Wednesday, September 26, 2007

Smoot & Hawley Were Visionary


The Smoot above isn't the same Smoot but according to urban legend is related.

What's going on? Bloomberg:The House Ways and Means Committee, seeking revenue to help homeowners in foreclosure, unanimously approved higher taxes on the sale of vacation homes.

The panel adopted a Democrat-drafted provision that would make it harder for people who sell their second homes to exclude as much as $500,000 in profit from capital-gains taxes. The provision would raise $2 billion in additional taxes over the next decade, according to an estimate by the congressional Joint Committee on Taxation.


Hardly seems the same on the surface. What do they share? An absolute inverse relationship between intent and results. Look, removing the tax benefits of selling are not going to raise tax revenues and they aren't going to free up the housing constipation. This is just random legislation that can only do harm.

Bonus points for identifying the Smoot in the picture.

36 comments:

wagga said...

First, let it be known that the Smoot is a measure of length. Back soon with references.

wagga said...

el Reg (read the comments)

wiki

Ogg the Caveman said...

I'm not sure what that chalk mark is all about, but the guys in the picture are clearly Bill Hawley and the Smoots.

Son of Brock Landers said...

MIT frat legendary measurement. The cops use the Smoot number to mark where an accident is. I like how the newbies still keep it up every year.

ha38349 said...

What is funny is that they are trying to offset tax revenue that they shouldn't be counting on anyway!
Just change the tax law so that 100% of your primary home capital loss is deductible. But then reduces your future cap gain exemption.

Bakersfield Bubble said...

How the hell will they differentiate?

Our goverment has been asleep at the wheel for 4 years on this housing mess and now they think they can clean up with stupid crap like this. How about we just enfore the fucking laws and regulations already in place.

This will only result in more tax code and no additional revenue.

Akubi said...

Fishnets for freedom!
BTW, do you care about the situation in Burma? If so, speak up - or at least sign this petition to let China know how you feel about it.
Burma is a country that has clearly wanted democracy for over 2 decades yet we've wasted so much money and life on Iraq (a losing battle from day 1).
Stupid.

Lou Minatti said...

Eliminate the home mortgage interest deduction subsidy. There's no legitimate reason for renters in California (or owners in flyover country) to subsidize greedy FBs in bubble zones. If it wasn't for the subsidy, maybe housing prices wouldn't have gotten so far out of hand. After all, the subsidy is trotted out by the real estate douches as being one of the key benefits of owning.

Or is this an untouchable third rail? I've gotten ragged on for mentioning this by the HBB crowd. They all agree housing prices are screwed, BUT DON'T TOUCH MY SUBSIDY.

serinitis said...

Mortgage interest is a third rail. Besides, even if you did get rid of the mortgage deduction, I would put my house in an s-corp and rent to myself. I would get the mortgage interest plus house maintenaince expenses and depreciation as expenses to ofset the pittance I make renting it out.

Centipede said...

Or a 3rd eye on rails reading 69...

aaron said...

akubi,
I like the second fishnet in that link. something innocent there yet....

Peripheral Visionary said...

I weep, yes weep, for the poor distressed families who won't be able to exempt from taxes the capital gains from the sale of their second home in Aspen. What's this country coming to when people of property have to pay taxes?

And you're absolutely right, mortgage interest is the third rail of taxation. As is the Social Security "lockbox" (ha!), as is the Roth IRA. But when Congress is desperate enough for cash, it will strap on the insluated gloves and plunder every lockbox they can find, no matter how wired it is. Wait . . . you didn't actually believe that line about Roth IRAs not being taxed upon withdrawal, did you?

The moral of the story: take every up-front tax break you can find, because back-end tax breaks have a way of disappearing before you can get around to using them.

Rob Dawg said...

I would put my house in an s-corp and rent to myself.

Exactly. Search this blog for "HMID".

"Were the HMID to be reduced it would only serve to push the rich into complex tax avoidance schemes involving shell businesses holding title and the rich merely occupying the residence." - Oct 2005

Rob Dawg said...

And just wait for the "Great Simplification." Revenue neutral my ass. And make no mistake, no matter what else all SocSec will be taxable income.

Funny Circus Bears said...

I shorted Merrill Lynch, MER, at the open - bought Oct 70 puts - based on the news that they are more exposed to subprime than was previously thought.

Ogg the Caveman said...

