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foreclosed house-for Rob(1).jpgHere’s an issue from the current state policy debate that hasn’t gotten nearly enough attention in recent days: the General Assembly’s new plan to tax homeowners who manage to get some of their debt forgiven in order to avoid foreclosure and stay in their homes. Under the new gas tax compromise brokered by the House and Senate and tentatively approved yesterday, the Senate’s original plan to tax these homeowners for the loan forgiveness — something the feds do not do — has been put back in the bill.

As the one state capital journalist who has been doing a consistently solid job of following this issue, Mark Binker of WRAL, reported last week:

“North Carolina has decided to charge taxes on some items that would have gone untaxed due to changes to federal laws. The most controversial change along these lines has to do with mortgage debt that is forgiven.

When someone who is in a financial pinch has the amount they owe on their home forgiven through a debt relief program, that can be counted as income. The federal government decided not to tax this amount, but the state will under the Senate Bill 20.

This change was controversial when the measure passed through the Senate because it levies a big tax bill on those trying to work their way out of debt. When House lawmakers first passed this bill, they excluded the mortgage forgiveness from taxes. The compromise measure takes the Senate position.”

You got that? even as people throughout the state gnash teeth and get hot under the collar about a few pennies on a gallon of gas, many North Carolinians will now quite possibly and unnecessarily lose their homes as the result of new taxes that directly defeat the purpose of public programs that were designed to save them. The move is, in short, a perfect symbol of the shortsighted and regressive approach to tax policy that is one of the signature features of the current state political leadership.

Commentary

Gas pumpThe Senate finalized its hurried approval of a new gas tax proposal today and as Budget and Tax Center analyst Tazra Mitchell explained yesterday, there are actually some things to like in it. Most notable among these is the bill’s recognition that tax rates will have to rise in the coming months and years to begin to meet the state’s infrastructure needs.

As today’s Fitzsimon File explains, however, the bill has some obvious and significant problems as well. First, is the wholly inadequate process whereby such a momentous and complicated proposal was rammed through with essentially no opportunity for public input. Second, is the silly camouflage that’s been added in the form of a temporary tax cut that will cost hundreds of Department of Transportation workers their jobs. And third is the inclusion of a totally unrelated proposal to tax people who lose their homes in foreclosure for some of the debt relief they receive (mind you, the people have still lost their homes). Great target for higher taxes there, senators!

Let’s hope the House addresses these flaws when the bill moves to the other side of the Legislative Building next week. Let’s also hope that the House considers one very obvious tool to address the inherently regressive nature of a rising gas tax: reinstating the state earned income tax credit (or EITC).

As Mitchell explained yesterday:

“Policymakers should reinstate a state EITC to offset the fact that the gas tax hits low- and middle-income taxpayers hardest. The state EITC was a key tool to ensuring that low-wage could keep more of what they earn and afford the costs of working, including gas and child care.  Reinstating a state EITC to ensure that the gas tax does not further increase the tax responsibility on working North Carolinians struggling to make ends meet is critical.”
Stay tuned.
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At 11:00 am, opponents of the constitutional amendment banning gay marriage will march from the N.C. State Bell Tower to the General Assembly in an event labeled the “Ides of Love.” More than 900 people,  who plan to vote No on Amendment One on May 8th, will take to the streets.

You can read more details by clicking here.

Later at 4:00 pm, Move On.org will be hosting a “We are the 99% – Save our homes rally.” Read More

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A new report from the Center for Responsible Lending offers a stark view of just how far we have to go before the foreclosure crisis is behind us. Here are just a few of the findings from “Lost Ground, 2011: Disparities in Mortgage Lending and Foreclosures”:

1. We are not even halfway through the foreclosure crisis.6.4 percent of mortgages made between 2004 and 2008 have ended in foreclosure, and an additional 8.3 percent are at immediate, serious risk.

2. Loan characteristics and foreclosures are strongly linked.

3. Although the majority of affected borrowers have been white, African-American and Latino borrowers are almost twice as likely to have been impacted by the crisis.

4. Racial and ethnic differences in foreclosure rates persist even after accounting for differences in borrower incomes.

5. Loan type and race and ethnicity are strongly linked. African Americans and Latinos were much more likely to receive high interest rate (subprime) loans and loans with features that are associated with higher foreclosures,specifically prepayment penalties and hybrid or option ARMs.

6. Foreclosure rates by income groupings vary by housing markets.

7. Impacts vary by neighborhood. Low- and moderate-income neighborhoods and neighborhoods with high concentrations of minority residents have been hit especially hard by the foreclosure crisis.

You can read the full report here.

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Dean Baker has an interesting post today that lists four ideas that the President ought to consider for creating jobs right away:

1. Establish a federal work sharing program;

2. Give homeowners foreclosed by Fannie Mae and Freddie Mac a right to rent back their homes;

3. Push the Fed more aggressively; and

4. Lower the value of the dollar.

All could be done while bypassing the do-nothing/deadlocked Congress. Read the entire post by clicking here.