ANOTHER reason not to pay off that mortgage

behaviorkeltonJuly 1, 2008

Listening to Neil Bortz (sp?) on the radio yesterday, he mentioned a bill that democrats have tried to pass.

That is; That you can be taxed on the rental value of your home.

So, if your home is all paid off... no mortgage payment... and your neighborhood homes *rent* for around $1,300 a month, you would have to declare the difference as income.

Now, I don't know if a bill such as this could ever pass, but it doesn't seem too far fetched at all.

I suppose Bortz was warning against allowing Democrats into office.

If this sort of bill passed, I would happily refinance my home at 100% if possible!


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Hi Kelt,
...... shaking my head in utter amazement........

IF ONLY this could be the wildly imaginative meanderings of merely a comedian.....

We need to start regulating POLITICIANS... and requiring they all get AT MINIMUM a 6 year education in economics, with serious tests requiring high-level scores to pass.

A very simple concept so many fail to grasp;
"Whatever activity or concept you tax gets reduced!"

Tax income, and society will find ways to make less income.
Tax property values, and there will be a downward pressure BY society on values.

OTOH, (one reason why I liked Al Gore's premise,)
Tax carbon footprints (or anything else we sincerely WANT to reduce,) and society will find ways to reduce that issue.

Such a simple basic economic concept.......

    Bookmark   July 1, 2008 at 10:51AM
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Even as a registered independent I find your post offensive if not intentionally inflammatory...this is not the place for abrasive comments like this...go post on FOX news or something if you want to bash liberals, you'll be among friends there.

And don't get me started on your comment about 100% financing...

    Bookmark   July 1, 2008 at 10:52AM
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LOL, I happened to come across his radio show yesterday while in my car at the exact instant he was discussing this issue. What a complete imbecile! Not only did he completely mischaracterize the old proposed legislation, he made an idiot of himself trying to do simple math.

He started out by saying that if you lived in a $200k house and your mortgage payment was $500 month, you would be paying $6,000 a year. So far, so good. (Except for the ridiculous example of using $500/month).

Then, he said if your neighbor rented the same house for $2,200 month, that would be .....and here is wear it gets funny......he hesitates for awhile and then says $22,000/year.

Apparently his producer started talking in his ear, because he then interrupted himself and said, no that's not right, it's, mmmmmmmmmm $22,200/year. He hems and haws awhile longer and then comes up with $24,000/year. Mumbles some more and then announces the correct figure is $24,400/year.

(No, Neil, but at least you're finally getting a little closer, lol.)

When he realizes that he's still wrong, he decides to change the rental amount to an even $2,000 month instead of $2,200/month because he aparently has the capability of multiplying 12 X 2 to come up with $24,000.

I'm sure behaviorkelton can back me up on my recollection.

I was laughing so hard I almost ran off the Interstate! I didn't even know who I was listening to until he went to a commercial break shortly thereafter.

That's when I said to myself, "So THAT's Neil Boortz!"

I can't believe people take this mental midget seriously.

    Bookmark   July 1, 2008 at 11:40AM
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You are write... that is an accurate account of how the show went. We must have turned our radios on at precisely the same time!

However, it clumsiness with arriving at the numbers was beside the point.

I had never heard of this kind of legislation. If true, it is stunning.

Wow! Where are you coming from? Offensive???
I'm just calculating the merits of paying off my mortgage and am re-telling a relevant event heard on the radio.

If that's offensive, I strongly suggest that you disconnect your cable & internet, and remain indoors.

Bortz is an atheist who wants to legalize dope... not exactly "Fox News" material.

Anyway, your comments have revealed which side of center your "independent" philosophy resides.

Hmmm, maybe I'll start a thread on the fair tax... wondering what others think of it. Bortz spends a good deal of time evangelizing this approach to taxation.

    Bookmark   July 1, 2008 at 4:28PM
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Did I just spell "right" as *write*? ugh.

    Bookmark   July 1, 2008 at 5:24PM
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"Did I just spell "right" as *write*? ugh."

That's okay. I was typing faster than my brain was thinking and typed "where" as "wear." LOL

    Bookmark   July 1, 2008 at 6:16PM
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behaviorkelton: "I had never heard of this kind of legislation. If true, it is stunning."

Don't worry, it's not true. Boortz has been ranting and raving about this supposed "Secret Democrat Tax Plan" for years and years. There has never been any such proposed legislation. I decided to track down where this originated and the earliest reference I could find was that Rush Limbaugh first tried to scare his listeners with this shortly after Clinton took office in 1993. Limbaugh used the same story, but with different numbers in March 1993 according to one site I found. As with a lot of Rush's "stories", this too, was proved to be false. But that hasn't stopped the far right from frothing at the mouth about this alleged secret tax plan.

If you do a google search on the phrase "imputed tax" you'll get hit after hit of right-wing blogs talking about this same "Secret Democratic Plan." As a matter of fact, you can just google "Secret Democratic Plan" and get to the info that way, lol.

As I said, Boortz is an imbecile who can't even do simple math. And it's not only the fact that he made a fool of himself on the radio yesterday. He can't even get straight how much the supposed FAIR tax would cost. He states over and over that it would be a 23% surcharge or sales tax on all purchases. In fact, it would be a 30% tax and I can demonstrate it to you very easily.

Say you go buy a pack of gum and it costs you exactly one dollar. Under the FAIR tax system as currently proposed, that pack of gum would cost $1.30. Now, how much of an increase is that?

To me (and everyone else who passed third grade arithmetic), that is an increase of exactly 30%. Not to hard to figure out right?

Not to Boortz's backward way of thinking though. He starts with the $1.30, then says if you reduce that figure by 23%, you come up with $1.00. Therefore, the "tax" is only 23%.

I'm not making this up folks. That's the way he does math. You can go to his website and see for yourself.

