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NAR Talking Points ~ Mortgage Interest Deduction
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The deductibility of mortgage interest is one of the few remaining
incentives provided by the federal government to promote homeownership
growth in the United States. While the NATIONAL ASSOCIATION OF REALTORS®
has been very vocal and very successful in fighting threats to eliminate
or scale back this deduction, suggestions to eliminate it or scale it
back continue to surface in Congress. Policy-makers and voters have a
legitimate desire to simplify the tax system, but removal of the
mortgage interest and property tax deductions would be unwise, if not
disastrous. Moreover, the mortgage interest deduction is one of the
simplest provisions in the tax code. NAR will strongly oppose any attempt to modify the current tax treatment of mortgage interest. These ill-conceived proposals should be viewed as what they really are: a hidden tax increase for the nation's homeowners -- specifically, the middle class. Of the 28 million families who claim the mortgage interest deduction, 71 percent have household incomes of less than $75,000 and 42 percent have incomes below $50,000. The mortgage interest deduction has been an important part of U.S. tax policy since the federal revenue code was first enacted in 1913. A home purchase - the largest investment most families will ever make - builds national savings and individual wealth, provides tax revenues for local governments, and stimulates growth in all housing-related industries. Real estate and housing are the engine that drives this nation's economy. Therefore, measures that help people become and remain homeowners are worth preserving. In 1996, when the issue of tax code overhaul started gaining attention, DRI/McGraw-Hill analyzed the economic impact of eliminating the mortgage interest deduction. This study concluded that home values would drop an average of 15 percent, causing mortgage defaults to triple and home foreclosure rates to double. The drop in value approached 25 percent in high-cost areas such as California. NAR finds those projections sobering. The homeowners most likely to be affected would be the most highly leveraged - those who made down payments of less than 20 percent. These "low-down payment" buyers often are first-time buyers with modest incomes. Would any sensible policy place these homeowners at risk? Some tax code overhaul measures - including a flat tax proposal - could be reintroduced in this Congress, as part of the ongoing debate over how best to reform the current system. NAR believes it is crucial that any legislation achieves true reform by simplifying regulations and moving toward a lower overall tax burden. Tax reform proposals that result in unfair distribution of present tax levels, heavier total tax burdens, or disruption of markets are not desirable. NAR will remain vigilant in opposing any tax reform plan, including a flat tax plan, that does not retain the deductibility of mortgage interest. Reproduced from www.realtor.org "For The Record": Spring/Summer 1999 - Talking Points for Association Executives |
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