Capital Loss for every homeowner if mortgage tax deduction ends

One of the ways to avoid the fiscal cliff is to take away the mortgage interest tax deduction that all homeowners who have a mortgage are entitled to. However, if that tax deduction of  goes away, the lower level of income mortgage holders then go bankrupt because they then cannot afford to pay their mortgage without the tax deduction. They then lose their houses because of this which creates a ripple effect up and down home valuation nationwide with the net effect that every homeowner's value of his or her home loses value which creates a real time capital loss for every homeowner who tries to sell their home or who goes for a mortgage because the value of their home is lowered.

Another problem is people who donate to charities. If that tax deduction is done away with during these times there will be less for the poor because less people will be able to afford to donate without this tax deduction in place. More poor will then have less: less food, less clothes, less shelter and less of everything they need to stay alive. So, ending the charity donation tax exemption likely will diminish and end lives in the U.S. both directly and indirectly.

It has not been decided yet whether either of these two things will go away during the fiscal cliff. I just think the consequences both to homeowners capital and for the poor will tend to have such a negative effect on our country that if both these tax deductions go away, the first will increase the homeless and bankrupt who lose their homes and the second will make sure that more of them die or get sick or ill (mentally or physically) or both because of it.

The third potential problem is regarding writing off any state taxes you pay on your Federal Tax form. If this goes away state's (who are also having problems) will have to reduce taxes on their citizens in order to prevent more bankruptcies of individual state and Federal tax payers. So, the best way to put this is any or all of these potential changes to the tax codes could by themselves throw a state or even the whole country into another recession or worse.

All the main facts for this article are from: PBS NewsHour Monday December 10th 2012