What Is Obamacare Doing Taxing Home Ownership?

When government is involved with home ownership and the real estate industry, it tends to put restrictions on free market capitalism, for better or worse. It’s not so much left or right politics but the Obama administration, and socialists historically, who have made a grab for American home ownership. As Obamacare has been likened to the crown jewel of socialism, home ownership could be likened to the crown’s heirloom.

There is a power struggle taking place over home ownership within the United States that can be reduced to philosophical differences between socialism and capitalism. A socialist views home ownership differently from a capitalist. A capitalist thinks everyone should own a home if they choose to from the fruits of their labor. However, a socialist thinks either no one should own one or everyone should, and not necessarily from the fruits of their own labor, but provided by and through government.

The home ownership rate in the U.S. has never been 100%. The highest rate in the last decade was in 2006 and 2007 when it was 73%. Today the home ownership rate in 2013 is 62%, which may be the lowest in the decade, but is only a slight dip from 67% of 2001. The highest rate of home ownership in the last 13 years coincided with the surge in home prices, or the housing bubble. Mortgage loans were easy to get during that time, as banks were taking more risks than previously. When housing market prices plummeted so did the home ownership rate.

Gallup: U.S. Homeownership Rates, 2001-2012 Trend

In a recent Gallup poll in April 2013, “U.S. Homeowners’ Reasons for Owning More Than Financial,” U.S. homeowners said the top reasons for owning are the investment and appreciation value, build home equity, and because ownership was more cost-effective to own rather than rent. Other reasons cited for owning that are non-financial reasons are belief in owning a home; people don’t want to pay someone else’s mortgage, a home for the family, freedom, pride of home ownership, and of lesser importance – the American dream.

Renters in the same poll were asked why they rented versus owning, and most said because they can’t afford to buy. 45% said they lack the money for a down payment and that homes are too expensive. The second reason cited by 12% of renters was because of bad credit, or lack of financial stability.

As home prices continue to rise during 2013, which may make current homeowners glad, more renters are shut out of the home buying market and left with the alternative of renting. Renting is rarely viewed as a positive alternative to homeownership because it has not been sold as the American dream, but there are beneficial reasons to rent: a job that requires a lot of moving, it is easy, and no-cost home maintenance.

One reason, interestingly, not cited for owning was the mortgage interest deduction (MID) on IRS taxes, which allows an individual to write off their income the mortgage interest and mortgage insurance premiums they’ve paid throughout the tax year. Mortgage interest deduction, or MID, has been a huge tax benefit for homeowners, but government lawmakers continually, year after year, make efforts to eliminate MID from the IRS tax code so that government can keep more money.

With the fiscal cliff deal that President Obama signed in January 2013, mortgage interest and mortgage insurance deduction stays. Allowing both to stay is a big win to keep housing prices up, as it could make the difference for homeowners currently underwater in their mortgages from losing them to foreclosure. The housing lobby is powerful, and although it may have dodged a bullet this time, property and home ownership rights, and especially the mortgage interest deduction, are continually at stake in front of big government.

Obama, we know, is fond of wanting to tax the rich, and with the fiscal cliff deal there were limits placed on the mortgage-interest deductions for higher income earners that weren’t in place previously. Mortgage interest deduction is an obvious tax break socialists and big government can’t let go by.

What isn’t so obvious is a hidden tax embedded in the Obamacare bill, called the Obamacare Home Sales Tax, a real estate tax aimed at the perceived “rich,” and cited on obamacarefacts.com:

ObamaCare increases taxes on unearned income by 3.8%. This also applies to home sales over a certain amount. The 3.8% homes sales tax typically doesn’t apply to your primary residence. It also doesn’t usually apply to homes you have owned for over 5 years or on profits of less than $300k.

In short the ObamaCare home sales tax isn’t something that most of us will pay, it is a tax that is aimed at people who won’t be crippled by the tax, not at the average American buying and selling their primary residence.

What is Obamacare doing taxing home ownership? You might wonder why there is a real estate tax in a healthcare bill. I’ve wondered the same thing and can come up with the only answer – that Obamacare is swag for taxing and taking more money from taxpayers. Katie Pavlich writes in Townhall that Health and Human Services Secretary, Kathleen Sebelius, has said implementing the Obamacare law is more complicated than she had anticipated. Maybe because state Governors are not rolling over and going with the program, and 46% of Americans strongly disapprove of Obamacare? Let’s hope Congress learns from the Obamacare debacle to read what’s in a bill before they pass it.

 By Pamela Seley