patrick.net

patseajul,

I rest my case.

Some more bad news, California is starting to do audits. They have targeted tax free exchanges, sales of personal residences (they will want receipts to prove your basis), dependents, and the big one-mortgage interest.

Bad news? We should rejoice! :)

Peter P

I was thinking the same thing, but that is how she wrote it!

She may have been thinking this: tax preparers may be somewhat overly "aggressive" in claiming deductions, but they may have future liabilities if caught.

I am trying to understand the genesis of MID.
Suppose the interest portion of your mortgage is $3k a month and you are in the 28% fed, 9.3% tax bracket CA. What does a fellow taxpayer get for the $13k+ you get to write off your taxes?
Is it that ownership encourages people to treat their homes better, demand that their neighbors treat their homes well, and that society work to ensure their neighborhood holds its value?
Or is it that home buyers are effectively capitalizing banks so they can fund companies that then give jobs?
Really, I am trying to figure why the govenment is in the business of giving home owners tax breaks.

Duke,
I actually looked into the history of the MID last year. After the XVI Amendment (1913) made income tax Constitutional, all sorts of interest payments were quickly made deductable under the theory they were in general a "business expense". Hence the MID pre-dated the New Deal.

As time went on, OTHER forms of interest deduction (e.g. credit card interest, car loan interest) were phased out leaving the MID standing alone. There never was any government theory on why the MID made - or makes - sense.

Government always wants the society to have more homeowners, through tax rebate or stamp duty exemption, or outright first-time home buyer subsidy. More homeowners means more stability, a homeowner is essentially "chained" down to his house for at least 15-30 years, at least mentally so, so he is more likely to support status quo, because, he is already, uh, a homeowner (never mind how much equity he has in the home).

Other governments have similar approached to encourage home ownership, although not all in the form of MID. Subsidized interest rate, first-time home purchase grant, tax write-off, you name it. In this particular respect, the US government is just following the norm of all governments.

With the current housing mess we are facing, I think MID will only get bigger, because the government would hate to see under-water borrowers walk. Those who walk become a destabilizing element for the society.

Debt is a form of slavery, if you don't know how to take advantage of debt for strategic purposes. Having your debtors go into debt mindlessly is a great way of manipulating them. The best manipulation is not to make them broke, but to keep them on the brink of insolvency all their life.

Debt is a form of slavery, if you don’t know how to take advantage of debt for strategic purposes.

But if you know how to take advantage of debt for strategic purposes...

Debt = Wealth
Slavery = Freedom :)

People who mastered the art of indebtedness will not be talking on this blog, they are already running this country.

People who mastered the art of indebtedness will not be talking on this blog, they are already running this country.

Well said.

Here's the link to a history of the MID that I posted in an earlier thread.

www.taxfoundation.org/blog/show/1382.html

The existence of deductions merely illustrates the excessiveness of taxation.

"I think MID will only get bigger"

OO, you may know PM/Forex inside out but you know absolutely nothing about..., ?

(Aw...you're probably right) :(

When the NAHB had their 10K CREDIT for buying a "new" home brain fart, Len Burnham of the Tax Policy Institute (that DennisN references above) was beside himself with disgust. He said, "How is it possible to extend an even more generous tax code to real estate than we already HAVE!"

I guess I can buy the argument that encouraging a home ownership society is stabilizing. Ummmm. When homes prices go negative on a national basis, I cannot imagine a more destabilizing problem. Perceptions of unfairness are everywhere rright now.
My current perspective is one of the tax base meeting society needs. Notably, the infrastructure of CA is deteriorating. While it does not get much press now, our levies are a disaster. Our roads are poor, our schools are underfunded, the police to resident ratio are at historic lows. Our legal system is so back-logged we now try to solve everything in arbitration.
For me, these are the biggies a society must undertake: education, security, legal recourse, public health, and infrastrucure. Since we are not providing these at acceptable levels, we need to consider, as a state, if giving big mortgage breaks is something we want to do. A great deal of revenue is lost to the MID. Of course, I will fully agree with anyone who points out that we must remove most, if not all, state spending outside these categories.

Off topic, but very important.

If what's reported on here is true

www.nextenergynews.com/news1/next-energy-news2.13s.html

then this is the most important economic story of the decade.

Duke,

What's worse is that NAR has brain-washed every new Realtor (TM) to "tell the tax advantages story".

Well... like that hasn't been factored INTO the asking price of the home!?

Oh man, you guys will love this. I was watching "Unnatural Causes: Is Inequality Making Us Sick?" on PBS last night. So, I kid you not, some doctors did a study where they infected subjects with a cold virus. The longer the subject's parent was a homeowner, the less likely it was for the subject to become sick. If that isn't a ringing endorsement of home ownership, I don't know what is! :-)

RE: “Unnatural Causes: Is Inequality Making Us Sick?”

No, but unhappiness can certainly make us sick.

Is it just me, but I think PBS programs tend to be extremely liberal.

Again, this shows my point, that one can use "science" to support any agenda.

If "equality" really means what it is, I wonder how many US liberals are willing to drastically lower their stand of living so that the third world can have their "rightful" share.

Of course not. Equality generally means that no one is allowed to be richer than me.

Argh!

In regards to my Bakken Formation post several up....

