Comment by keltex

2 years ago

You used to be able to deduct any consumer debt. But that stopped in 1986. The reason was "Congress believed deductions for personal interest encouraged people to consume and stifle savings."

https://www.telegram.com/story/news/local/worcester/2007/03/...

11 comments

keltex

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ghaff  2 years ago

There used to be mostly piddling deductions for all sorts of things that you don't have today. It's probably mostly a positive to not keep track of things like sales tax in order to minimize your income tax.

  • bombcar  2 years ago

    Deductions also cause people to go temporarily insane - it’s fine paying 5% unnecessarily because I get 2% back on my taxes! Ignore the 3% that is gone forever …

  • lupire  2 years ago

    Sales tax deduction still exists. 2017 law temporarily lowered but didn't eliminate it.

    • brewdad  2 years ago

      IF you itemize. 90% don't. Also, you can only deduct sales tax OR state and local income taxes but not both.

bombcar  2 years ago

Even then I’m not sure how much it affected the poorer people, since you still had to overcome the standard deduction (lower, sure).

The deduction on mortgage interest now mostly only affects the well-off because the standard deduction for married filing jointly is so high.

  • bonton89  2 years ago

    The the 1980s the deduction for mortgage interest would have been significant, I suspect most people itemized then. And the huge standard deductions we have now are a fairly recent tax change.

    • bombcar  2 years ago

      It was 3400 for a married couple in 1980, but yes, many more people deducted mortgage interest until 2018 when the standard deduction nearly doubled.

      Many people didn't math the interest deduction correctly - only the amount over the standard deduction should be counted, as you'd get the standard deduction anyway. Can vary depending on SALT and charity donations.

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toyg  2 years ago

Which is kinda stupid, when the economy is based on people consuming.

I guess Reagan's friends at that point wanted more money for Wall Street to gamble.

gottorf  2 years ago

> encouraged people to consume and stifle savings

Ironic in hindsight; every monetary and fiscal policy as of late seems to be designed to punish savers and reward debtors.