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Imputed Income

From Neal Boortz.

I mentioned the concept of imputed income to a caller in the final hour yesterday, so I thought I would flesh it out for here today.  This is an idea that the Clinton administration was working on when the Republicans took over.  The concept here is to take people who are not in the higher income tax brackets and move them on up, so to speak, by creating income for them out of thin air.  That way you can tax them more. The name for this artificial income would be “imputed income,” and it would be fully taxable.

Now ... for you homeowners, here is what the Democrats may have in store for you under an Obama-Pelosi-Reid Troika. 

Let’s say you own your own home.  You’ve had it for some time.  Your mortgage payment is $1000 a month.  Homes similar to you in your neighborhood rent for $2000 a month.  The IRS will tell you that since you are living in your home for $1000 a month less than you would have to pay if you were a renter, that extra $1000 a month is actually income to you, and you should pay income taxes on that money.  That would be an extra $12,000 a year on your taxable income line ... maybe enough to shove you into a higher tax category!  And think what would happen if you owned your home free and clear?  Bingo!  $24,000 in imputed income!

There are more ways than just increasing tax rates for politicians to whittle more cash out of the taxpayers.

Posted by Owen at 1706 hrs
Politics + Politics - General

1. Wow, will that drive a big rush to downsizing.  Law of unintended consequences…that will destroy the ownship society and the responsibility and values it helps sustain.

   Posted by .(JavaScript must be enabled to view this email address) on October 31, 2008 at 1815 hrs
   
   
   

2. So, I must have missed that page on Obama’s website. For that matter, I think I must have missed on Reid’s and Pelosi’s websites, too.  Anyone care to point me to a source for this other than Neil Boortz’s ass?

   Posted by folkbum on October 31, 2008 at 2321 hrs
   
   
   

3. Anyone care to point me to a source for this other than Neil Boortz’s ass?

   What more do you need?

   Posted by .(JavaScript must be enabled to view this email address) on November 01, 2008 at 0004 hrs
   
   
   

4. Have you guys given up on actually reading the post?  I guess that’s what comes of blind faith. 

   Boortz mentioned the concept of imputed income on his show (as he says).  He was using this post to define it for his readers/listeners.  Then he said that this is the kind of thing that “may” show up if the Democrats control the entire apparatus of government.  Far-fetched?  Not really.  They tried it last time the Democrats controlled the government.  Nowhere did Boortz even hint that this is part of any of their published platforms. 

   Reading comprehension, folks.

   Posted by Owen on November 01, 2008 at 0902 hrs
   
   
   

5. Yes, Owen, and a giant spaceship “may” arrive at earth any day now and gather up all the left-handed people on the planet for study and to live in alien zoos.

   So why are we taking Boortz any more seriously than my spaceship?

   Posted by folkbum on November 01, 2008 at 0916 hrs
   
   
   

6. Well, because one happened before and one hasn’t (allegedly).  But feel free to go ahead and post on your spaceship theory.

   Posted by Owen on November 01, 2008 at 0933 hrs
   
   
   

7. Well, because one happened before and one hasn’t

   No, neither has happened. I’ve spent the better part of the last half hour trying to find a source beyond Boortz that Clinton actually proposed this and the best I got was a guy quoting Rush Limbaugh at RedState.

   Boortz is making up crap to scare people.  You’re repeating it uncritically.  And you claim the word “may” lets you get away with it—but it’s still crap.

   Posted by folkbum on November 01, 2008 at 1000 hrs
   
   
   

8. The talking points for the concept of imputed income go back to 1993 - there were several papers written on the topic.  Unfortunately, it is hard to source the documents.

   Although this is in the public domain and can be copied, for some reason the document is “locked” (hmm?  And Fannie Mae yet!).  It was written in reaction to “The Preferential Income Tax Treatment of Owner-Occupied Housing: Who Really Benefits?”:

   http://www.fanniemaefoundation.org/programs/hpd/pdf/hpd_0401_grigsby.pdf

   Here is an article about the original paper:

   The Preferential Income Tax Treatment of
   Owner-Occupied Housing: Who Really Benefits?

   This paper examines the size and distribution of federal tax expenditures to owner-occupied housing across and within homeowner income classes with a model of expenditures that is more comprehensive than those currently in use. The analysis builds on a clear and specific statement of homeowner tax preferences and includes a discussion of their relation to other elements of the income tax and to mortgage debt. A novel element of the analysis is the explicit consideration given to net implicit rental income. The estimation of tax expenditures is based on 1989 American Housing Survey data and a fairly complicated set of procedures which are succinctly described.

