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Wells Fargo chief portfolio strategist Brian Jacobsen gives his outlook for tax reform.
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I I thank you to call now let's talk about tax reform which certainly has taken center stage of the presidential race and our first guest today.
Says come 2014.
We could see reform similar to that put -- by President Reagan and congress in 1986.
But.
-- one major difference according to Brian Jacobson chief portfolio.
Strategist at Wells Fargo.
And I don't think it has anything to do with the Mets when in the World Series but instead about your mortgage deduction right -- Yeah unfortunately I'm hoping that maybe the brewers win the World Series -- Simon want to hear.
But that's probably an all wire call given how they're looking right now.
I but as far as with the in the big concern that I have is that any tax reform that's being proposed it has to be paid for in some way.
And both parties whether it's on the Democrats Republicans are really talking about trying to eliminate some of these tax expenditures.
One of the big tax expenditures is related to the housing market the mortgage interest deduction also some of the deductibility of property taxes that could be on the chopping block.
OK so that's where you come and there's.
I guess a two part question here once economic what does that do to the housing market.
And the other is an investor related questioned how do we prepare for this if you're you're betting on -- as you seem to be.
Being something it's gonna happen in the future.
Yet know keep in mind that this is always in the future and the 2014 I don't think we're gonna see substantial tax reform.
No matter who wins I in 2013.
It's just it takes too much time to negotiate this so I think investors they'll still need to position themselves in anticipation of this.
Now as far as what it could do for the housing market unfortunately.
The unintended consequence could actually be as sort of a double dip for the housing market if they suddenly eliminate the mortgage interest deduction.
That's going to reduce the incentive of people to buy investment properties or perhaps -- hit people especially hard in California on the East Coast as well.
So you're not a proponent of it because of that is that fair to -- -- because housing.
We've been waiting for for -- -- that we start to see some signs they may be finally we're gonna get going here a little bit this.
-- -- that we've at least it bottom restore the cease and depending on which side you look at we might be started to come back and you're saying if this goes into effect forget about it we're back down again.
And I think that's the problem is every time we see signs of life it's almost like -- get smothered again yeah and that's what this could do not long term IMO.
-- in favor of getting rid of the mortgage interest deduction for it and perhaps -- it means tested or having it only -- to your primary residence or perhaps the secondary residence as well so limiting -- I'm in favor of that for the fiscal position right I think that it might be a little premature to be doing that now since we're so all sort of baking on the housing market making -- come.
And how much as a matter who wins we look at president Obama's tax plan the White House.
This fall just said this this is this something goes into effect a matter.
Who the candidate is what it's Romney or Obama -- it in the White House or does it matter.
I think that it does depend somewhat on who is in the White House but for the most part if you like say if you look at the Ryan plan where he was trying to say that what we need to do is have a lower tax rates.
Get rid of some tax expenditures and he didn't really specify what that makes sense because of the process that they use in order to pass this need to budget resolution.
Then you follow that up with budget reconciliations.
To current and can bring the budget in the line with the resolution.
I think that's where there's going to be some committee that's formed that's going to determine which of these expenditures are gonna be eliminated Brian Jacobson now Wells Fargo always good to talk to thank you Brian.
