One of my goals with this blog is to understand finance as a whole; to truly understand how the things I read on print pertain to my life and my future. An article recently published by the Wall Street Journal titled "Top Earners May Face Big Hit" struck me as a great example of the philosophy that I hope to espouse with this blog.
This article summarizes a recent presidential panel's modification of certain tax credits and deductions which currently exist of our current tax system. Their proposal, as stated by the WSJ, "could hit higher earners hard, largely by wiping out deductions and investment breaks that tend to especially benefit those who make enough money to itemize their taxes." I'm sure, that by the time you read that last sentence, you thought "ok, whatever, high earners...zzz...NEXT!" So would I, and I did, but my darling husband sent this article to me with a high 'alert' attached - could this mean something to me and mine?
Why yes, indeed it could and it does. In plain language, the panel proposed that the deductions that "high earners" receive for mortgage interest payments be removed from our current tax credit system. It's thought that "high earners" can recoup this loss from other types of changes encompassed within the proposal but the question is...are all "high earners" the same? I think not. I would never think of myself as a high earner - in my opinion, I get paid a very modest salary. My husband earns more than I do - is he rich? Nope, not at all (in fact, my closet can definitely attest to this fact) What he does have is an excellent credit score & a tendency to save, which allowed him to put a down payment towards a lovely apartment. I'd say a good amount of his salary goes towards the mortgage & housing costs, and now his concern is mine - that the proposed change would dramatically affect his take-home salary and tax return.
The point is - does it seem right to create something that would greatly impact what was such a huge life decision for him? Who qualiifies as a "high earner"? While I am the first to agree that our nation needs to implement drastic changes so as to reduce our nation's budget deficit, it's pretty clear that there is something of note here, namely, that our definition of a "high earner" needs some further clarification within the context of individuals who utilize tax credits to make saavy business decision to their benefit and others. Color this whatever party color you'd like, but could we afford our apartment without the mortgage tax break? Probably not. We'd rent out an apartment, steadily losing money on a place we could never permanently call our own. What will we do if this passes? We're not panicking, but it does have us rethinking some of the larger decisions we've each made over the years (like taking out school loans, for example).
What about you? How would the proposed modifications change your life? Would any of your recent life decisions be impacted? What type of changes would you propose to our current tax system?