   The authors focus their analysis on the size of the tax expenditure benefits and the vertical and horizontal equity of their distribution. They highlight three major conclusions. First, on net, the inclusion of net implicit income in the measure of homeowner tax savings adds a substantial amount to the estimated tax expenditure to owner-occupied housing: the aggregate tax expenditure is estimated to have been $109 billion in 1989. This is approximately two and one-half times larger than the estimates of the Joint Committee on Taxation and the Treasury’s Office of Tax Analysis. Second, the interaction of recent changes in the standard deduction with the tax treatment of non-housing itemized expenses has rendered the mortgage interest deduction worthless, or nearly so, for many low and moderate income households. As a result, they have introduced an anti-mortgage debt bias to the federal income tax code. Third, although the bulk of the tax expenditure benefits high-income households, the distributional effects of its elimination depend upon the manner in which the attendant savings are distributed.

   http://www-cpr.maxwell.syr.edu/metro/abs160.htm

   Look at how many times the terms “distributional” & “distributed” are used.

   Posted by .(JavaScript must be enabled to view this email address) on November 01, 2008 at 1004 hrs
   
   
   

9. Folkbum… 1993 was before the internet was a widely spread phenomenon.  Just because you can’t find it on the internet doesn’t mean it doesn’t exist.  Sheesh.  As a teacher, I would think you would know that.

   Posted by Owen on November 01, 2008 at 1013 hrs
   
   
   

10. mht, the pdf works fine for me.  The introduction, I thought, was prophetic for 1993—in part:

    Too much investment is drawn into housing and away from more productive sectors of the economy.

    At any rate, these read like academic discussions; there’s still no evidence that I have seen to suggest that Clinton proposed anything like taxing “imputed income” or even eliminating the mortgage interest deduction.

    Posted by folkbum on November 01, 2008 at 1022 hrs
    
    
    

11. Oh, and I hope you’ll forgive me, Owen, for not taking Neal Boortz’s word for it.

    Posted by folkbum on November 01, 2008 at 1032 hrs
    
    
    

12. You are right, these are “dueling” academic papers.  I guess I was just trying to point out that there was some “basis” for the concept. I also think Boortz oversimplified the concept when he discusses the scenario of the paid up home - I think the discussion at that time was about off-setting the interest deduction with imputed income.

    I couldn’t “source” anything that old on the Clintons - I just have a very vague recollection that at one time there was discussion about what constituted various levels of income (i.e., “upper middle”,) & Hillary Clinton made some kind of comment that the definition of income should include the value of the mortgage interest deduction.  Again, this is very vague recollection on my part.  I tried finding something, but since Hillary ran in the primary, most of the searches give her more recent positions on tax policy.

    Posted by .(JavaScript must be enabled to view this email address) on November 01, 2008 at 1032 hrs
    
    
    

13. mht, it’s days like this that I wish I had me some Lexis-Nexis.

    I think the last thing anyone would try to do in the present situation is anything having to do with more taxes on your housing, given the underlying causes of the current crisis and how many people are already upside-down.

    On the other hand, I have considered the possibility that McCain’s buy-up-the-mortgages proposal could have been made more palatable if 1) we bought only at current market value and forced the holding companies to eat the losses and 2) if homeowners who opted for the federal buyout surrendered their mortgage-interest deduction until the loan was paid off, refinanced, or sold to a non-federal company.  That would punish the bad lenders (or those buying bad derivatives) and the bad homeowners and be slightly closer to revenue-neutral.

    Posted by folkbum on November 01, 2008 at 1137 hrs
    
    
    

14. Folkbum, as I was trying to find more detail re:Clinton, I saw one reference to dealing with the ability to deduct mortgage interest as being the political equivalent of “touching the fourth rail” (Social Security being the “3rd rail” that no politician wants to touch).

    This issue had numerous dynamics to it & I would have to contend that perhaps Boortz (and until this post, I never heard of him) was being a bit “hyperbolic” with it - but I’m not going to say that his points are within the realm of the impossible.

    Posted by .(JavaScript must be enabled to view this email address) on November 01, 2008 at 1220 hrs
    
    
    

15. What do you mean “they” wouldn’t do this in the current economic environment????  Sure they will….didn’t you hear the interview with Joe the Plumber when he said Obama thinks 40% is the “correct” percentage for the FLAT TAX??
    Didn’t you see all the Democrats on election night in Chicago at Obama’s victory speech?  They are all being “unfairly treated” as they are all renters….they need to be subsidized.  I, for one am a sole proprietor…..but WTF I can get a PHD fellowship that’s non-taxable and go over and study in Belgium or some cool place and get a new “post-doc” ever couple years for the rest of my life and live anywhere….since it’s not in the US anthing less than I think $80,000 is non-taxable anyway if it’s earned overseas….I hereby quit working…..I am going to get my PHD and I am 55 years old.  By folks…..oh-and I will be getting the money for the phd through Fullbright Scholarships….your tax money.

    Posted by .(JavaScript must be enabled to view this email address) on November 05, 2008 at 0105 hrs
    
    
    

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