The congress, following an approval rate at historically low level, around 10%, voted the removal of the tax credit on earned income tax and the deduction of the mortgage interest and child tax credits from the tax code, beginning with the fiscal year 2014. This move aims to improve the way this 113th United States Congress is perceived, namely as distanced from the problems or the people that it is supposed to represent and serve.
This move will have as main effect the cutting of entitlement payouts of more than $177 billion, as follows:
- $54.33 billion from eliminating the tax credit on earned income paid by people whose income is lower than $12,000 a year, which means high tax cash rebates, exceeding by far the current tax those people paid.
- $69.7 billion dollars from the deduction of the mortgage interest tax, criticized for primarily favoring high income earners.
- 54 billion dollars from the removal of the child tax credit, considered to serve an unfair purpose.
Wisconsin congressman Paul Ryan and Texas congressman Ted Cruz are the active promoters of this reform. Although democrats expressed their opposition, the majority party, supported by several industry groups, proclaimed these measures as an important victory for America.
They said that businesses and corporations would create more jobs, and the tax burden would be reduced by 500 billion annually. The vote was preceded by the intense lobbying of several libertarian/free market groups, especially those sponsored by Koch Industries. In fact, democrats could not do much about it after having been defeated in the elections. As a consequence, republicans easily imposed their agenda and platform.
The enthusiasm of congressman Paul Ryan made him say that this was great news for the American people. More money for job creators means economic growth, although skeptics worry that giving even more money to the wealthy does not spur the economy.
According to Ryan, the detractors do not base their allegation on facts, but on mere empirical considerations and, therefore, they cannot prove their point. On the contrary, the supporters of these measures are convinced that giving more money to corporations will allow the latter to extend their businesses, hire more workers and, thus, push the country’s economy forward.
According to the predictions of Heritage Foundation Conservative Economists, the country’s economy will experience a 20% yearly growth under the new circumstances. The Dow Jones stock index is expected to go beyond 25,000, generating numerous opportunities for speculators to get rich, if the tax breaks for corporations become effective. This would be a strong impulse for the economy to move forward, exactly what it needs.
The best strategy to follow would be to redirect all the funds used now for wasteful entitlements toward those vital functions that can move the economy forward. Capitalism giants are expected to rise and take action, giving the American Dream a new meaning.
If you want to find out how this will impact your mortgage loan application, do not hesitate to contact Maureen Martin, your San Diego home lender, always willing to help.