The President has always promised not to raise taxes on those making less than $400,000 per year, but now we learn that fees applied to mortgages don’t count in his mind, or transactions on Venmo or PayPal of more than $600 per year in what mounts to a war on responsibility.
“The one thing all Americans agree on is that the tax system is not fair,” President Biden said during his State of the Union Address last year, using phrasing that was typical throughout the 2020 campaign. “We have to fix it. That’s why I’ve proposed closing loopholes so the very wealthy don’t pay a lower tax rate than a teacher or a firefighter. And under my plan, nobody earning less than $400,000 a year will pay an additional penny in new taxes. Nobody.” Since taking office, he’s repeated this promise too many times to count, frequently mentioning how he will build an economy from the bottom up rather than the top down. Last week, however, the Administration announced two regulatory changes that make clear the government has its sights set on squeezing additional money from middle income Americans one way or another. The first proposal technically concerned mortgage interest and fees instead of taxes, but will ultimately have exactly the same effect. Starting May 1, home buyers with good credit and a substantial down payment will pay more for their mortgage while those with poor credit and a limited down payment will pay less. Federal Housing Finance Agency Director Sandra Thompson claimed these new rules were designed to “increase pricing support for purchase borrowers limited by income or by wealth” and they can be achieved with “minimal” fee changes. Minimal in their mind is apparently $40 per month, $480 per year, $14,400 over a thirty year term, for an average buyer with a 680 credit score taking out a $400,000 mortgage. This is on top of the current crippling mortgage rates which can already cost close to $1,000 per month. If, however, you have better credit and put more money down, this “fee” – definitely not a tax, mind you – could increase to $100 per month. Importantly, the new fee has nothing to do with a person’s income. It is essentially a tax on responsibility. A janitor and an office worker earning below the median income who pay their bills and save up for a down payment on a modest house are now paying more than the same couple who does the opposite.
“If you have a high credit score, and 680 is a good credit score, you have to pay more. And we’re talking about real money. This could be $100 a month more, depending on the size of your loan. So it makes no sense,” real estate expert Mitch Roschelle explained to Fox News. “And by the way, this isn’t about first-time homebuyers. There’s nothing in this rule that says it applies to first-time homebuyers. It applies to anybody borrowing money that’s insured by FHA. It’s madness.” Strategic Wealth Partners CEO Mark Tepper noted, “That’s not the way you grow as a country, as an economy, by essentially saying, ‘Hey, if you spent recklessly, you lived above your means and you stopped making your payments on time, have no fear. Someone who’s done it the right way is going to pay for you.’ That’s not what capitalism is all about, and it puts us in a situation where there’s no consequences when you make bad decisions.” Mr Tepper also believes there are parallels to the administration’s currently suspended plan to forgive a portion of student loan debt. “We mentioned the student loan issue. Cab drivers who never went to college are subsidizing that student loan debt, and in this situation, this Biden administration more and more often, they are making decisions to reward bad decisions,” he added. Some have remarked that the move is stunning considering it comes only fifteen years after the subprime mortgage crisis crippled the economy, helping to usher the President’s former boss, Barack Obama into office. For those with something resembling long term memory, the crisis was precipitated by lax mortgage rules that lead to people purchasing homes they couldn’t afford. We are now proceeding down that road again, this time in the name of equity with our fellow taxpayers picking up the bill for high risk customers, who in all likelihood should consider renting until they can secure a sufficient down payment.
The Biden Administration’s second financial related announcement last week was equally troubling. Despite his promises that the army of new IRS agents hired as a result of the Inflation Reduction Act, some 87,000 in all, would be focused entirely on ensuring wealthy individuals do not cheat the system, the agency is now inserting itself into Venmo, PayPal, and other person-to-person monetary transactions. Starting next year, anyone receiving $600 or more in an entire calendar year will have to file a 1099-K form or face a $2,500 penalty. In other words, if you sell a pair of popular concert tickets on StubHub, list an old couch on Ebay, or run a Fantasy Baseball league, the IRS wants to know about and potentially tax you for it, effectively demanding you pay income taxes on the proceeds from a garage sale or a popular lemonade stand. The new $600 limit is down from the previous $20,000 and 200 transactions, a much more sensible level given that volume suggests a person is using the payment service as part of a business. Barely $500, on the other hand, suggests merely a causal exchange. Republican Congressman David Kustoff of Tennessee described it this way in an op-ed for Fox Business. “Families and small businesses have enough on their plate dealing with President Biden’s economic crisis – inflation is out of control, grocery store shelves remain empty, and small businesses are struggling to find workers to keep their doors open. The last thing households need right now is a confusing and complicated tax filing season with more rules, paperwork, and scrutiny from the IRS.” He also voiced obvious privacy concerns given that “confidential taxpayer information will be more exposed to hacking, data breaches, and other forms of unauthorized access.” This move can only be described as punitive. We’re not talking about millionaires and billionaires selling yachts online and trying to hide their capital gains from the government. We’re talking about ordinary people engaged in common transactions for a very limited amount of money. That President Biden believes one of the most feared agencies in history should be monitoring these transactions to charge a person a few bucks on the sale of a couch is a level of micromanagement of the economy and intrusion into our personal affairs that has no modern equal.
It is also worth mentioning that both of these new taxes and fees have been implemented via executive fiat. There was no debate. There was no vote. There was almost no coverage in the media outside Fox News, and yet every American now has the IRS peeking through their PayPal account and responsible Americans have fees that could easily total $30,000 or more over the life of a mortgage. Incredibly, the Administration would increase this burden even further if their recent budget proposal is any indication. President Biden promises deep reductions in the deficit, but only achieves them by increasing everyone’s taxes when he allows the current rates to expire. He insists that somehow the lower rates will remain in place for the average family, without saying how he’d achieve that, and while he’s already broken his other promises. Why would anyone believe him based on the events of just the past week? Ultimately, it is one thing to argue that Elon Musk, Bill Gates, and Warren Buffet do not pay enough in taxes. We might disagree on the optimal strategy to maximize revenue to the government and economic growth, but clearly they can afford to pay more, at least in principle. The President, however, is no longer pursuing that course. Instead, he’s using it to distract from his plans to increase taxes and fees for every responsible American, pretending he’s at war with wealth when he is really at war with responsibility. Two identical, middle class families separated only by 50 points in their credit score and the amount of money they’ve saved for a new home will now pay different rates based solely on poor choices. The responsible family will pay more. The irresponsible family less. Putting this another way, in President Biden’s view a family is better off having a lower credit rating in this instance. The family that pays its bills and saves money should be penalized, not the other way around. The obvious result will be less responsibility overall. Adding insult to injury as it were, this will come with more intrusion from the federal government. The army of new IRS agents will not be policing Mr. Musk. They will instead be perusing your Venmo account.
The combination of the two does not suggest a happy ending for the average American taxpayer, beset by paying for irresponsibility and then dealing with the IRS for the privilege of it. This morning, the President announced his reelection bid, saying the battle for the soul of America is not completed yet. This is Biden’s America now, however he may lie about it.
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