Off-Topic: The GF Truth Detector has arrived....

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	Name:	MartiniMan -
	Subject:	The GF Truth Detector has arrived....
	Date:	6/16/2010 9:38:10 AM

As usual GF only provides part of the story and manages to throw in a bit of class envy to boot.

First of all, this law is actually a change from the pre-1997 law where the only way to avoid paying taxes on a home sale was to roll it over into another residence or take advantage of a one-time exemption. The people who got screwed by this change were the middle class folks that either bought their homes a long time ago in most markets or bought homes in strong markets (i.e., San Francisco, LA, DC, etc.) that had the option to sell their homes at huge profit (often more than $1M) and moved to less expensive markets and retired (I call them equity transplants and there are tons of them in Oregon, Idaho, Washington). Before the new law they could take their one-time exemption and pay no taxes. But for many people that don't win the housing lottery or move often this new law is an improvement because they can take advantage of the tax break multiple times (of course there are certain conditions that must be met).

Second, the limit on the profit for married couples is indeed $500K but it drops to $250K for a single. So widows or widowers are particularly vulnerable to be hurt by this law. It is very easy to imagine some nice middle class couple that bought their home awhile ago, one dies and then when the survivor sells they have to pay taxes on the gain (the difference between the sales price and what they paid for the house plus improvements). While a $500K profit is hard to reach for most homes in most markets, $250K is not. My wife's parents lived in the same home for 35 years that they bought for $21K in 1965 and was sold for $350K after her Dad died. And this was in Cincinnati, Ohio which is not exactly a hotbed of real estate value growth. They were very much middle class (her Dad never made more than $35K in any year). So if you extend that to the millions of middle class folks that have lived in their homes for a while it can very much impact the middle class.

Third, what GF fails to mention is the actual current tax on a home sale is 18.8% (long-term capital gains of 15% plus the 3.8%). And this number will go up to 23.8% in 2011. So after 2011 almost one quarter of the profit from a home sale goes to pay taxes. As I pointed out above this does indeed have the potential to impact the middle class.

So GF is factually correct in what he wrote (except the bit about not impacting the middle class) but as usual he only told part of the story and engaged in leftist class envy.