The capital structure of US real estate assets has been in a long process of change. By subsidizing real estate and making mortgage debt artificially cheaper than equity capital, the US government has been effectively transferring real estate ownership from individuals to lending institutions and the Federal Reserve. Here’s how this game has been unfolding, and a warning to Americans that they will one day wake up in a country where most people live as feudalistic peasants, beholden to their banking and political overlords. Continue Reading
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.
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.
Politicians love to preach about the virtues of an industrial base. They do it for three reasons: Industrial firms are great sources of subsidies and political patronage, such patronage buys support from organized labor union voting blocks, and it actually does make sense for countries to produce real things of value. Since WWII America’s industry has steadily declined as a percentage of GDP, but the winds of change are blowing. Continue Reading
The shackles of serfdom are being silently fastened to America. Every dollar Congress spends beyond its budget, every Federal Reserve Note printed, every tax, regulation, and government intrusion into our lives renders us less free. Ever wonder why it feels like it’s increasingly difficult to make ends meet? Remember the days when one spouse could work, the other raise the kids, and still save for a comfortable retirement? Those days are gone, but why? What’s next? The 5 Steps to Freedom: How To Cut Your Dependence On Institutions And Escape Financial Slavery, by Jeff Nabers explains what happened to our once prosperous society and how we can all take definite steps to escape what is to come. Continue Reading
This article is dedicated to the growing segment of American society that is awakening to the ideas that we are increasingly overworked and overtaxed. My goal is to determine an effective tax burden on the average middle-class American. I will leave it to the reader to judge relative severity of the burden as measured against associated “benefits” to which he is “entitled” from the system. Continue Reading
Sen. Rockefeller proposes bill that would give government sweeping powers to control, monitor, and regulate the Internet, ACLU demands public schools stop blocking gay web sites on public computers, Rep. Jane Harman calls incriminating NSA wiretap “abuse of power,” National Service legislation signed into law that will cost $6 billion over 5 years by hiring “paid volunteers,” government will need to issue $2.4 trillion in new Treasury securities in 2009 to meet budget shortfalls and bailout program requirements, and U.S. to give another $5.5 billion to automakers… Continue Reading
Sen. Jay Rockefeller (D-WV) introduced a bill in the Senate on April 1st calling for sweeping powers for federal regulators to “secure cyber communications.” The Cybersecurity Act of 2009 (S.773) would give government authority over all networks considered part of the nation’s critical infrastructure.
The usual threats and scare tactics are used to justify giving Big Brother greater powers, including giving the President the power to shut down portions of the internet he deems a threat to national security, and access to vast amounts of digital data currently legally off limits.
Industry experts criticize the pervasive intrusion into private business standards and practices that would result from some of the finer points of the legislation, including a section that grants government exclusive licensing rights to IT professionals.
Here are the basics:
National Institute of Standards and Technology (NIST) standards development and compliance.
Licensing and certification of IT professionals.
Regulation of domain name contracts.
Executive authority to “shut down the Internet” when in interests of national security.
The bill is still in its infancy being referred to Committee, so now is the time to stop it! Take the time to write or call each of your Congressional representatives. You can look up your representatives’ name and contact information using this tool.
Here is a sample letter you can cut and paste to use as your own:
Details of the Cybersecurity Act of 2009 (S.773) have recently come to my attention. I am writing to voice my utter contempt for this proposed legislation and wish to document opposition to what I consider unacceptable expansion of federal authority into the cyber domain.
S.773 would give the federal government excessive power in regulating the Internet. The power to unilaterally shut down private networks, to garnish unprecedented digital data currently outside the realm of legal authority, and intrusion into commercial practices of professional certification are unacceptable.
Please take serious consideration in evaluating this measure. I urge you to support freedom of the Internet, individual privacy in digital information, and continue to let the private sector make certification and employment decisions without federal coercion.
We must actively fight the erosion of liberty and individual freedom, preserving the values that made this country great. Thank you for your time!
Take a moment to leave a comment below to voice your support for this movement!
Watch Sen. Rockefeller discuss the bill below. It is not at all evident he truly understands what he’s talking about, yet this man wields power to control us all:
Rep. Jane Harman exchanged favors for power-aided Israeli lobbyists accused of espionage, top government investigator says that bank bailouts are open to fraud, Obama tells Cabinet to cut spending by 0.02%, U.S. Treasury estimates it has lost $900 million of taxpayer money from holding $301 billion in Citigroup junk assets, Russian tariffs take toll on U.S. companies, and could the U.S. be headed for a Russian-style economic collapse circa 1998? Continue Reading
U.S. Treasury Dept. considers converting loans to equity ownership in major U.S. banks…is this a backdoor to nationalization? Congressional push-back to Obama’s revenue raising plans is leaving $1 trillion gap in budget, Obama set to take on credit card companies for charging interest rates that he considers too high, the U.S. Energy Secretary warns that some Caribbean islands will disappear because of Global Warming, and China issues another condemnation of U.S. economic policies…threatens to diversify currency reserves out of USD… Continue Reading
On April 9th Texas Gov. Rick Perry joined state Rep. Brandon Creighton and sponsors of House Concurrent Resolution (HCR) 50 in support of states rights under the Tenth Amendment to the U.S. Constitution.
The Tenth Amendment states:
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.
In his speech Gov. Perry states “I believe the federal government has become oppressive. I believe it has become oppressive in its size, its intrusion in the lives of its citizens, and its interference with the affairs of our state.”
The Freedom Factory is launching a campaign to get every state government to adopt comparable legislation, reaffirming their legitimate rights within the context of a free American Republic.
We need to spread the word, to mobilize residents from every state in the Union to remind our public servants that we will not tolerate erosion of our rights and the Constitution that guarantees them.
Here’s a sample letter you are urged to send every public servant in your jurisdiction. Send this to your state’s governor and state legislatures, and leave a comment below to sign our petition:
The federal government has grown too big and too powerful, infringing upon the legal sovereign rights of our state affirmed by the Tenth Amendment to the U.S. Constitution. There is a resurgent federalist movement best highlighted by the Texas Legislature that I want implemented in [list your state]. The Texas legislature will soon be voting on House Concurrent Resolution (HCR) 50 that reaffirms state sovereignty. We need similar legislation in our state.
No one in Washington D.C. knows how to run our state better than our own residents. I am tired of our government bowing to federal authority. I demand that we reassert our right to self governance. I urge you to do all you can to support this movement and regain control of our state from Washington D.C.
The residents of this state need you to protect them from a growing central government. I hope that you have the courage to stand up for those to whom you are responsible.
Here’s a great resource for finding the names and contact information for your elected representatives. Take a few minutes to cut and paste the sample letter into an e-mail and let these lawmakers know we mean business. Enough is enough!
Please join our cause and subscribe via e-mail if you want to continue following these updates and fight to preserve our Constitutionally protected freedoms.
You can read more about Gov. Perry’s speech here, or watch it directly below:
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