You’ve all heard folks ask this- Are you still happy with the folks for whom you voted? This year, it’s been terribly poignant, since so many folks fell for the bait and switch politicians. The ones who promised to do A and then promptly did B- or nothing at all.

As one example, Americans will be in for a rude awakening in a few weeks. When the Republican majorities in both the House and the Senate will erase the two most used tax dodges in America- the deductions for mortgage interest and real estate taxes. (As a matter of fact, I predict this one change will lead to a resurgence in home foreclosures- with the caveat I detail three paragraphs hence- as folks find they can’t still afford to own their homes.)

Now, before you jump up and down, the GOP does plan to give something as it takes this away. The standard deduction will jump from $ 12,600 to $ 24K (for joint filers) and from $ 6300 to $12K for individuals.

Now, for those of you who live in the center of the country (where, I might add, most GOP voters reside), this won’t be a major disadvantage. After all, most of the homes there don’t involve $ 12K in total for mortgage interest and real estate taxes. (I recall with astonishment how my daughter couldn’t even itemize when she owned her home in Tuscaloosa, AL. The interest and taxes were so low.) About 5/6 of the 45 million folks are those who live in such regions of the US and they will actually break even or might even profit from this tax change.

But, it will devastate those who live in major cities and the two coastal regions. Which is exactly why the GOP plans to do this. After all, these are the folks who vote for the opposite party members. As such, they need to be punished.

And, there is another surprise up the sleeves of these tax “reformers”. But most of you won’t be affected by this one. Many folks who own property and rent it out (those who file a Schedule E or an 8825) often sell their properties- and buy other ones with those funds.

For those of us NOT in the rental business, we have the $ 250K (single taxpayers) or $ 500K (joint filers) shield against capital gains taxes, when we sell our homes. No such shield exists if one sells a home that is not the principal residence of the taxpayer- or if the property sold was commercial in nature.

Folks who engage in real estate rental  employ what is called a 1031 exchange, when they “trade up” on their properties. (This property swap, which provides for tax-deferred exchanges, is sanctioned under Section 1031 of the tax code, where it has been in effect since 1921.) Basically, by identifying the property one plans to purchase with the proceeds of the sale of the currently-owned property (and following through on that “swap”), the gains on the property sale are deferred until there are no further swaps for new properties.

There are complex rules governing such exchanges, including deadlines, how the money is handled in such transfers (“qualified intermediaries” are the only ones who can handle such transfers), etc.. Moreover, the real property exchange rules exclude house flipping, fixer-uppers, and even owner-occupied dwellings.

Right now, there are some 16 million rental homes in the US- and almost every one of them (more than 15.5 million of them) are owned by what would be considered mom and pop type folks (non-institutional investors). And, the Joint Committee on Taxation has guesstimated (in December 2015) that these exchanges generate tax expenditures of $ 11.7 billion for smaller corporate entities and $ 6 billion for personal taxpayers. (For a point in fact, the mortgage deduction involves significantly larger numbers- $ 84.3 billion; the real estate tax deductions involves almost $ 37 billion (just $ 100 million shy of that figure.)

Many of the proponents of the 1031 exchange remind legislators that this benefit stimulates economic activity- since the properties are often redeveloped and upgraded. That part is, indeed, true.

But, the proponents also promote the fiction that taxes will eventually be paid when no further 1031 exchanges are effected. However, the data suggest that most of these exchanges cease when the taxpayer bequeaths the properties- and given that the inheritance tax now shields some $ 5.5 million- there never is a tax bill for most of those properties.

Let the fun begin!