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Whose money is it, anyway?

By: 12 December 2010 3 Comments

As most people who have been following real estate news know by now, a proposal to scale back the mortgage interest deduction failed.

Let’s review. President Barack Obama formed the National Commission on Fiscal Responsibility and Reform earlier this year for the purpose of putting together a proposal to cut the deficit. On Dec. 1, the bi-partisan task force released a 66-page report – called The Moment of Truth – that was designed to save $4 trillion over 10 years by rolling back deductions, raising some taxes and otherwise calling on most of us to sacrifice at least a little something on the altar of debt reduction.

Bloomberg News provided its typical excellent summary of the proposal. The report includes a recommendation to increase taxes $1 trillion by 2020 by scaling back or eliminating hundreds of tax deductions, exclusions and credits such as those letting homeowners write off interest on their mortgage payments.

The mortgage interest deduction is one of those deductions targeted in the proposal. Specifically, the planned calls for turning the deduction into a 12 percent credit available to all home owners, rather than the current deduction that is tied to income. The mortgage size would be capped at $500,000 and interest on mortgages for second homes and on home equity loans wouldn’t be eligible.

The plan also calls for cutting Social Security benefits, raising the gas tax by 15 cents, reducing discretionary spending by $1.6 trillion and cutting Medicare by more than $400 billion.

What was the commission supposed to do with the report? Review it and then send the matter to Congress if 14 of the 18 members on the commission voted to do so. The proposal netted 11 votes on Dec. 3 – three short of what was necessary to deliver the recommendations to lawmakers.

As expected, the National Association of Realtors (NAR) declared scaling back the deduction would result in a drop in home values, dump another financial burden on current home owners and keep some people from considering buying a home in the first place. The NAR also declared that even talking about reducing the deduction cut into sales as such discussions made potential buyers nervous.

Justin Moore, president of the Mortgage Bankers Association of Arkansas, agrees that cutting back the deduction would put an already fragile housing market in peril. Further, he said attempts to reduce the national debt should continue.

“There is no doubt in my mind that our government needs to make some strategic moves to impact the enormous debt that has accumulated but attacking the homes of Americans is not the answer,” he said.

One fascinating aspect of the entire debt reduction debate has to do with the notion that letting taxpayers keep our money costs the government money. The Tax Policy Center, for example, said the deduction will cost the government an estimated $131 billion in 2012.

That kind of view ought to disturb people more than any talk about eliminating mortgage interest deductions or any other measures deemed essential for reducing the national deficit. The very idea that the money we keep and live on is viewed as a government subsidy suggests a serious question about who actually owns that cash in the first place.

Column written by Ethan C. Nobles and distributed to Arkansas publications on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email =


  • Just another citizen said:

    But of course the cash belongs to the government. We subjects have the privilege of using it at its discretion. Or at least that’s what some seem to think. I’d like to think we fund the government for programs we deem appropriate. Doesn’t seem to be working that way, though, does it?

  • Ethan C. Nobles (author) said:

    What? You mean the government should be run from the bottom-up rather than from the top-down? It exists to benefit citizens and do what we want rather than tell us what’s best for us?

    Geez, such revolutionary talk…

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