Mortgage interest deduction under fire?
Earlier this month, an article in the New York Times got a lot of attention.
Specifically, the publication pointed out that the National Commission on Fiscal Responsibility and Reform – a group appointed by President Barrack Obama to balance the budget by 2015 – was considering scaling back the mortgage interest deduction. That deduction, of course, allows taxpayers to reduce their taxable income in accordance to the interest paid on mortgages.
The National Association of Realtors’ reaction to the news was a bit odd as the group tends to hyperventilate whenever any suggestion is made that its favorite tax break might be eliminated. Instead of issuing the typical warning that eliminating the deduction would destroy Western Civilization, the NAR promptly made reference to a “leaked report” and stated there is little cause for alarm at this point as the proposed cuts in that deduction are contained in a draft document that will likely change between now and when a final report is submitted.
On Nov. 16, the reason for NAR’s measured response to the “leaked report” became a bit clearer. The group issued a letter to the Commission on Fiscal Responsibility stating that the mere suggestion that the deduction might be eliminated has hurt homes sales.
Whether or not the report is leaked is of little consequence. The report is easy enough to find through the commission’s Internet site at FiscalCommisson.gov. The draft was, indeed, released on Nov. 10 as a set of recommendations from co-chairmen Erskine Bowles (a Democrat and former White House Chief of Staff during Bill Clinton’s presidency) and Alan Simpson (a Republican and former U.S. Senator from Wyoming).
Bear in mind the commission, created earlier this year by Obama, is politically bipartisan and has 18 members. Before any final set of recommendations is presented, it must be approved by 14 of those members. A final report won’t be released until Dec. 1 at the earliest.
At any rate, the draft recommendations from Bowles and Simpson touch on a number of hot-button issues including introducing a 15 cents per gallon tax on gasoline, cutting defense spending by 15 percent, a cut in corporate tax rates and, yes, scaling back the mortgage interest deduction.
It’s very true that the aforementioned draft if very preliminary and will likely change. Still, the national Mortgage Bankers Association was alarmed enough by the draft to avoid the “move along, nothing to see here” approach and release a statement urging the federal government to proceed with caution.
“Given the fragile state of the nation’s housing market, now is not the time to be scaling back incentives for homeownership,” said Mortgage Bankers Association Chairman Michael D. Berman in the statement. “The mortgage interest deduction is one of the pillars of our national housing policy, and limiting its use will have negative repercussions for consumers and home values up and down the housing chain.
“We share the widespread concern over the growing national debt and want to help identify reasonable solutions, but we cannot support proposals that would chip away at the foundations of the real estate market.”
Berman made a reference to the growing national debt and that’s worth mentioning. The whole reason the Commission on Fiscal Responsibility was formed is that the national debt has grown considerably due to stimulus spending, unemployment cutting into the tax base and a host of economic issues of which many of us are keenly aware.
It makes sense, then, that the federal government will take some steps to cut into the national debt. What those steps are, exactly, remains to be seen.
Hopefully, the mortgage interest deduction – a major incentive for buying a home – will remain intact. The Mortgage Bankers Association of Arkansas will keep an eye on what the Commission on Fiscal Responsibility is up to and will report any reforms that could hamper the growth of commercial and residential real estate markets.
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.