First, understand that the “payroll tax cut” allows the employed to skip paying a portion of their payroll taxes each and every month, while the employer continues to pay into your account. Payroll taxes include your personal investment into your personal Social Security account. So while our magnanimous Congress gave you a “tax cut” amounting to about an average of $40 per month according to Obama, your Social Security is only funded in part – of 6.2% Social Security taxes, Congress is allowing you keep 2% for now. How will they get you to pay that back – to make up the difference and pay into the Social Security Trust Fund so that you can receive your month SS check when the time comes? Well, you may never have to if you don’t need to purchase a home or refinance your mortgage in the next 10 years. Those who choose to buy a home or refinance over the next 10 years will pay your portion for you. It’s the new Post-American Way. The new fee taxes new home buyers – throughout the life of their loan. It also taxes some estate transactions. The housing market is floundering, people have walked away from homes because they owe more than the house is worth. The rental market is soaring. The American dream of owning a home is dying. But for those who do purchase a home…we will be taxed to assist your Social Security account.
UPDATE: 7:12 pm CDT: Tipster Judy has clarified that the home mortgage tax will NOT GO INTO THE SOCIAL SECURITY TRUST FUND. It will go to the General Fund to be spent, and you know what that means. Read it in the CBS link below.
The new fee is a minimum of one-tenth of 1 percent on Fannie Mae- and Freddie Mac-backed loans, and is likely to go much higher.
It will be imposed for the next 10 years on most mortgages and refinancings and it lasts for the life of the loan…
Bill Burnett…broker and president of the Virginia Association of Mortgage Brokers, said you won’t see Congress’ new charge in the paperwork, but it’s there.
“It’s actually built into this [interest] rate. You would never see the fee as a cost to you,” he said.
Burnett said the fee will affect a “very large number” of homeowners.
“Your pocketbook is being raided in order to pay for a tax policy issue decided at the last minute by probably people who didn’t understand fully what they were legislating on.”
For every $200,000, it amounts to an extra $15 dollars a month. Source: CBS News
If I understand correctly, there is another tax as well that will be levied on behalf of Medicare on some real estate sales. If you sell your home and make a $500,000 profit, you will pay a tax of 3.8% on all profit above $500,000. This tax goes into effect in 2013. Read more conversation about this tax at Gateway Pundit and note the update.
Again, if I understand this correctly, you continue to pay your state and federal withholding. Of course, they want that revenue each month, but your Social Security account is diminished by 2%, and someone else will pay it for you, or you will contribute if you have a real estate transaction any time in the next 10 years. I welcome any additional insight into how this works. Please leave it in comments. Thanks to Judy W for the tip!
UPDATE: 2-20-12: As I said above, the new mortgage and refinancing fees DO NOT GO INTO THE SOCIAL SECURITY TRUST FUND:
The $35.7 billion collected in fees won’t go into the Social Security fund to replace the lost payroll tax. It goes to the general treasury where Congress can spend it however they please…
CBS News went to Capitol Hill ask what Congress was thinking when they passed the mortgage fee hike. Boehner pointed the finger at the Senate.
“As you’re well aware, this bill came over from the Senate. I don’t know how they justified it. We would rather have offset that two-month extension with reductions in spending,” he said.
But the Senate blamed the House. And Democrats and Republicans blamed each other.