Romney's plans to ax wealthy homeowner tax breaks

Ah, politicians and their loose lips.

We recently listened to Obama's open mike "second term" remarks to his Russian counterpart. Now we have his likely Republican challenger talking a bit too loudly about tax breaks at a private, but outdoor, event.

Mitt Romney, the almost official Republican nominee for the White House, has offered a broad outline of his tax plan.

He would keep the Bush tax cuts in place permanently, eliminate the estate tax, repeal the alternative minimum tax (AMT), ax the taxes created by the health care reform act,  do away with investment income taxes for most folks, lower the corporate tax rate and broaden the tax base by reducing tax preferences.

None of Romney's suggestions is earth shaking or even new. We've heard them all in some form or fashion before, especially that general "broaden the tax base by reducing tax preferences" portion.

It's a nice catchall category that allows politicians maneuverability while their economists and numbers crunchers come up with specific dollar targets.

Inadvertent tax specifics: But thanks to the sharp ears of reporters, we've gotten a tiny bit of specificity from Romney about which tax preferences might be on the chopping block.

At a fundraiser Sunday night with high-dollar donors, the GOP hopeful said he would eliminate the tax deduction for interest on mortgages for second homes. Romney also said he might consider doing away with state and property tax deductions for the wealthy.

The remarks, first reported by the Wall Street Journal, were overheard by reporters gathered on a sidewalk outside the event at a swanky private estate in Palm Beach, Fla.

I've got to give Romney credit. He personally told rich folks who paid big bucks to meet with him that he might take away some of their tax breaks.

I wonder if any asked for their money back?

Tough tax trade-offs: But Romney's comments do raise a legitimate issue. All of us -- taxpayers, lawmakers and wannabe legislators -- are going to have to make some tough, for some, trade-offs when it comes to taxes.

To keep rates low without increasing deficits something has to go.

Republicans tend to opt for cutting programs, most of which don't affect wealthier individuals.

Democrats tend to want to make up the difference with new money from other sources, generally higher-earning taxpayers.

Means testing some tax breaks would combine the two approaches. It could ensure that all sorts of tax benefits go to the individuals who truly need the help.

And all the home-related tax breaks, especially for second homes, are a good starting point.

The myriad tax breaks offered the housing sector are often cited as a major drain on the U.S. Treasury.

We all know that this tax break won't be eliminated for folks with a mortgage on a primary residence. Attaining the American dream and all that.

But if Romney's comments are an indicator, there seems to be a softening of hard tax lines in the sand when it comes to additional pieces of real estate.

Second home sale tax break already tweaked: In fact, the tax law already has moved in this area.

It used to be easy to convert a second home or vacation property to a primary residence so that the owner could then escape any capital gains on the sale of the second house. That's no longer possible.

Second home sellers owe tax on part of the money they get for the additional home's sale based on how long the house was used as their second, rather than their main, residence.

Why the change? Congress had to come up with money to pay for the provisions in a 2008 bill that granted relief to other homeowners who face foreclosure,

So while Romney's remarks might cost him some future fundraiser bucks, the idea of limiting or removing tax breaks for second homes is not new and it's probably going to happen eventually.

You also might find these items of interest:

• Rethinking mortgage tax breaks
• The unfairness of housing tax breaks?
• Boat, sweet tax-deductible, second home,
  but perhaps for not much longer