Many people may not realize that the current housing/credit crunch the nation is facing actually does have a direct correlation on the taxes that all consumers will pay. All across the web, reports of taxes being raised across the country are becoming an everyday occurrence and it doesn’t seem that many consumers will escape unscathed.
New York State Targets Online Retailers
As an example, on 6/11, Jena McGregor of Businessweek.com reported that the state of New York had recently amended the tax law to require “online retailers to collect sales tax even when they have no physical presence in the state, such as a store, a warehouse or even a sales rep.” What’s even more far reaching is that New York not only seeks to collect taxes from these online e-tailers but from their linked affiliates as well. This would include other websites or even bloggers who are paid a percentage of the sale. Under New York’s recently revised tax law, these linked-in businesses are considered to be “a presence in the state” and therefore subject to the taxes charged therein.
Politicians Curry Favor with Property Tax Cuts
By contrast, on the same day (6/11) Martin A. Vaughan of The Wall Street Journal reported that New York Governor David Paterson had “launched a bid to make New York the latest state to roll back property taxes.” Are you seeing a pattern here? The government loses revenue with a tax cut in one area but gains it back by raising it in another. It’s kind of like “robbing Peter to pay Paul” and unfortunately, there doesn’t seem to any relief in sight as consumers ride out yet another negative side effect of the credit/housing crisis.
Laws Affecting Change in Mortgage Industry Regulations Will Benefit Consumers
Despite all the high negatives associated with the tightening of credit standards and the resulting fallout in the housing market, some positive changes are being affected which will benefit all consumers in the long run. Kevin Drawbaugh of Reuters reports, “Congress and the Bush administration are pursuing reform proposals on how brokers qualify to do business; how they get paid; and how much information they share with borrowers”.
In addition, The Associated Press reported in “The Baltimore Sun” that the Department of Housing and Urban Development is looking to make changes to the “Good Faith Estimate”. The “Good Faith Estimate” is a document that all lenders are required by law to provide to any mortgage applicant which details what the consumers are being charged in conjunction with originating a mortgage loan or refinance. Assistant Secretary for the Department of Housing and Urban Development, Brian Montgomery, said “The problem is the document is confusing…..” and “The unnecessary complexity of mortgages has actually greatly contributed to our housing crisis, we must do something to make mortgages more understandable and the process much more transparent.”
Cause and Effect, the Perfect Storm
Cause and effect, those two words perfectly sum up the situation outlined above. It helps to think of the economy at large like a big balance sheet, when one side of the sheet doesn't balance, then adjustments need to be made on the other side in order to bring the sheet back into balance. Although it's hard to come up with anything positive to say about taxes, they do serve an important purpose. Hopefully the government can put the revenue generated from these tax increases to good use and pump new life into a stuggling economy.
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