Home prices reflect both the ability of the buyer to qualify for the loan and the taxpayer’s monthly after tax monthly mortgage payment. With non-deductibility of a larger proportion of the monthly payment, the amount of income necessary to qualify for home loans would go up and the comfort for the homebuyers of the monthly after tax loan payment would go down. This could literally destroy a housing market that fuels the economy of the United States.
The most important itemized deduction in the internal Revenue Code is one everyone hopes they will never need and never use, but it represents a definition of fairness and social responsibility: the casualty loss deduction. Mr. Camp eliminates the casualty deduction. The casualty deduction provides a deduction for any uninsured casualty loss that exceeds ten percent of adjusted gross income. It is designed so that at the moment of personal tragedy (fire, storm, shipwreck, theft), where at the maximum, literally all could be lost, the taxpayer is not faced with the Internal Revenue Service demanding tax payments from assets that have been destroyed. This section in the Internal Revenue Code must be preserved.
The plan appears to be both a direct and indirect attack on education. The bill eliminates the deduction for student loan indebtedness, regardless of when the education loan was made. It no longer considers discharge of student loan indebtedness tax-free after certain public service activities. The bill repeals the exclusion from income of employer paid tuition. And in the oddest section of the entire proposal, Mr. Camp wants to place an excise tax on a portion of the investment income from certain private colleges. (This tax is estimated to be about $170 million per year and its result would be to move the $170 million from college building programs to the Federal government. How odd is that?)
Mr. Camp's plan eliminates both the deduction for and the income from alimony. While this change is perspective, the current law has been in place forever and seems to work. The very fact that the plan estimates that this would result in an additional $5.5 billion to the Treasury over the next ten years leads one to belief that this is an area to leave well enough alone.
Over time, commentators may be able to understand and report on the impact of the proposed plan on the comparative before and after amounts of federal taxes due by different categories of taxpayer. At this point, it is too early to comment thereon.
I love the proposals in Mr. Camp’s plan that make the preparation of a tax return something that can be done without the requirement to make more than a single calculation of tax. Simplicity is a very worthy goal. But, the changes to the home mortgage deduction, the elimination of the casualty loss provisions and the seeming attack on taxpayers who want to enhance their education and repay their student loans makes the bill as currently offered a non-starter. But credit to Mr. Camp for offering a comprehensive plan and after the next election, a competent Congress could find a pony in his effort.