The deadline for filing federal income tax is one week from Monday.
And it's not a good time in America. For many, wage stagnation and the threat of inflation do little to help the feeling that the country is greatly relying on taxpayers to pay the bills.
Personally, based on letters from the Internal Revenue Service
and the Treasury Department
since returning from working abroad, I find that it's best not to think of honest income earned as being one's own. Perhaps there is some comfort that the taxes are being put to good use, somewhere. But, there are cases where taxes are dragging down the housing recovery.
Trends nationwide show widespread household deleveraging. Economists add that this process is not due to higher salaries, insomuch as Americans simply want for less.
Downturns this long certainly induce psychological drags that lead to a widespread middle-America aversion to wanting more. And for those of us in housing, it's particularly acute. For one, it isn't easy when seven of the companies regularly covered in HousingWire are some of the least reputable companies
in the nation.
And it's hard to ratchet up a recovery from a consumer standpoint when the economic outlook remains so bleak.
expects the pace of global economic growth will slow during the year, particularly in advanced economies.
"Restrictive fiscal policy will begin to bite and consumer spending will weaken," analysts at the Toronto-based firm said. "Inflation will rise further in the coming months before falling toward the end of the year."
The report reiterates the pains we already know: U.S. household consumption — which still accounts for a sixth of global GDP — will slow later this year and into 2012.
Rising oil and food prices and the double dip in house prices is denting consumer confidence.
Meanwhile, the glut of shadow inventory in housing, which should be seen as an opportunity not as a burden, continues to grow. The reasons for this are well documented if the underlying causes are not. But for those in the business of moving distressed assets — ground zero for winning the economic war against the housing industry — there is more frustration than fruition.
In speaking of taxes, I had an interesting conversation with a particular high-touch servicer in the trenches of lower- and middle-income America. He talked of trying to put together federally supported modifications and short sales, but frequently getting blocked on the state and local level. How can such a thing happen?
"I recently wrote down a property from $32,000 to $12,000 and arranged the short sale," he said. "Everyone one was appeased until the title company informed me of a tax lien. The borrowers owed $8,000 in property tax, and the county refused to lift it."
In which case, and considering the distressed borrower's finances, a tax forgiveness would be in order. The borrower couldn't pay before, how could he pay now?
Releasing the borrower of painful financial obligations cannot be less than 100%, and the lender shouldn't be alone in its responsibility. And, it's immoral to push support only so far. It's understandable that municipalities are in need of funding. After all, demand for muni bonds has slowed and local governments are much more reliant upon tax collections for revenue.
But to think that the lien adds such a layer of impracticality to a short sale: If the servicers pays the bill, he will split the $4,000 difference eight ways? No, I believe he will take a bath. And the bank won't pay the lien either. So the property remains with a net present value of zero and on the books.
It's hardly supportive of a recovering economy. Worse yet, such mentalities run counter to the nature of housing finance itself.
In this industry, negotiations are key at every level. It is the ultimate barometer of general fairness. And for just about every distressed asset out there, there are parties willing to wheel and deal to resolution.
But that negotiation stops at the tax level, a government-sponsored drag on the recovery.
Write to Jacob Gaffney
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