When is a tax cut not a tax cut?
When someone, anyone, is “paying” for it.
A tax cut, as I understand the term, means taxes are cut – not made up somewhere else. In other words, it is a revenue loss for government. Period.
Not so with the latest payroll “tax cut”. In the case of the 2 month extension recently passed, government isn’t going to be out any revenue. Other tax payers will be paying the freight as they refinance their houses.
Just before Christmas, American workers got a rare gift from Washington politicians – the current payroll tax cut would be extended for two more months.
At the time, both President Barack Obama and House Speaker John Boehner lauded the move to avoid a tax increase for millions of working Americans.
But there’s something the politicians weren’t bragging about – the fact that they’re paying for the two-month tax cut with what has turned into a brand new fee on home buyers.
The new fee is a minimum of one-tenth of 1 percent on Fannie Mae- and Freddie Mac-backed loans, and is likely to go much higher.
It will be imposed for the next 10 years on most mortgages and refinancings and it lasts for the life of the loan.
Got that? This is simply unacceptable. If you get a loan backed by Freddie or Fannie within the next 10 years, you will pay a “fee” (read TAX) that will “pay for” this supposed “tax cut”.
An Obama administration official defended the mortgage fee, calling it "modest." She said it’s "unlikely to negatively affect borrowers" because increases "will be phased in over the next two years." And it will "help bring private capital back into the mortgage market, which [is] good for borrowers over the long term."
Here, take this poison — it will be good for your long term.
Here’s how it breaks down for those who are or are planning on buying or refinancing a loan in the next 10 years:
It’s bad news for Patty Anderson, who’s buying a home in Virginia.
Anderson will save a couple hundred dollars from having her payroll tax cut extended but her mortgage broker told her the new fee would cost her almost $9,500.
"I was absolutely startled that it would add up to that much," she said.
Well yeah, it’s only about $7.50 a month for every $100,000 in mortgage you’re committed too – for the life of the loan.
I think Bill Burnett, president of the Virginia Association of Mortgage brokers said it best, and, by the way, summed up in one sentence what has become routine in DC:
"Your pocketbook is being raided in order to pay for a tax policy issue decided at the last minute by probably people who didn’t understand fully what they were legislating on."
Remember “we have to pass the bill to find out what’s in the bill”? Well here we are again.
At least one representative figured it out, but couldn’t find anyone interested in the problem. Rep.Allen West:
"I read the legislation and raised the flag. Unfortunately nobody paid attention to what I was saying at the time," he said, calling the fee a backdoor tax increase on the middle class.
Of course it’s a backdoor tax and calling it a fee doesn’t change that.
Your government at work.