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Tax Breaks For Debt is Stupid

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November 21, 2009 – Comments (5)

I have posted previously that I think US tax policy encourages debt for the wrong reasons and that there are other ways to support programs that encourage people to build strong foundations.  Ultimately there is a spread between borrowing and lending rates so overall debt hurts people and helps to make a much larger financial sector. 

Well, here's a link to a report that says:

If the benefits are illusory, the costs are all too real. Economies work best, generally speaking, when people are making decisions based on economic fundamentals, not on tax considerations. So, as much as possible, the tax system should be neutral between debt and equity, and between housing and other investments.

 

5 Comments – Post Your Own

#1) On November 22, 2009 at 1:00 AM, ChrisGraley (29.63) wrote:

A long time ago, we decided that we were going to pass off over-consumption as growth. It will take the government a while to admit that we may have had a bad plan.

We are bailing out idiots now because we created the idiots in the first place.

Still not a good plan, but politicians like to cover their behinds.

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#2) On November 22, 2009 at 3:10 AM, AdirondackFund (< 20) wrote:

The Housing Boom was fueled by Tax Breaks with the deductabilty of Mortgage Interest and Local Property Taxes, a redistribution scheme meant to favor Government and Banking, with a cherry on top for equity buy and holders.  "A House is the single best thing a young family can do to pay for rises in inflation and future College Educations for their children, by building Equity through Home Ownership." was the Mantra...until it crashed and stopped.  Now, the economy has stopped with it.

The importance of diversification is absolutely unrelenting in it's most intrinsic forms in life.  It is a practical and absolutely necessary requirement at all times.  

   

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#3) On November 22, 2009 at 6:26 AM, kaskoosek (59.72) wrote:

Tax Breaks For Debt is Criminal

 

/corrected 

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#4) On November 22, 2009 at 3:25 PM, dwot (43.46) wrote:

Nice correction kaskoosek...

I had lots of different thoughts about what to call it...

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#5) On November 27, 2009 at 7:48 AM, degaston (99.56) wrote:

One big surprise to me this week was learning that the homebuyer tax credit is not really a tax credit. Its a loan that must be repaid. The only reason to do it is because it's interest-free.

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