To tax or not to tax, that is the question.
Business Week’s article, The Next Home Buyers: Ozzie & Harriet, depressed me as I read it. This article provides an overview of the U.S. economy in relation to home prices and interest rates and explains how the next few years will continue to be difficult. Although interest rates are at historically low prices, potential buyers are not yet willing to purchase homes because prices are still expected to fall and the government is considering removing mortgage interest tax deductions. I understand why home prices are falling as the supply of houses is shifting rightward with increased foreclosures but I do not understand why the government is considering removing mortgage interest tax deductions. I assume the government believes it will make more money in increased tax revenue but if this is their reasoning, I believe it is flawed. If homeowners must now pay more money to the government in increased taxes they will have less discretionary money for consumer spending. If consumer spending deceases, businesses will make smaller profits and will pay fewer taxes to the government. The question now becomes, will the government make more money by taxing home owners or will they make more money by collecting money from successful businesses? I believe the latter.