Free Markets, Free People


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.

~McQ

Twitter: @McQandO

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26 Responses to When is a tax cut not a tax cut?

  • A modest fee,
    to pay for 2 months of shinnegans,
    committed to over the next 10 years, by everyone who gets mortgages for the next 30 years –
    so, 40 years from now the last fee will be collected
    to support the 2 month Obama tax cut from 2012.

    Sweet.

    What a grand experiment we have going.

  • Traders earn “modest” sums on the “modest” dropping of the Nth decimal place, why can’t government “modestly” do the same? Then why not later just add another “modest” 0.1 points to the fee… heck, just “modestly” make it 0.2 points. Since we’re all so modest we won’t call them a bunch of scheming weasels sneaking a new tax in the backdoor while the PolSci professors are busy at the front door with the pretty Avon lady.

    • @DocD This certainly explains this story over the weekend …

      Obama Administration Plans to Shut Down Fannie and Freddie
      The Obama administration is working to attract more private funding for mortgage markets while winding down government-backed housing giants Fannie Mae and Freddie Mac.

      U.S. Treasury Secretary Timothy Geithner told reporters that administration officials are exploring legislative options for overhauling the nation’s housing finance system with lawmakers on Capitol Hill, as well as with academics and other non-government agencies and advocacy groups.

      In a white paper last February, the administration outlined three options for a long-term overhaul of the U.S. housing market. Each of those options proposed the elimination of Fannie and Freddie, though they differed on how or whether to replace the two agencies.

      http://www.theblaze.com/stories/obama-administration-plans-to-shut-down-fannie-and-freddie/

    • @DocD It will most certainly be modest if it’s a fee on services of a Fannie or Freddie that doesn’t exist.

  • Well, after all, it’s on the rich, right? 100,000+ multiples, right?

    Sweeter – and THEN when they deliver on their promised refinancing legislation to allow people to lower their current rates through re-finance, they have a built in customer base for the modest fee. It just keeps getting better and better.

    And if enough people fail to re-finance to pay for the 2 month largesse? Where does the money come from then or do we not need to worry about that until the can hits the road down there 40 years from now?

  • If taxes or fees are increased somewhere else, that still doesn’t deny that taxes for some are being cut. It’s still a tax cut. It’s possible to cut taxes for a large percentage of tax payers and increase taxes for others. Those who pay less still have received a tax cut.

    • @scotterb Admit it Scott, you have a sudden need to go and shower after writing that.

      • @DocD @scotterb No. Scott is a practiced liar, and submerged in his delusions…like the good Collectivist dupe he is.

        He is basking in the glow of his unearned moral superiority even as we speak.

    • @scotterb It’s 2 months of bullshite charged for over the next 40 years, you goober.

      That’s all right, your precious children will enjoy paying for it.

    • @scotterb doubleplus good scotty. Doubleplus good….your masters would be pleased

  • This is just wonderful.
    We have lots of folks who’s mortgages are upside down and our “Fearless Leader” (“the smartest guy in an empty room”) thinks it’s just find to start taxing home mortgage owners.

    Personally, I paid off my mortgage in December and expect to have my house taken from my cold dead hands.

  • This certainly explains this story over the weekend …

    Obama Administration Plans to Shut Down Fannie and Freddie
    The Obama administration is working to attract more private funding for mortgage markets while winding down government-backed housing giants Fannie Mae and Freddie Mac.

    U.S. Treasury Secretary Timothy Geithner told reporters that administration officials are exploring legislative options for overhauling the nation’s housing finance system with lawmakers on Capitol Hill, as well as with academics and other non-government agencies and advocacy groups.

    In a white paper last February, the administration outlined three options for a long-term overhaul of the U.S. housing market. Each of those options proposed the elimination of Fannie and Freddie, though they differed on how or whether to replace the two agencies.

    http://www.theblaze.com/stories/obama-administration-plans-to-shut-down-fannie-and-freddie/

  • This certainly explains this story over the weekend …

    Obama Administration Plans to Shut Down Fannie and Freddie
    The Obama administration is working to attract more private funding for mortgage markets while winding down government-backed housing giants Fannie Mae and Freddie Mac.

    U.S. Treasury Secretary Timothy Geithner told reporters that administration officials are exploring legislative options for overhauling the nation’s housing finance system with lawmakers on Capitol Hill, as well as with academics and other non-government agencies and advocacy groups.

