Phantom Income Tax Relief Update

Yesterday the house passed H.R.3648 - Mortgage Forgiveness Debt Relief Act of 2007 which

amends the Internal Revenue Code to: (1) exclude from gross income amounts attributable to a discharge of mortgage indebtedness on a principal residence; . . . and (4) limit the exclusion from gross income of gain from the sale of a principal residence by denying an exclusion of the gain allocated to a nonqualified use of such residence.

The vote was 386 to 27 with 19 abstaining. This "phantom income" relief bill, sponsored by Charlie Rangel, is not the same as the bill we reported on last month. That bill, HR 1876, simply solved the problem. The current bill modifies the capital gains treatment of second homes converted to primary residences to offset the tax revenue loss expected from the phantom income relief. The offset provision will kick in on second homes bought after 2007.

Yes Virginia, the phantom income monster was something Congress depended upon to generate tax revenue. So much for the hope that the phantom income monster was an unanticipated artifact. Your government knew it was kicking you while you were down. It can even tell you how much tax revenue mortgage forgiveness phantom income generates -- if the expected revenues from the offset are accurate, about two billion dollars a year.

The current bill only applies to phantom income situations arising on and after January 1, 2007. People foreclosed in 2006 and before are still screwed. Congress can give tax relief to the down and out, but not too much.

More after the break.

According to a story in the Daily Herald the bill now moves on

to the Senate for consideration, where a mortgage cancellation relief bill sponsored by Sen. Debbie Stabenow, D-Mich., is already pending before the Finance Committee. That bill, S-1394, lacks the House's capital gains changes affecting second homes, but was cited favorably by President Bush recently.

I wonder what is going to happen in committee.

One wonders how many similar little tax "gotchas" are out there quietly generating a billion here and a billion there for the treasury while waiting to be exposed and promptly "fixed."

There's more: "Phantom Income Tax Relief Update" >>

Why Americans Are Angry

Matt Stollar at MyDD has put up a post that goes along way toward explaining just why Americans are becoming very, very grumpy with Democratic lawmakers.

This is a liberal country that likes liberal leaders, but it's also an angry country frustrated with the political system. Here's one reason why. Most polling has the government negotiating with drug companies as incredibly popular. According to this poll, it was actually the most popular item among the Democrats 100 Hours Agenda, clocking in at 87% approval and only 12% disapproval. Even the minimum wage is only at 85% approval versus 14% disapproval.

And yet. There was some promising movement a week ago, and now the Senate looks like it's going to be a dead end.

It seems big time Pharma and big time lobbyists are killing a bill demanded by 87% of Americans. That's right special intersts are being preferred over 87% of Americans. Read his post. It's maddening.

There's more: "Why Americans Are Angry" >>