John Boehner can take a hit on this one too. You know that wonderful payroll tax cut? Guess who’s going to pay for it?
(CBS News)Just before Christmas, American workers got a rare gift from Washington politicians – the current payroll tax cut would be extended for two more months.
At the time, both President Barack Obama and House Speaker John Boehner lauded the move to avoid a tax increase for millions of working Americans.
But there’s something the politicians weren’t bragging about – the fact that they’re paying for the two-month tax cut with what has turned into a brand new fee on home buyers.
The new fee is a minimum of one-tenth of 1 percent on Fannie Mae- and Freddie Mac-backed loans, and is likely to go much higher.
It will be imposed for the next 10 years on most mortgages and refinancings and it lasts for the life of the loan.
For every $200,000, it amounts to an extra $15 dollars a month.
It’s bad news for Patty Anderson, who’s buying a home in Virginia.
Anderson will save a couple hundred dollars from having her payroll tax cut extended but her mortgage broker told her the new fee would cost her almost $9,500.
“I was absolutely startled that it would add up to that much,” she said.
The money collected by this tax will go toward social security, right?
Nope.
The $35.7 billion collected in fees won’t go into the Social Security fund to replace the lost payroll tax. It goes to the general treasury where Congress can spend it however they please.
“We had to pass it to find out what was in it” Boehner is rumored to have said. Fingerpointing all around.
CBS News went to Capitol Hill ask what Congress was thinking when they passed the mortgage fee hike. Boehner pointed the finger at the Senate.
“As you’re well aware, this bill came over from the Senate. I don’t know how they justified it. We would rather have offset that two-month extension with reductions in spending,” he said.
But the Senate blamed the House. And Democrats and Republicans blamed each other.
The Obama administration says this won’t hurt much because the knife will be stuck into the taxpayers’ backs slowly.
An Obama administration official defended the mortgage fee, calling it “modest.” She said it’s “unlikely to negatively affect borrowers” because increases “will be phased in over the next two years.”
Patty Anderson doesn’t agree.
“I think it just looks like Washington grabbing more money,” she said.
Yep.
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Except for liberals being foolish.
For your enjoyment.
http://www.popmodal.com/video/7768/Taxman
What it will do is further stagnate housing prices, already deflated heavily by the housing bubble bursting in 2008. Most people who go into buying a house have a set budget amount, like say, $300k. That is based whatever interest rate they can get, the terms of the loan itself, and in some, possibly many, of the cases, the property taxes. Adding in another tax on top of the property taxes increases the monthly mortgage amount a person has to pay, meaning, to stay within a set monthly budget amount, with the new tax, the available budgeting solely for principal has to decrease. So, instead of that amount of $300k a person can spend on a house, now it has dropped to more like $290k.
Not a big difference you say? Ok. Think about those selling their homes. If they had a house on the market and their minimum they would take is $300k, now they have lost out on the number of available buyers for their home. If they need to get out from under their mortgage quickly, say because they are moving to a new one, then their only option is to take less money. And that affects the housing prices in that area as well, as sellers are competing with other sellers for the limited amount of buyers available, particularly in the state the housing industry is in right now.
And for what? so that the government can take in, estimated by the way, a few billion extra per year when the annual deficits are topping $1Trillion.
What’s more, this isn’t a tax that only affects the “rich”. This tax will also affect those middle-class and the poor, even those who rent or lease.
Yup… it’s a POS deal and one of the many reasons I have opposed the payroll tax cut to begin with… most especially after reading the bill. The other is, of course, the shell game accounting of transferring the money not being put into the SS Trust fund from the general, then having Congress replace it with IOUs and spending it again. It’s almost like they borrow twice, with twice the interest. Once to put it in there, and again when they have to replace it.
Compound and amortize all that interest/debt, and I guarantee you that the increased costs of buying a home will never begin to pay back this particular tax cut. Considering the status of the housing market, it was the wrong tax to pick, the wrong way to pay for it, and a really dumb move on the part of both parties.
And all for the small amount in a paycheck per month?? duh…
@johngalt, didn’t you get the memo? The admin and Dems are telling us all is well, the earth is healing and the waters are parting. /sarc
Bernanke isn’t as sure, and has now extended his guarantee on way too low rates until 2014 now. That’ll keep the housing prices artificially high which, of course, translates into a bigger “1%” fee.
And of course you are right that it’s a flow thru negative effect – from the mortgage lender to the borrower. And if that borrower is an investor, it flows thru to the renter.
But since the amount of loans an investor may hold with Fannie/Freddie is limited, the impact on renters won’t be as much as on primary homeowner occupants. Now if they decide to apply that to FHA as well – who also does multi family unit properties and is the most common loan in the past few years – that’ll really hurt. But, if I remember the bill correctly, the FHA loans were not involved – just conventional loans purchased by the GSEs.
I found this Article earlier this week. I have already sent it to http://www.hobb.org homeowners for better building and http://www.hadd.com. Homeowners against deficient dwellings. These are the two largest homeowner advocates and they are going to spread the word.
Boehner has been a failure left and right, and needs to go. His recent spiel of putting a stop to the Fast and Furious issue is the icing on the cake.
Sorry guys, the GOP is responsible for this.
Really Liberalmann? Sen. Bob Casey, D-Pa, the chief sponsor for the Senate side of this bill that was passed. Man you really are stupid, that D-Pa means DemcoratPennsylvania, not republican.