About This Blog
You probably remember that President Obama's payroll tax cut was extended for two months near the end of December.
What you may not know is who paid for the payroll tax cut:
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.
What Obama and Congress gave people with the right hand, they took away from people with the left hand.
But at least this money will go into the Social Security fund to prevent a larger shortage there...won't it ?
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.
Thus, Obama and Congress have figured out yet another way to rob the Social Security Trust Fund.
Who is to blame for this ???
It depends who you ask:
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.
One congressman, Florida Republican Allen West, said he tried to blow the whistle on the whole thing before Christmas.
"I read the legislation and raised the flag. Unfortunately nobody paid attention to what I was saying at the time," he said, calling the fee a backdoor tax increase on the middle class.
"It absolutely is because you're talking about the homeowners - when you're talking about the people that are gonna be using the Fannie Mae, the Freddie Mac, the government-sponsored enterprises - it is absolutely a tax increase on them."
Hmmm. One wonders how the mortgage fee was passed in the first place if both Democrats and Republicans were against it. Don't you just love politicians ?
The Obama administration defends the tax cut that isn't:
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." And it will "help bring private capital back into the mortgage market, which [is] good for borrowers over the long term."
Maybe so. But Patty Anderson only knows that for the next 30 years, she'll be haunted by the Washington ghost of Christmas past.
"I think it just looks like Washington grabbing more money," she said.
I can't make much sense out of that Obama official's claim that the fee will "help bring private capital into the mortgage market" (if anything, wouldn't it have the opposite effect by dissuading homebuyers ?), but paying for a payroll tax cut with a fee (tax increase) is some trick, and using the fee as general revenue instead of earmarking it for Social Security is an even dirtier trick.
All I can say is, our tax code seems to get more screwed up by the year. Getting rid of our monstrous 67,000 page tax code and replacing it with a simple flat tax is sounding better all the time. At least that way, we could keep partisan gamesmanship to a minimum. Getting the grubby hands of politicians off of our Social Security funds sounds like a great idea too. Why doesn't that ever happen ? I thought our elected officials were supposed to look out for our best interests....