@ Rob Dawg:

"Were the HMID to be reduced it would only serve to push the rich into complex tax avoidance schemes involving shell businesses holding title and the rich merely occupying the residence." - Oct 2005

That would cause said rich people to pay a higher interest rate on the mortgage because the property is no longer owner-occupied, wouldn't it? Would the tax savings be enough to offset that?

Akubi said...

@Aaron,
I’m glad you appreciate the image. There’s so much tasteless fishnet p0rn out there, it takes quite a bit of effort to find quality hot a$$ in fishnets images for Zillow Book.

Rob Dawg said...

Ogg,
the shell corp or s-corp or whatever would probably pay end up paying LOWER rates as residential mortgage demand shrivels and sends more liquidity into commercial paper. The owner-occupied becomes inoperative as the owner of record is a business entity rather than a person. As a business they can take acellerated deduction, management fees, looses against other income, travel costs, on and on. Trust me, they (we?) won't lose in this contest of wills.

Rob Dawg said...

Akubi,
Smoking? Ewwww. Smoking hot = good. Actual smoking = bad. Keep fishing. Your catches to date are worth the effort.

Ogg the Caveman said...

@ Akubi:

I’m glad you appreciate the image. There’s so much tasteless fishnet p0rn out there, it takes quite a bit of effort to find quality hot a$$ in fishnets images for Zillow Book.

The real sweet deals are in content creation. You get the fishnets, I'll bring my camera.

HauspocalypseNow said...

Rob,
the meltdown in RE is really accerlating faaaast locally.

The september sales numbers are down so low as to to approach zero!(oh eggagerating)

A realtor tells me the simi vally sales for sept are 30 MTD. last sept was like 144.

there are 1088 listings or so in simi so its gonna be 2 years inventory. All year long b4 september it was 9 months inventory.

FL is 2+ years inventory. If sales dont pick up(ha!) then we should se declines like in FL locally here in vent co. The countrywide layoffs, amgen layoffs, and credit crunch are a perfect storm!

quick to the basement!!!!!

(you have no idea how much a 2 year inventory will kill prices, this is historic and happend litterally overnight!!)

Rob Dawg said...

Haus,
Big reply bear with me.

Countrywide made their required report to the State today. No link yet sorry. They are letting go roughly 50% more locally than predicted on the high end.

I know exactly how much 2 plus years inventory will kill prices. I also know just how clueless our leaders are as to the issue. Noshing last night with one of the candidates at a neighbors house it was everything except the housing crisis. Every President comes in with a plan and every one gets handed a different set of problems. In between jokes about my humble origins and such he was ummm, "entertaining." He wanted this p0rn stuff off the internet for the children and adults and yet wanted to send troops anywhere more democracy was needed. Amazing that California was his by far largest donor. Well not so amazing with the inside scoop but that's not important. I do wish to thank our host, David Murdoch for the generous use of his home for the event.

HauspocalypseNow said...

Great,I can already see what the anti pr0n lobby will do.

It will go down just like do not call list.

They will pass laws fining webhosting companies for hosting certain types of sites. Overnight all pron sites will be hosted offshore and we will have 100,000 layoffs of IT workers in US.

Just like the do not call list caused the boiler room call centers to move to canada (they kept calling!).

pr0n is SoCal's last great industry!!!Sales are up every year no matter what.

all these laws protecting wages,the environment, children, the air, the unions, the trees, etc are sometimes overboard and chase the factories/jobs away. When you have good people who work hard that cant find jobs we will have problems.

September sales figures are not final but it appears they are gonna be lowest on record, probably 15-20 year lows (and the population is higher now!)

scary times ahead.

Ogg the Caveman said...

Don't those candidates know that the internet is for porn?

Peripheral Visionary said...

Goodness, this discussion just took an . . . interesting . . . turn.

Banning adult content from the internet probably won't fly anytime soon, but a consistent way of separating general content from the "mature" (ha!) content would help parents (and employers). That's effectively what they've done with zoning laws (back on topic!), and most of the time it works. The old "just monitor your children while they're on the internet" doesn't work, parents can't be home and/or looking over shoulders all the time. And nobody's using the "living next door to a brothel isn't a big deal, just keep an eye on your kids and make sure they don't cross the property line" argument.

Unfortunately, we're to the point where the U.S.'s biggest exports are pornography, guns, debt, and movies with Rob Schneider in them. No wonder people hate us.

Ogg the Caveman said...

Banning adult content from the internet probably won't fly anytime soon, but a consistent way of separating general content from the "mature" (ha!) content would help parents (and employers).

