Why Are Treasury Bonds Taxable?

Discussion in 'Economics' started by jamis359, Jun 17, 2005.

  1. Why is the interest on treasuries taxable?

    When the government issues a bond, it is borrowing money from the public to finance the public's debt. Interest is paid is fair consideration for the public's loss of use of the principal. When the government taxes the interest, it is essentially taking back a portion of that fair consideration. Interest on bonds should not be viewed as taxable income, IMHO.
  2. I think interest on mortgages to the investor should be tax free too and not deductable to the person paying the debt. That would lower mortgage rates by 30% overnight. Plus tax rates are so skewed now that a lot of the lower income people don't use the interest deduction and they would also be the most helped by lower rates.

    Of course one would have the option to get a regular mortage that is not tax free to investor and one that can be deducted on the tax return.

  3. If you made the interest tax free, it would lower the rate the govt paid anyhow. It would be a wash.

    Imo, interest deduction for anything but a home you live in, should be non deductable. I don't like the idea of govt financing second homes, vacation homes, and rampant speculation.

    Not even sure the primary interest should be deductable. CC interest isn't.