Staff members of the House and Senate tax-writing committees are busy putting together legislative drafts that may determine the fate of real estate's most prized tax benefits — first and second home-mortgage interest deductions, property tax write-offs, capital gains exclusions and others.
National Association of Realtors President, Gary Thomas testified before the U.S. House Ways and Means Committee concerning Federal tax provisions that affect residential real estate. Thomas said that homeownership has had long-standing support in the country because of its many benefits to individuals and families, communities and to the nation's economy.
"The mortgage interest deduction (MID) makes sustainable homeownership more affordable for millions of middle-class families; these families are the nation's backbone," said Thomas. "Protecting these hard-working Americans should be Congress' top priority as it pursues comprehensive tax reform. On behalf of our one million REALTORS® members and millions of home owners, we urge Congress to do no harm to housing."
However, the Ways and Means Committee Chairman Dave Camp (R.-Mich.) held tax reform hearings in April to eliminate loopholes. He said he's "carefully looking into revising" the popular provision that many in the real estate business consider crucial to the industry. Camp said he'd like a total tax reform package before the year is out.
One analyst says the time is ripe to change the deduction—in existence since 1913— which is costing the U.S. government billions in tax revenue while doing little to help home ownership. "It costs at least $70 billion a year in lost tax revenues," said Will Fischer, a senior policy analyst at the Center on Budget and Policy Priorities, and co-author of a study released last month that called for changing the mortgage interest deduction into a tax credit.
The Tax Foundation, a Washington-based think tank that describes itself as nonpartisan, released a study at the end of July projecting that an elimination of the mortgage interest write-off would cut the gross domestic product (GDP) by $254 billion based on incomes in 2012, and would result in the loss of 659,000 jobs. In a separate study, the Tax Foundation projected that elimination of homeowner property tax deductions would lower GDP by $94 billion and trigger the loss of 216,000 jobs. Findings such as these lead housing proponents to believe that neither the House nor the Senate bill can afford to make drastic reductions to long-standing homeowner tax benefits. Other industry analysts aren't so sure. Not only did a panel of prominent economists slam the housing write-offs as inefficient and heavily tilted to benefit higher-income taxpayers, but Camp's own make-or-break income tax cut targets could take precedence over retaining current deductions.
From Rep. Adam Schiff (D-Burbank):
"The mortgage interest deduction has helped millions of Americans achieve the dream of homeownership, and at a time when the housing industry is just getting on its feet, I believe it is a mistake to even consider getting rid of the deduction. That's why I'm a cosponsor of legislation (H.Con.Res. 4) which expresses the sense of Congress that the current federal income tax deduction for interest paid on debt secured by a first or second home should not be further restricted. I do not think that this is a deduction that will be eliminated – it is incredibly popular, both among homeowners and Members of Congress. But as Congress continues the tax debate, it is important that homeowners and industry professionals weigh-in on the issue. I support the goal of tax simplification that would streamline the process, help small businesses and end the many unjustified special interest provisions. But millions of families have built their lifetime's financial plan on the continued availability of the mortgage interest deduction and I think it neither fair nor prudent economic policy to consider eliminating it now."
Write, email or facebook your local Representative or Senator NOW that you oppose any change in the MID. Also remember there is Power in Numbers – lead a movement in your group (sorority, fraternity, social group, or your church home) to send as many signatures as obtainable to oppose any change in the MID. Keep it simple.
Senator's contact: http://www.senate.gov/general/contact_information/senators_cfm.cfm House of Representative's contact info: http://house.gov/representatives/.