MN-01 : Davis Endorsement – The End of Mortgage Tax Deduction

As the newspapers are issuing their endorsements in the First District, Congressman Tim Walz (D-01) has converted the New Ulm Journal to a supporter (after endorsing Republican Gil Gutknecht in 2006) as well as earning the support of Rochester Post-Bulletin (which withheld an endorsement in 2006.)

However, the Fairmont Sentinel found that the Republican challenger Dr. Brian “Davis has a better grasp of the key issues.”
To voters who have heard Dr. Davis in the debates might disagree, but maybe the Sentinel had the opportunity for extended interviews to glean information that may not have been widely disseminated to the public. It should be noted that Dr. Davis has failed to provide questionnaire answers regarding ethanol subsidies, illegal immigration, agricultural trade policy, environmental quality issues, and senior citizens issues but the Sentinel was able to discern that he “has a better grasp of the key issues.”

The endorsement is clearly hinged on tax policy. One aspect that is mentioned is mortgage-interest tax deductibility, which Congressman Walz supports, but the Sentinel cites as part of the problem with the housing debacle. Did Dr. Davis tell the Sentinel that he wants to end the tax deduction for mortgage-interest ?
The most important deduction for most itemizing individuals is the mortgage-interest deduction. While many will defend this deduction as encouraging home ownership; it is not all that unthinkable that it could be eliminated since the deduction disappears under the Flat Tax. Previously, First District Congressman Gil Gutknecht was a major proponent of the Flat Tax. The Flat Tax has been supported by many Republicans including John McCain who in response to a question during an October 29,1999 debate, stated : “Sure, I’m for a flat tax. I’m for a tax system where average Americans can fill out their tax return on a postcard and send it in and not have the fear of an audit.” Today, McCain may be not so inclined since there could be problems with implementing a flat tax that might be resolved by grandfathering pre-existing mortgages; but with (initially) higher tax rates.
One of the major concerns is what the sales tax rate would be ? Projections range from 23 to 30 %.

Now, there is an advantage to a Flat Tax as payments are collected at the sales tax level. No doubt the current system is ripe for underreporting. For example, Forbes reports that “the rich are different when it comes to paying taxes: They hide more of their income. The previously unreported study estimates that taxpayers whose true income was between $500,000 and $1 million a year understated their adjusted gross incomes by 21% overall in 2001, compared to an 8% underreporting rate for those earning $50,000 to $100,000 and even lower rates for those earning less. ”
Since Dr. Davis has not released his tax returns, voters have no idea if Dr. Davis has reported all his income, but voters do know that Dr. Davis has repeatedly not paid his property taxes on time.

For this voter, I would rather have a Congressman supporting IRS’ efforts to collect all taxes including from the “rich” who probably won’t like losing their mortgage-interest deduction either.

Dr. Davis needs to explain if he had any discussions with the Sentinel concerning any changes in tax policies other than retaining the Bush tax cuts and what he would advocate that the federal government do to resolve the housing crisis. Until he responds, voters may not agree that “Davis has a better grasp of the key issues.”