The current do-nothing Congress appears to be headed for its August recess safely in reach of winning the title for most do-nothingest assembly in U.S. history, which, let’s face it, is not necessarily a bad thing.
The nation breathes a sigh of relief anytime Congress adjourns without doing too much damage, such as repealing the law of gravity because textbook publishers and the makers of Post-It Notes want to sell a new round of study guides based on the concept of Intelligent Stickiness.
Coming from a lot of folks who don’t believe in science, this living proof of the physics of inertia is impressive. Unfortunately, doing nothing has its costs. This is an expensive lesson learned by homeowners who decide, “That soft spot in the laundry floor probably is nothing,” only to find later that the washing machine has fallen straight through to the crawl space.
In this case the bad news for homeowners goes to those still suffering through foreclosures, mortgage modifications and “short sales,” which is when the property is sold for less than the full amount owed. Whenever the principal on a loan is forgiven the IRS considers it income, which creates a big tax bill for the already troubled homeowner.
Since 2007, Congress has excluded mortgage write-offs under the Mortgage Forgiveness Debt Relief Act. But Congress isn’t renewing that tax rule, along with about 50 other annual “tax extenders,” such as the deduction for teachers who buy their own classroom supplies.
Cynical Republicans are holding the extenders hostage in a feckless attempt to repeal a tax on medical devices that helps pay for the Affordable Care Act. Spineless Democrats wants to delay any vote reaffirming the tax until after the election to avoid angering swing-state voters by actually supporting their party’s only major legislative accomplishment in decades.
Home-seller: Do ya feel lucky?
I know Americans crave bipartisan cooperation, but what we had in mind was something like a new national highway bill, not a coalition of childish anger and outright cowardice. The stalled mortgage rule is part of the reason the National Association of Realtors cut its projection for short sales this year from 330,000 homes to 200,000 homes. That’s the last thing we need in our wobbly economic “recovery,” which shows about as much resilience as a steamed carrot.
This leaves tens of thousands of short-sellers either taking their homes off the market, staying stuck where they are and keeping much-needed inventory away from prospective home buyers. Or they can go through with the sale knowing they’ll get hit with a tax bill for thousands of dollars unless Congress retroactively renews mortgage forgiveness in a lame-duck session later this year, months after the damage to homeowners and the real estate market has been done.
That would be barely more than nothing, but for Congress, that’s saying something.
Brian O’Connor is author of the award-winning book, “The $1,000 Challenge: How One Family Slashed Its Budget Without Moving Under a Bridge or Living on Government Cheese.”