Does anyone have any suggestions for North Dakota REITs? :)

Here is a list:

http://www.inrealty.com/restocks/ligert.html

I don't see anything for ND and SD though.

Rice went up 30% in a day
http://www.ft.com/cms/s/0/425a0e2e-fc6a-11dc-9229-000077b07658.html

I have long seen this coming but couldn't get a focused exposure to rice price. RJA is the best I can do which includes rice, but the component is too small to make a difference.

The rise in food commodity price is just the beginning. I hope there will be a rice ETF soon. Quite a few Asian countries are running out of rice inventory, China has exhausted almost all of its backup rice storage in the last 3 years. A further 100% hike from the current level is not unreasonable to expect.

The fact is, the $100+ oil has not seen its ripple effect in agriculture fully illustrated yet. Farmers, particularly those from developing countries, are squeezed by the soaring fertilizer price which is 90% driven by natural gas, so most of them CUT BACK their production instead of ramping up. They only grow enough for themselves to eat. The reason for the cutback is because the food commodity price in these developing countries are heavily controlled by the government so that everyone can afford some food. When you have an input price that is soaring and not controllable by the government, and output price that is subject to heavy government control, the result is even lower agriculture inventory and even higher food price.

This is only the beginning.

But how do we survive trading leveraged positions in commodities?

soaring fertilizer price

Potash?

I think CBOT has a rough rice contract. Is that what you want? It does not look super-liquid though.

I don't do futures, because I am not good at timing. If I identify a trend, I just want to buy and hold.

Soaring fertilizer price may not help the fertilizer company. Like I said before, the farmers just cut back and grow less food.

Soaring fertilizer price may not help the fertilizer company. Like I said before, the farmers just cut back and grow less food.

Have you seen the price of Potash (POT)? It is going up like a homesick angel.

It is possible to buy and hold futures. In fact, this is what many DB funds are doing? Leverage kills, but it is possible to have unleveraged position with enough T-bills in your account.

Not investment advice. Futures trading involves *great risks*.

Rogers is right on this one, this food trend won't benefit the fertilizers, won't benefit the farmers. It benefits only one thing - the price of the end product. And as more speculators get into the market, food hoarding will become very prevalent which will further escalate the situation.

I definitely don't want to be living in these countries during such a turmoil. I guess that's why Rogers chose to live in Singapore but not Shanghai. You can't take advantage of such a situation by putting your life on the line.

POT is already very frothy. There's a lot of expectation built in, they are not in hi-tech and with that kind of P/E, one mediocre quarter can send them right back to earth.

I prefer to bet on the end price, because farmers can choose not to use any fertilizers, but we cannot choose to not to eat.

As I have said, Nature is ways to deal with overpopulation. People are liabilities.

POT is already very frothy.

Agreed. I have no position in that stock.

I prefer to bet on the end price, because farmers can choose not to use any fertilizers, but we cannot choose to not to eat.

Fertilizers are the food of our food though...

There seems to be a bubble in the number of ETFs though...

There are huge pile of cow "stuff" all over the Boise valley. How in the heck can fertilizer be priced so high right now?

Peter

Have you ever spent any time in the 3rd world?

Have you ever given any money to someone begging in the street?

Simply curious.

I have donated to some breast cancer foundation and some tsunami relieve efforts.

I might have given money to beggars when I was small. Now I make a conscious effort not to pay them. I am not against charities who reach out for the homeless though.

Dennis-

Official stated oil reserves are a less reliable number than US inflation numbers. Folks have been talking about major unproven fields for many many years, every other month you can find a new one. Be very very skeptical.

For my money, that report is utter nonsense.

On another topic, any thoughts relative to the illegal US income tax movement ala Wesley Snipes and that crazy tax protesting couple up in the backwoods of New England?

I think charities should focus on education and medicine.

Feeding the hungry will only prolong pain and suffering.

Off topic apologies, here is a new one.

Fairfax county Virginia, a Washington dc suburb and one of the wealthiest in the country, is intending on massively purchasing foreclosures directly. (now our local governments are going to be catching falling knives).

About 25% of firefighters, police, teachers etal currently employed by the county actually reside there. The operating assumption being the common story of lower paid professions being "forced" to outlying sprawl. Obviously a great trend for the builders, developers, and Mobil Exxon. Not so great for the supposedly underprivileged public servants.

So Fairfax county endeavors to "kill two birds" through mass purchase of 'discounted' foreclosures, subsequently offering this stock to this select group on subsidized basis.

US has a much better chance counting on agricultural export to tie us over than counting on finding another big pile of oil reserve. The chance of the latter is next to 0.

US is the largest food exporter of the world with the most arable land per capita. Food shortage in the world is definitely a good news for us because that means for once our farm subsidy will pay off handsomely.

I am a strong supporter of farm subsidy no matter how much it costs. Food security is just as important as maintaining a military superiority, without both we are just another Argentina.

oo

I find that rice post of yours immensely disconcerting.

Food shortages equal political instability, mass migration, and more war.

Many argue we have already entered the century of resource wars, of which our Iraqi adventure marks the opening salvo.

Poor Africa.

I'm not sure if you simply manage your own funds or also those of others, but I'm continually impressed with the depth of your knowledge in such things. Apologies if its inappropriate to ask and feel free not to answer, but what do your avg annual returns look like? I'm prepared to be a very jealous bitter investor on your report.