Tuesday, January 20, 2009
The other day, I got a form from my state of residence that would allow me to estimate my quarterly taxes and send them a check every three months.
I have a better idea. I think I'll send them a form listing my quarterly estimation of what I expect my tax refund to be. They can send me a check every three months.
Thursday, January 08, 2009
The first half of the so-called bank bailout funds have been thrown at the perceived problem, and it appears that $350 billion of our tax money didn't accomplish much. The "toxic" mortgage assets are still being held by banks, and the government still hasn't figured out how to deal with them. Apparently, the plan from the Smartest People in the World is to create a new bank that will buy them up and eventually they will become worth more than they are now. Question: If the reason these mortgages are toxic is because they've been defaulted upon, how do they become more valuable as an investment if nobody's making payments on them?
It would seem to me that a simpler and far less expensive approach would be to allow the financial institutions holding these worthless notes to forfeit them. Grant title of homes financed with those instruments to the mortgagees instead of foreclosing on them, and let the banks write off these bad debts on their taxes. Have the IRS determine a one-time imputed tax value on the homes (independent of state property tax valuations) and require the new owners to pay a portion of the tax due annually for as long as they remain in the home. The remaining tax becomes due when the owners vacate or sell the home. The tax obligation or lien is not passed on to the next mortgagee.
Banks don't have to borrow money from the federal government (US), which may never get it back if the banks default. They are punished for their sloppy (and Congressional meddling driven) lending practices, but their losses are partially offset by the tax write offs they will be able to make. The loss of revenue to government is partially recouped by requiring people who elect to remain in homes affected by these toxic mortgages to make tax payments on the homes in lieu of paying on a bad or unaffordable mortgage. And the home market is stabilized.
But since the Smartest People in the World didn't come up this plan, it's not going to happen. After all, if it were this simple, we wouldn't need them. It is, and we don't. In fact, it was the Smartest People in the World that got us into this mess in the first place.