As I said, he's an idiot.

    Bookmark   July 1, 2008 at 7:32PM
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I was more referring to the way you were using the word Democrat...sorry, should have been more clear there...I get sick of people using the words "Democrat" and "Republican" like they're insults.

Was having a terrible morning and probably should have waited to post...on re-reading this afternoon, it wasn't nearly as abrasively phrased as I have my apologies.

That said, it's interesting that he thinks they should legalize dope, considering his website went off about how the supreme court "finally" outlawed the handgun ban in DC! Talk about both sides of the fence:)

    Bookmark   July 1, 2008 at 11:29PM
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I hear you Jim.

He considers himself something of a libertarian. I am most certainly a libertarian sympathizer, and am very suspicious of both democrats and republicans.

Like most libertarian-minded folks, I see very little difference between the two major parties in the sense that they are both control freaks.

I am also an atheist who wants to legalize all crimes of vice. It was on this topic that I found favor with Boortz, but he is far too paranoid about the democrats ... he also has some nasty things to say about the Republicans... not the least of which is his take on the Christian Right.

I looked up "imputed tax" and "Boortz".. and found the exact snippet we are discussing:

In the end, he says that if the democrats take full power of the branches of gov't (as they did early in the Clinton era), they are likely to introduce the imputed tax again.

I think he is saying that this tax was introduced during that same early-Clinton administration.

I don't know.


    Bookmark   July 2, 2008 at 8:11AM
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Yeah, and 17% of people believe the sun revolves around the Earth, according to a recent survey. But that doesn't make them right....

    Bookmark   July 5, 2008 at 1:31PM
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I'm not sure to whom or to what you are directing your sun-earth analogy.

In politics, we are not talking about science. People literally must "believe" in political views in much the same way they believe in religious views. They latch onto a favored world view at some point in their lives, and then launch into a life with that sort of bias.

They can argue endlessly about each of their favored-but-unprovable tit for tats.

The Earth-Sun relationship is a matter of provable fact. This doesn't relate very well with politics (or philosophy).

So what was your point? : )


    Bookmark   July 5, 2008 at 7:11PM
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If you put a heavy mortgage on the house that was formerly paid off, quite likely the issue of whether the new mortgage interest would be deductible would depend on what use you made of the borrowed money.

If it didn't relate to the operation of that house, it likely wouldn't be allowed.

o j

    Bookmark   July 6, 2008 at 6:12PM
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Hi Old Joyful,

If you put a heavy mortgage on the house that was formerly paid off, quite likely the issue of whether the new mortgage interest would be deductible would depend on what use you made of the borrowed money.

Partly true... its less an issue of "whether" and more likely "in which manner."

If it didn't relate to the operation of that house, it likely wouldn't be allowed.

Not true.

If you borrow funds collateralized by your residence, and use those funds for acceptable investment purposes, the interest charges of that mortgage are deductible against the taxable revenues of that investment as a cost of business.

There are other twists & spins to tax deductibility of interest as well... not really all that intuitive, overall.

Dave Donhoff
Leverage Planner

    Bookmark   July 6, 2008 at 8:06PM
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Tax rules would depend on your jurisdiction. Olé Joyful has a lot of experience with preparing tax forms in Ontario, Canada.
I suspect that his experience with US tax law is limited.

    Bookmark   July 6, 2008 at 8:28PM
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Don't forget that the "FairTax" would charge that 30% sales tax on rent payments! (And gas, and new cars, and new houses, and prescription drugs, etc. etc. etc)

    Bookmark   July 21, 2008 at 1:11PM
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I'm still shocked people follow the theory that you shouldn't pay off your mortgage and instead give money to the banks so you can get a small percentage of it back in tax deductions (assuming you don't hit AMT).

What a country full of misinformation.

    Bookmark   July 25, 2008 at 11:56AM
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rooseveltl, that's not the reason not to pay off a mortgage.

The only reason is to retain liquidity, especially if you don't have a lot of other resources. Once the money is invested in the house, it's difficult to access it. And then, as we have seen recently, if the value of the house goes down, you can't access it at all.

    Bookmark   July 25, 2008 at 5:18PM
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We paid the mortgage on our home several years ago. We've continued to save/invest the "mortgage payment" in all the years hence, and we've continued to save/invest in retirement vehicles and regular savings, as well.

We live in an area that hasn't seen the wild fluctuations in real estate value that many other parts of the country have. I think paying off the mortgage was a good choice for us. We don't have "corpie jobs", military careers that would require us to pull up stakes and relocate at the drop of a hat. We are definitely firmly based in our community. With that in mind, when we decided to build a garage we put down some cash and we used the equity in our home to back the note. I don't see that "liquidity" is an issue for us, but maybe I'm missing/not understanding something really important.

Again, this is just an example of how an "old-fashioned" approach to finances can work for you. It's called living below your means, day in and day out, and using your wits to minimize/meet your bills. Lower your daily/monthly expenses and BANK the money you don't have to spend. It ain't brain surgery, but it does require attention to details and strict adherence to the precepts. It's really pretty easy, actually.

Do you "want" it or do you "need" it? Take care of needs first and foremost and set a priority list.

"Want" is OK! as long as you take care of "need" first.

Money is a wonderful slave, but a terrible master. (thanks for that quote, OJ).

    Bookmark   July 26, 2008 at 12:44PM
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If you were in serious dire straights... no job... depressed economy ... then the bank may not be willing to offer you a loan at the time when you most need the money.

If you have plenty of cash left over after a payoff, you are much better off.

Dave, of course, would say that it isn't financially wise.

For me, I live in a pretty darn cheap house... so if I pay it off, it's not a huge sum that I'm tying up in home equity.

    Bookmark   July 27, 2008 at 10:41PM
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