Not all bank interest is equal / by kevin murray

Americans are in aggregate debt as of the fourth quarter of 2017, at the highest limits ever recorded, with non-household debt alone as reported by at $3.82 trillion, whereas in the fourth quarter of 2008, it was just $2.71 trillion.  All of this debt, which is loaned money, must be paid back, of which the lending institutions of this debt, are banks or bank equivalents such as credit unions, that charge their consumers of such debt, an interest rate, based on negotiated terms, credit worthiness, and other assorted factors.


When it comes to Americans paying their taxes, the interest that Americans pay on those taxes, is not equal in the sense that some interest payments are deductible on those taxes and some interest payments are not.  It use to be, before the Tax Reform Act of 1986 was passed, that all interest payments were deductible, and while there are some interest payments that based on the passage of recent tax legislation, that limits the amount that is deductible, for mortgages, as well as student loans, those limits, for the most part, are limiting only to very high mortgage amounts, and/or to the third personal home, and to the fourth personal home, etc… in addition to student loans that max out at the $2,500 interest deduction along with phasing out such a deduction for high earners.


However, for most people, mortgage interest as well as student loan interest is deductible, subject to those limitations and cap rules.  On the other hand, personal loans for your car, and personal credit card loans or installment interest are not deductible, unless such is for a non-personal use, that is, for a business enterprise.  The fact that business loans for cars and business credit card loans and business installment interest is deductible for businesses, is clearly prejudicial for those that have the means to actually have a business and grossly unfair to those that do not.


In point of fact, almost by definition, the people that own houses and pay a mortgage, along with those that have a business and have a business car loan, are, for the most part, people that earn more money and have more assets than those that just have personal loans for cars as well as for credit cards.  This so indicates that those that are allowed interest rate deductions on their tax payments are beneficiaries of governmental largess, whereas the poorer people, are not.


It doesn't make a lot of good sense, that this government makes it a point through its tax policies to provide tax deductions for interest payments, that deliberately segregates out some interest as not being worthy of any tax deduction, whereas the preferred interest type is permitted.  This quite obviously reflects that the power structure of governmental officials in conjunction with those that have their ear, favors a certain class of citizens, that already have more income and more assets, over other citizens that have far less income and far less assets.


The thing is from a banking loan perspective, interest is interest, whether business or personal, consumer loans or car loans, it is all interest, of which the prevailing rate of that interest being charged, reflects the credit worthiness and type of loan so proffered, yet, from a taxing perspective, not all interest is equal, and those that struggle the most, aren't even permitted the opportunity to use the tax interest deduction, despite typically paying the highest prevailing rates on such interest.