    In a white paper last February, the administration outlined three options for a long-term overhaul of the U.S. housing market. Each of those options proposed the elimination of Fannie and Freddie, though they differed on how or whether to replace the two agencies.

    http://www.theblaze.com/stories/obama-administration-plans-to-shut-down-fannie-and-freddie/

    It will most certainly be modest if it’s a fee on services of a Fannie or Freddie that doesn’t exist.

  • There is another case in which a tax cut is not a cut, when it is temporary. Temporary tax cuts do nothing to stimulate the economy and in fact you are better off without them.

  • “Your government at work.”

    That is rapidly becoming untrue at several levels…and more so than ever before in my life.

    It does not “work”, in the sense it functions according to design. Even according to a recognizable rationale, at this point.

    And it is not “my” government, nor that of the vast majority of other Americans, in the sense we feel connected to it, and it responsive to our expressed wishes and its charter.

    The kind of outright fraud being practiced wholesale in DC now is criminal, and the DoJ is the LEAST likely agency of government to address it. The Obamabanana Republic is here.

  • No Tax cut is a tax cut unless there is a budget surplus. Everything else is just a tax deferment with interest.

    • @CaptinSarcastic Exactly right.

      This is a tax shift, and while in general I approve of shifting taxes from production to consumption, it should be a permanent shift – tax holidays are wasteful. Cutting the payroll tax for two months isn’t going to lead to new hires.

    • @CaptinSarcastic Except for that part of human experience showing a reduction in the tax rate WILL produce more revenue in the right circumstances.

      FIFY.

      • @Ragspierre If you see more places where we can be confident we’re on the far side of the Laffer curve, let everyone know. A modest, short-term payroll tax cut won’t do the trick.

        • @BryanPick General v. specific. Global v. particular. See?

        • @Ragspierre Yep, you had a valid point: there are exceptions to the rule. When cutting tax rates means raising revenue, you’re not shifting taxes onto future taxpayers.

          I just have a knee-jerk reaction when my fellows on the Right mention this phenomenon, because too many of us seem to ignore the near side of the Laffer curve, or think that we’re always comfortably on the far side of it.

        • @BryanPick We coo…

  • Under Democratic control, Congress depleted the Social Security Trust Fund by $110 billion to cover for President Obama’s gimmicky tax break. This time around, House Republicans insisted on cutting spending to pay for the estimated $160 billion cost of extending the payroll-tax cut, unemployment and the “doc fix” that protects doctors from cuts in Medicare reimbursements. These items were previously extended for the first two months of 2012, so Congress is now negotiating how to pay for extending them through December.

    Mr. Reid refuses to allow Democrats on the committee to agree to any spending cuts, thereby putting the whole package in jeopardy. House Speaker John A. Boehner said Tuesday that, “We offset all of the costs of these programs, and most of the offsets came from the president. One can only wonder why Senate Democrats are dragging their feet and not coming forward with a plan.” The big-ticket pay-fors discussed in the committee Tuesday include freezing federal employee pay for another year and increasing the amount they have to contribute to their pensions. Other GOP offers from their original bill include increasing Medicare premiums for upper-income individuals and increasing the maximum amount of subsidy overpayments that must be repaid to taxpayers under Obamacare.

  • Under Democratic control, Congress depleted the Social Security Trust Fund by $110 billion to cover for President Obama’s gimmicky tax break. This time around, House Republicans insisted on cutting spending to pay for the estimated $160 billion cost of extending the payroll-tax cut, unemployment and the “doc fix” that protects doctors from cuts in Medicare reimbursements. These items were previously extended for the first two months of 2012, so Congress is now negotiating how to pay for extending them through December.

    Mr. Reid refuses to allow Democrats on the committee to agree to any spending cuts, thereby putting the whole package in jeopardy. House Speaker John A. Boehner said Tuesday that, “We offset all of the costs of these programs, and most of the offsets came from the president. One can only wonder why Senate Democrats are dragging their feet and not coming forward with a plan.” The big-ticket pay-fors discussed in the committee Tuesday include freezing federal employee pay for another year and increasing the amount they have to contribute to their pensions. Other GOP offers from their original bill include increasing Medicare premiums for upper-income individuals and increasing the maximum amount of subsidy overpayments that must be repaid to taxpayers under Obamacare.

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