Would Raising The Mortgage Interest Deduction Revive The High End Home Theater Market Nationally?

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MortgageTaxCut-SavesConsumerElectronics.gifI have an idea for a tax cut that could rekindle the home theater market right away. No, it's not a $2,000 rebate for anyone buying a 3D LED HDTV but I think many HomeTheaterReview.com readers would applaud such legislation. I am suggesting that increasing the mortgage interest deduction from $1,100,000 to say $2,000,000 would reenergize the high end housing market nearly overnight. While the middle class is, without question, suffering in The Great Recession from awful unemployment and the complete failure of the real estate market - there are millions of well-heeled people who only spend to the Federal limit of what they can write off. Literally, they are sitting on the sidelines when they could be buying bigger homes or other vacation properties.


These slightly more affluent taxpayers, many of whom live in cities like New York, Los Angeles, Chicago and San Francisco, are the ones most likely to buy home theater systems, audiophile components, home automation equipment, green energy goodies like lighting controls, shades, HVAC controls and more. These are the same people who will be getting tax increases in the next year as the "Bush tax cuts" likely expire. Other than increases to the capital gains tax, I am not suggesting that higher taxes for the most wealthy people in the country are a bad thing but how about also throwing them a bone to help resuscitate the all-important real estate market?

People who know me politically know me as a capitalist first and a liberal second. I am quick to point out to those who boo-hoo about being over-taxed in the United States that there is no other first world country with better economic opportunities and lower taxes in the world. We have it pretty good here even in the middle of a brutal recession, but that doesn't mean there aren't ways to make taxes more fair and to inspire consumers to responsibly start spending again. Here in California, Prop 13 locks in one's property taxes at 1.25 percent per year based on the purchase price of your house. Baby Boomers who took advantage of this when Governor Reagan signed the bill in 1977 benefit by paying for things like schools, police and fire in 1977 dollars. That also has resulted in California's schools going from number one in the nation to number 49 in just one short generation. Warren Buffett reportedly reached out to Arnold Schwarzenegger to see if he would take on this tough topic - and he wouldn't. Prop 13 has Generation Xers who own homes locked into their current properties and not moving, which means they aren't buying new audio systems, more HDTVs and all of the other goodies. No matter what side of the aisle you are on, political leaders need to look at what works and what doesn't. Prop 13 is killing the consumer electronics business in California, which is far and away the largest market for AV in the nation, in a state that is currently the seventh largest economy in the world. More disturbingly, it's affecting the spending habits of younger Generation Xers who should be in their peak spending years right now. Currently, they are in hibernation because of high unemployment, fear of unrealistic and unfair property taxes and beyond.

If you don't believe that revoking the Bush tax cuts will generate enough revenue - reports show that our taxpayer share of Citibank is up $8,000,000,000. That's eight billion dollars profit and the Treasury doesn't have to pay capital gains on that home run. GM likely will yield similar results. The bailouts of the banks made my skin crawl at the time but likely were necessary. Many of them have been paid back while others are pending. Add in some capital gains from the companies we did bailout and buy into, along with more taxes on a bigger economy than 10 years ago, and you have the tax base that can afford to inspire people to own bigger or more homes. Did I suggest ending the Iraq war and or hurrying up in Afghanistan? Those quagmires could help actually pay down some of our massive debt - but I digress.

There is one beam of sunshine from the devastation known as the Nevada real estate market. In Las Vegas, there is an actual uptick in sales in the newly resold, bank-owned homes. For the ones where the owners didn't pour Quickcrete down the drains (I am not kidding) before they were evicted, people are moving into $500,000 homes that just a few years ago cost three or four times more. These McMansions are in need of in-wall speakers, lighting control, HDTVs, automation and more. The new home owners aren't spending like it's 1999 or even 2005 but they are spending. They buy Prontos or Control4 over Crestron. They buy Vizios over Runcos - but they are starting to buy and that is a good thing. I predict that it's going to get contagious and could go nationwide under the right circumstances. Just like "Cash For Clunkers" helped put the car makers on the right track, how about a little help for the housing market?

With taxes likely to increase in the next year and the Treasury set to take in a nice draw - especially if the economy rebounds a little more - wouldn't it be nice to see the people who spend the most on homes in the most expensive markets get a little help to make the American dream happen? This Democrat thinks a tax incentive is order. I just hope I don't get disinvited to that $2,000 a plate DNC dinners in Beverly Hills. Hell, I can't afford those anyway.


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