Bring back the personal interest tax deduction especially for credit cards.?
Posted by Financial Advisor | Filed under Tax Savings
What would be the problem with bringing back the personal interest tax deduction especially for credit cards?
Yes we were able to once upon a time deduct the interest on credit cards as well other sorts of personal interest such as a car loan. Back then the excuse for eliminating this was that they did not want to promote spending. Well that was a bunch a crap in my book. That is all we heard recently to get the economy back on the roll – go out and spend. The government wouldn't have to bail us out just allow for this type of deduction to be taken once again. Depending on how much debt someone is in would determine the overall amount that could be deducted. Some more some less. As for the banks having any say with this, they are at our mercy now and with this we would like to see some of our life line money they know all to well how to spend be once again back in our wallets. With that a credit card charging 30% interest would become a thing of the past. With the hudge bailouts that the banks got without our approval and with our money this is the least that could be done to help the backbone (middle class) of this economy.
The problem with that would be that the federal government would be losing money. Any interest you get to write-off on your taxes is money not being paid in taxes. Since when have you heard of the government thinking that was a good idea and doing it?
As for the eliminating it in the first place, you have to consider the the state of the economy at the time. If you're in a time period of heavy inflation, you don't want to encourage heavy spending on credit. I would imagine that this had something to do with it although I'm sure the government was only too glad to get more money.
As for getting the economy back on track by spending, that was a ridiculously simplistic view of the problem at the time and only shows how clueless Bush was. Lastly, allowing the write-off won't hurt banks and credit card companies. You'd still have to pay it but all you would be doing is transferring the expense to the government ie the rest of the taxpayers.
Bringing back the writeoff only helps at tax time, and to be honest, I suspect the middle class that you mention does not make its spending decisions based on tax advantage. It's not like "Woo hoo, it's deductible, so now I can spend more!" People who are going to spend are going to spend to their limits, anyway. People who are wise will realize that even with a tax deduction, they are STILL paying the interest, and still use credit sparingly.
In fact, when something is subsidized, the price might actually increase, so if credit card interest becomes deductible, then rates may rise so that people are paying the same amount of net interest over the long term, anyway.
That would be nice, but it isn't going to happen. The federal government would loose to much money