Your government at work: good and bad. First, the bad.
Homeowners took a trillion-dollar hit as a result of the Tax Cuts and Jobs Act, according to ProPublica.
The math is difficult to follow, but the independent investigative newsroom reported recently that President Trump’s tax reform package bestowing nearly $700 billion in benefits to corporations also harmed millions of homeowners, who are paying the price of Trump’s largesse.
Because the 2017 law capped the deduction for state and local property taxes at $10,000, everyone who owns a house has seen its value decline.
Consider someone earning $200,000 a year who purchased a million-dollar house. Assuming a mortgage rate of 5%, the inability to write off real estate taxes means the place is now worth $138,720 less, according to ProPublica. At 4%, the loss jumps by nearly $35,000, to $173,400.
Of course, big losses like that don’t apply across the board. If you take the standard deduction, for example, you can’t deduct property taxes. And taxes can be higher or lower depending on where you live and on the value of your house.
But the principle is the same, and “applies to everyone who owns a home or is interested in owning one,” reported ProPublica’s Allan Sloan.
And there’s this kicker: “According to the Tax Policy Center, the Treasury will get $620 billion of additional revenue over a 10-year period because people can’t deduct their full state and local taxes. That, in turn, covers most of the 10-year, $680 billion cost of the income tax break that corporations are getting.”
The bottom line: Homeowners, now and in the future, “are paying more federal income tax in order to help corporations pay less federal income tax,” writes Sloan.
Now for some better government news: The Department of Veterans Affairs has paid out more than $400 million in refunds to borrowers who overpaid their home-loan-funding fees.
The returns stem from an inspector general’s finding that military personnel who used their VA benefits to buy houses were charged extra fees at closing. The fees involved some clerical errors, but for the most part, borrowers were simply charged too much. The IG found at least 53,000 cases where borrowers were overcharged one way or another.
The VA reviewed 130,000 loans going back 20 years. “Our administration prioritized fixing the problems, and paid veterans what they were owed,” said VA Secretary Robert Wilkie.
The total payout was “significantly above” the nearly $290 million investigators estimated earlier this year. Refunds ranged from a few thousand dollars to more than $20,000.
Meanwhile, the Federal Trade Commission is in the process of mailing some 8,000 refund checks, totaling nearly $2.7 million, to timeshare owners who paid upfront fees to Pro Timeshare Resales to help sell their unwanted vacation-home weeks.
The average payback is $332. Unfortunately, Pro Timeshare charged customers $2,500 or more, in advance, on the false promise that it had a buyer or renter ready to buy or rent their properties for a specified price. In other instances, the company falsely promised to sell the timeshares quickly, sometimes within a specified time period.
At the same time, the FTC and the Utah Division of Consumer Protection has sued a “flipping system” purveyor for making false claims that its program on buying houses on the cheap and reselling them at big profits involves little risk, time or effort. Like most such affirmations, it just isn’t so.
The company in question, Zurixx, promised people who attended their free seminars that they could generate substantial income by flipping houses. It often used celebrities from popular home renovation television shows to lure its marks to free seminars, where the outfit showed supposed “success stories” of customers who claimed they made thousands using the system.
But, according to the FTC and DCP, the free event is just a scheme to get people to buy Zurixx’s three-day “risk-free” beginners’ workshop, which costs $1,997. Presenters also tried to upsell advanced programs that totaled $41,297.
To pay for the programs, the complaint also alleges, the company told attendees to obtain new credit cards, or to increase the credit limits on existing cards, supposedly to help finance real estate deals.
If any of this sounds familiar, it should. This is just the latest example of similar rip-offs by get-rich-quick scam artists.
Last year, for example, a federal court dismissed a suit by students of Armando Montelongo, the one-time host of the A&E series “Flip This House,” alleging that he and three of his companies engaged in a “pattern of racketeering activity.” The court ruled that the accusers failed to meet the standards required by the RICO Act.
But the plaintiffs aren’t going away. Now numbering more than 420, they have re-filed their suit, this time in Texas, where Montelongo is headquartered. Montelongo has countersued.
While those cases play out, the U.S. District Court for the District of Utah has issued a temporary restraining order against Zurixx and affiliated companies.
Warns the FTC: “If someone promises that you can earn a lot of money with little risk, time or effort, that’s a sign of a scam.”