Principal Reduction Tax Time Bomb Generates More Discussion

By: Tuesday September 11, 2012 2:55 pm

About a month ago, I wrote in Salon about a potential time-bomb embedded in the efforts to increase debt relief for mortgages, the expiration of the Mortgage Forgiveness Debt Relief Act. Finally, some mainstream sources have gotten around to reporting on this, in basically the same way and with even many of the same principals quoted. Jim Puzzanghera writes at the LA Times:

 

House Democrats Try to Stop Foreclosure Fraud Settlement Beneficiaries From Getting Hit With Big Tax Bill

By: Thursday March 29, 2012 6:00 pm

Here’s an almost completely unremarked-upon side effect of the foreclosure fraud settlement: the tax implications. If you are one of the lucky few eligible to receive a principal reduction from the settlement, when the banks aren’t paying off their penalty bulldozing homes and waiving deficiency judgments, you have to reckon with this: because of the expiration of a Congressional law, every dollar you receive in principal reduction would be viewed for tax purposes as income, and thusly taxed. Most of the people needing a principal reduction are in dire financial straits; they wouldn’t need a write-down otherwise. So now, we’re going to hit them with a big tax bill that they can pay for with money they don’t have.

Democrats: Boehner Not in Control, Conservative Hardliners Want to Impose Social Agenda

By: Thursday April 7, 2011 5:02 pm

House Democrats lit into John Boehner and the Republicans in a conference call with progressive media just now. “Boehner has about 80 members who think that compromise is a dirty word. They keep wanting to move the goalposts and stick in radical social changes that they can’t get any other way,” said Jim McDermott (D-WA), referring to the unrelated policy riders around abortion and women’s health funding that Republicans are demanding. “This isn’t about debt reduction, it’s about the social agenda they’re trying to jam through. It’s really a cultural war that’s going on here. They’ve been offered the money, the President gave them the money.”

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