IL-06/IL-14: Beware of Analytics Saying SALT Deduction Caps of TCJA Causing Home Values to Drop, Part I

Lauren Underwood

Cal Skinner beat me to the punch and published an article citing a recent Moody Analytics measurement of the loss of housing value as a result of the Tax Cut & Jobs Act of 2017 (TCJA) and the state and local taxes (SALT) deduction limit of $10,000.

The SALT deduction limit of $10,000 was critical to pay for the TCJA. But Democrats have seized on fear to frighten suburbanites across the country and lie about TCJA, SALT deduction limit and all, while ignoring the truth that TCJA has given the American people a roaring economy and the lowest unemployment rate in 50 years.

The Moody Analytics metrics were used by ProPublica in an article published last Thursday titled and sub titled:

Trump’s Trillion-Dollar Hit to Homeowners

By reducing deductions for real estate taxes, Trump’s 2017 tax plan has harmed millions — and helped give corporations a $680 billion gift.

That headline sounds scary if you’re a homeowner, doesn’t it? Here’s the problem with it — it’s a lie that begs for discernment.

And discernment on the “gift” given to businesses and corporations across the country — the fruit of that “gift” is the roaring economy and the record low unemployment rate previously cited. Some, particularly leftist Democrats, want you to ignore the truth and vote in fear based on the lie.

A lie seized upon by Congresswoman Lauren Underwood in a tweet on Saturday citing the October 10 ProPublica article, which demanded responses by me in Twitter.

Please read through the embedded tweets from Saturday, including BOTH articles, from ProPublica and the Tax Foundation I linked to at the end of the thread. Read both with discernment. The respective articles can be accessed by clicking the links to the articles in the embedded tweets (and ICYMI the Jeanne Ives article published last Thursday on McHenry County Blog can be clicked, too):

My tweet response to Underwood’s 2-part tweet drew a response from Rick Wion, senior director of consumer engagement at Kellogg Company, and previously the social media leader at McDonald’s who in 2013 was named to the Top 50 in AdWeek (getting a response from someone with the “verified” check mark means they are a “someone” as far as social media is concerned):

My Saturday afternoon tweet to Wion was actually premature in my assessment of the ProPublica analysis. Not only was it incomplete, it was wrong because of the metrics Moody Analytics used.

This will be addressed in the next part concerning questionable analytics, as well as reminding everyone where we’ve seen this kind of faulty analytics before on major tax policy.

Hint: Think the 1990s and the Dick Armey Flat Tax plan.


IL-06/IL-14: Beware of Analytics Saying SALT Deduction Caps of TCJA Causing Home Values to Drop, Part I — 12 Comments

  1. There are over 160,000 Property Owners in Cook County, who didn’t pat their 2018 taxes and could care less about deductions.

    Thank God there are citizens willing to show us the way and be our moral beacon.

  2. Blah, blah, blah. Hate on Underwood just because she’s smarter than you and is Afro-American.

  3. Nice try, UnderwoodNow, but your distraction will not avail you.

    And I am predominately brown-red mix.

    But your response did betray fear in the Left, which means the message is getting out and the truth will set us all free.

    Don’t be afraid of the truth.

    Embrace it.

  4. Let us seize on a rare POINT OF AGREEMENT:


  5. “Blah, blah, blah, I’m a journalist wannabe just like the sunshine blogger, blah, blah, blah, I’m living and breathing to push Catalina for Congress, blah, blah, blah…” This sunshine blog never stops being entertaining…tic, tock, tic, tock, tic, tock, meeeeeeoooooooooowwwwwwwwwwwwww…

  6. [[[BUZZER SOUNDING!]]] Sorry Angel, you’ve got the wrong number.

    But after watching the nearly hour long interview of Catalina Lauf from the Deep South just now, I can see why she has the Left afraid, just as you are now.

    And I’m not backing anyone.

    Just helping discerning voters see the truth that will set them free.

  7. Hey whatever happened to Johnny Pletz? Is he tryin’ to get his contribution back from Evelyn S?

    How sad. Is she returning ANY $$$$$$?

  8. Destruction of home value can be quantified as attributed to aberrant high property tax rates.

    People usually borrow money to purchase homes, in the form of a mortgage.

    To qualify for a mortgage, a borrower front-end debt to income ratio must not exceed a stated maximum.

    DTI ratio 36% means 36% of pre-tax household income is to be allocated to mortgage payments which include principal, interest, insurance….AND PROPERTY TAXES.

    To illustrate how aberrant high property tax rates may cause homes` values to decrease, consider a typical example:

    A 4% 20 year $200,000 mortgage:

    In Woodstock, borrower would need to qualify for payment ability of $1900/ month (4% property tax rates) vs $1600/month Chicago borrower (2% property tax rates).

    DTI ratio 36% requires the Chicago buyer’s household income to be $53,333.

    Woodstock buyer would need $63,333 income to qualify.

    Note that median household income in US is about $63,000.

    That means that half of the population would not qualify for a mortgage to purchase a home in Woodstock, versus their ability to easily qualify for the mortgage in Chicago.

    (It seems to be a significant inflection point to consider: the property tax rate at which conventional mortgage applicants are disqualified as a function of property tax obligations.

    In this example, half of US households will not present with sufficient DTI ratio, and will not qualify for mortgage loan in Woodstock IL.

    This severely diminishes pools of potential home buyers in aberrant high property tax rate regions).

    The only tool available to homeowners who are forced to sell is to lower the asking price of the home to a point attractive to buyers.

  9. There should be revisions to Fannie Mae mortgage qualifications to reflect the high default risk of aberrant high property tax rate regions.

    It seems the spirit of SALT deduction limits was to make a more fair and uniform allocation of tax burden distribution in America.

    Before the SALT reduction limitations, taxpayers in America were subsidizing Illinois voters’ choices to pay aberrant high salaries and pension and health insurance benefits to teachers and other government workers.

    (It is a separate argument that Illinois subsidizes the choices of taxpayers building expensive properties on coastal regions prone to natural disasters, for example).

    But SALT deduction limits fail to account for the signiicantly higher default risk forced upon American taxpayers (who are the guarantors of FNMA mortgage loans).

    This inequity in taxation uniformity can be cured by including another ratio for FNMA loan qualification: the ratio of property taxes -to- principal +interest+homeowners insurance.

    Using typical example of 20 year 4% mortgage on $200,000 loan:

    at 4% property tax rates as in Woodstock Illinois, the monthly payment is $1900. The ratio of (floating) property tax to fixed payments is 46%.

    At 2% property tax rate as in Chicago Illinois, the monthly payment is $1600. The ratio of (floating) property tax to fixed payments is 23%.

    At 1% property tax rate as in most of America, the monthly payment is $1450. The ratio of (floating) property tax to fixed payments is 12%.

    It is inequitable to force Federal taxpayers all across America to serve as guarantors for high default risk homes carrying property tax obligations which account for 46% ratio compared to the normalized home equity value, when across America that ratio is 12%.

    Local banks sell their originated loans to FNMA so they will respond rapidly to any incentive such as inclusion of a maximum ptax-to-fixed costs ratio in FNMA mortgage qualifying standards.

  10. Susan, both of your comments posted are outstanding, especially this portion:

    “Note that median household income in US is about $63,000.”

    That touches the heart of what Part II will be about, given how the metrics for Moody Analytics, used by ProPublica is flawed and that callout, combined with your comments, is why the fear-mongering must be challenged.

    Today is FEC filing day, so Part II won’t be published until Thursday. Keep up the way you are going, and you’re writing Part II for me. Good job.

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