Last night we heard a proposal to raise the capital-gains tax. Can we cut to the chase and dive into reforming the tax code instead?
I don’t want to get into the politics of it, let’s leave that for other bloggers. Everyone can agree that some sort of tax reform is wanted and needed – and hopefully somebody will pull it off someday.
Realtors hear about it all the time, especially from the long-time owners of rental properties. The thought of paying a huge tax bill makes them immediately dismiss the idea of selling, because they know if their leave it to their heirs, the stepped-up basis will apply.
We shouldn’t have a tax code that influences real estate decisions. Tax reform should include a neutral stance on when you sell real estate – it should be taxed the same, whether you are dead or alive.
What about the MID, the mortgage-interest deduction? Let’s get rid of that too, and create a pure marketplace where people buy homes to live in, and raise a family, and not because they get a tax break.
If you have any other reason to buy a house – investment, etc. – then great, but tax benefits shouldn’t be one of those motivators, because they won’t apply to all citizens.
‘Oh Jim, now you’re asking for it. The NAR is going to punch your ticket and throw you out of the club for that kind of crazy talk.’
Yeah? The National Association of Realtors needs to play a bigger game. The millions they spend on lobbying could help champion tax reform, instead of sounding like a broken record on the MID.
Here are two articles discussing the topic:
1. This guys says that something has to give:
2. This guy points out how small the MID benefit really is: