So, instead of getting the relief they need to save their houses, victimized homeowners will be forced to pay a significant portion of that savings to Uncle Sam. Since the average homeowner will receive about $19,000 in settlement relief, and the average middle class family pays about 25 percent in taxes, approximately one quarter of the forgiven debt — some $4,750 — will have to be paid to the IRS and by those who can least afford to pay it. For some families, that could be enough to tip the scales, pushing them back to the brink of foreclosure and eviction.
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This is fiscal insanity. And Congress knows it.
To his credit, McDermott has introduced a bill that would extend the tax cuts until 2015. But herein lies the first indication of Congressional business as usual on this issue. A different bill, introduced by Sen. Debbie Stabenow (D-Mich.), also would extend the tax cuts, and has a better chance of passing than McDermott’s, since it has bipartisan support from 17 co-sponsors of both parties.
So what’s the problem? McDermott’s bill extends the tax cuts until 2015, the same year in which the major banks must complete distributing restitution to their victims. Stabenow’s more popular bill, on the other hand, extends the tax cuts only until 2014; meaning that even if it passes, some homeowners will be pushed to the precipice of the exact same financial cliff two years hence.
Dumb? Yep. And but that’s only the Democrats’ portion of the stupidity. Republican stupidity is found in the party’s complete legislative blockade, a strategy they have pursued over the last two years to deny President Obama even a sliver of economic success. The odds that the members of the Party of No will find it in their hearts (or their steely-eyed political calculations) to save homeowners from this counter-productive tax in the next two months are only slightly better than the odds of America achieving universal peace by Election Day.
[Related Link: Tax Help: How to Dispute A 1099-C Form]
And what happens after the election? That’s anybody’s guess. I rather doubt, however, that forcing Wall Street megabanks to pay billions of dollars in restitution to regular homeowners will be Priority #1 in the event of a Romney-Ryan administration. Those aren’t the taxes they are looking to cut (wrong bracket).
No matter who wins on Nov. 6, however, this tax is wrong, and it must be allowed to lay dormant where it belongs. Innocent homeowners who were victimized by robosigning, illegal evictions, and loan servicing shenanigans aren’t getting rich here. It’s about keeping people in their homes and preserving neighborhoods. Actually, it is a real stimulus package.
Democrats must get serious and back legislation that protects all the relief won in the National Mortgage Settlement, not just some of it. Republicans must stop their willful obstructionism, and follow through on their oft-repeated promises to prevent taxes that hurt the economy.