The problem is that there isn't a universal standard for what is acceptable for both children and work. If you try to impose one, you end up in most cases blocking stuff that should be allowed and allowing stuff that should be blocked. Furthermore you're putting a positively enormous amount of power in the hands of whatever central agency categorizes content. That kind of power will be abused, without question. Just look at filtering software companies that classify sites critical of filtering software under hardcore gay underage animal rape or whatever.

The track record of companies that provide voluntarily-used filtering software is abysmal. I fail to see how making that sort of thing mandatory or government-sanctioned could possibly be a good thing.

Before you respond, I suggest this little exercise: Design a set of rules that will decide whether a support forum for rape survivers should be allowed to be read in a given environment.

HauspocalypseNow said...

I submit to you that pr0n is healthy. That sex creates babies and everyone loves babies right?

If you dont like pron you hate babies!!

People should be surfing MORE pron, not less. Then wed have more babies/families to buy all these damn vacant homes!(ha back on topic!)

HauspocalypseNow said...

So MY housing bailout program is this: "SURF MORE PORN!"

Akubi said...

As an example of filtering software miscategorization,
Tokyomango
is one of the many feeds I regularly receive at work yet it was recently blocked by our filtering software due to "Adult content." Was it the "Toilet Stickers Help Men Target Their Pee" or the "Mix-Like-A-DJ Instant Noodles" post? Perhaps "The Hamster Wheel Pedometer"...
Of course, it must have been the DIY Octopus Ball Making Kit!

Ogg the Caveman said...

@ HauspocalypseNow:

If you dont like pron you hate babies!!

What about the opposite? Is it possible to be pro-porn and anti-baby?

HauspocalypseNow said...

@Ogg,

If you are pro porn I will let you do anything you want. porn needs all the help it can get!

however thanks to all this pword disussion Robs site is gonna get filtered and the chumps at countrywide with the filerted firewall wont be able to 'spy' on us no more! sorry chumps!(back on topic again to countrywide!)

Lou Minatti said...

Here's another third rail: Tax the profits from the sale of a house as ordinary income. That would destroy bubble prices even faster than ending the stupid mortgage subsidy.

Arthur Wankspittle said...

Here's another third rail: Tax the profits from the sale of a house as ordinary income. That would destroy bubble prices even faster than ending the stupid mortgage subsidy.
This is a bigger "third rail" than the tax relief on interest. It would stop the market in its tracks (pardon the pun) but because it's the biggest money the average guy is ever going to make (tax free) it would be suicidal for any party to introduce it.
Here in the UK we lost tax relief on interest a few years back. The rate was cut back then the relief was removed completely. However, over here, the upper limit wasn't keeping up with prices anyway, so HPI overtook the benefit in any case.

(If you have been wondering, I have been looking in but not posting. I have some serious family problems going on, so keep popping in occasionally when I can)

Peripheral Visionary said...

Removing the tax protection of the capital gains from a home seems a bit unfair, as a LOT of the appreciation is simply due to inflation. A sixty-year old couple sells the home they've lived in for thirty years, how much of the "gain" is a real gain and how of it is just inflation?

On the flip side, I'm not opposed to removing the tax deduction for mortgage interest. Yes, it would hit housing prices hard, but that would actually make homes more affordable. And it's blatant tax favoratism for owners over renters--favoring the rich over the poor. Ahh, regressive taxes, can't have too many of them (sales tax, gasoline tax, cigarette tax . . . )

If they really wanted to close loopholes that allow the rich to keep from paying taxes, they'd eliminate the tax protection for municipal bonds. Every municipality in the country would scream bloody murder, but let's face it, that one tax break alone helps the super-rich avoid paying taxes more than any other. Given that more and more of those bonds are owned by foreigners, I think it's well past time they eliminate that tax break.

H Simpson said...

6:54 PV said
>>Removing the tax protection of the capital gains from a home seems a bit unfair, as a LOT of the appreciation is simply due to inflation. A sixty-year old couple sells the home they've lived in for thirty years, how much of the "gain" is a real gain and how of it is just inflation?


True, but then again, I just sold stocks I had held for 17 years. Shouldn't I get the same benefit against inflation?

Arthur Wankspittle said...

Over here we used to be allowed a government inflation index against the "capital gain" as the tax category is called. Now there is "taper relief". So you can get a % discount against the period you have held it. Hold for 1-3 years get nothing, over 10 years get 40% discount. (Better rates for businesses, those are personal rates)