventors, and the industrialists inside the very fabric that made America great.  The same virtue is found in every hard working American who puts in extra time, strives for extra hours or works multiple jobs in order to provide a better quality of life.  Abraham Lincoln:

Property is the fruit of labor…property is desirable…is a positive good in the world. That some should be rich shows that others may become rich, and hence is just encouragement to industry and enterprise. Let not him who is houseless pull down the house of another; but let him labor diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built.

As we work harder, more and more people feel entitled to the fruits of our hard work.  These people have organized and elected a federal government that sees fit to transfer 100% of the tax burden to the upper 49% of wage earners in this country.  If successful, please tell me how 51% of the population who is receiving some form of entitlement from the 49% of tax-paying Americans ever give that power up. Thomas Jefferson said it better:

A democracy is nothing more than mob rule, where fifty-one percent of the people may take away the rights of the other forty-nine.

or maybe even more telling, Thomas Jefferson:

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.

When you only tax a certain portion of the populace, you have already set up class warfare because the people not paying taxes have everything to gain and nothing to lose.

And I have to include my favorite quote from Alexander Fraser Tytler:

A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world’s greatest civilizations has been about 200 years. These nations have progressed through this sequence: ‘>From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.

What we are presented with today is not just doom and gloom for free-market capitalists because the government is applying more regulations and taxes for the “common good” to promote the “general welfare.”  But rather, we are experiencing the largest transfer of power from the American people to the government in the history of this great nation. We, the worried liberty loving, free market capitalists who generate jobs and fortunes never before seen on this earth will soon be silenced.  Soon, we won’t have a vote because we will be in the eternal minority of achievers who make this country run.  We,  are the motive power behind economic superiority.  The take-over of our liberty and property is being cheered as popular change.  Change that promotes giving people an equivalent fish to eat today, while relying on hard working individuals to fish harder tomorrow in order to provide more fish to the same undeserving people.  You have the right to pursue happiness, i.e. go fishing, you do not have the right to be given a fish at the expense of someone else.

The system works because we’re too busy working harder in order to be taxed more in order to maintain a quality life we have earned.  They rely on us and our ingenuity to invent new wealth such that they can tax it and redistribute it.

Ludwig von Mises:

It is important to remember that government interference always means either violent action or the threat of such action. The funds that a government spends for whatever purposes are levied by taxation. And taxes are paid because the taxpayers are afraid of offering resistance to the tax gatherers. They know that any disobedience or resistance is hopeless. As long as this is the state of affairs, the government is able to collect the money that it wants to spend. Government is in the last resort the employment of armed men… Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.

I understand if you are frustrated. I am frustrated too.  It seems as if we don’t have a voice to be taken seriously because we are called selfish for wanting to keep the property we have earned in our lives.  Never forget, we earned our property such that we have the personal choice to do with it as we please. That choice is called liberty.  When you exercise your choice, you have experienced freedom.    It’s not selfish, it’s your constitutional protected right to have the choice on how your property is distributed.

William Boetcker:

You cannot bring about prosperity by discouraging thrift. You cannot help small men by tearing down big men. You cannot strengthen the weak by weakening the strong. You cannot lift the wage-earner by pulling down the wage-payer. You cannot help the poor man by destroying the rich. You cannot keep out of trouble by spending more than your income. You cannot further the brotherhood of man by inciting class hatred. You cannot establish security on borrowed money. You cannot build character and courage by taking away men’s initiative and independence. You cannot help men permanently by doing for them what they could and should do for themselves.

Death and taxes a given?  We can’t die without at first living.  We can’t pay taxes without at first prospering.  I ask the government to get out of the way of the industrialists, the capitalists, and the hard workers such that we can prosper.  A government that strives to guarantee equality of outcomes is in direct violation with a constitution that guarantees equality in opportunity.

The government relies on our taxes every pay period, every month in order to provide entitlements to those who have not earned them.  They won’t pay attention until they know we are serious about fighting back.  If we want them to pay attention, we need to withhold, even for just a little while, the very thing they rely on us to provide.  Without the legalized looting of their plunder, our property, the government won’t be able to fund the programs that enable and promote the very anti-thriftiness ideals that are so popular today.

Raise your federal and state tax withholding to the maximum for 2009. When April 15, 2010 comes along, file the maximum extension.  Delay paying into a system that only wants to drain you as long as legally possible. Let this be the wake up call to all liberty loving Americans. Let this be our generation’s tea party.

Posted in PoliticsComments (1)

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