A BIPARTISAN OPINION: WE MUST SAVE THE MORTGAGE INTEREST TAX DEDUCTION

Who knows what Washington politicians might do? I figured the U.S. House of Representatives might pass a law prohibiting moms and apple pies before they’d tamper with the mortgage interest deduction, which benefits almost everyone and has been a cornerstone of American housing policy since the inception of the tax code almost 100 years ago.

However, in their zeal to balance the federal budget without further raising the marginal income tax rate, some lawmakers have expressed a willingness to reduce or even eliminate the mortgage interest deduction, at least for some homeowners. “Everything needs to be on the table,” they say.

Most of the talk right now is around capping or ending the deduction only for high-income households and leaving it intact for everyone else. However, various academic think tanks are pushing to eliminate it altogether.

What’s worse, the idea appears to be regarded as at least worthy of consideration. Just do a Google search for “mortgage interest tax elimination” if you don’t believe it.

The mortgage interest tax deduction is a tax break for just about everybody. After all, nearly 60 percent of us make a mortgage payment.

Tax deductions for mortgage interest and real estate taxes primarily benefit middle-class taxpayers with annual incomes between $50,000 and $200,000, according to the findings of a study by the National Association of Home Builders (NAHB).

Taxpayers earning less than $200,000 pay about 40 percent of all income taxes. However, they receive about two-thirds of the total benefit of the mortgage interest deduction and about 80 percent of the total benefit of the real estate tax deduction.
By an overwhelming margin, voters strongly value homeownership and would oppose efforts to weaken or eliminate the mortgage interest deduction or diminish the federal role in helping qualified buyers get affordable mortgages, according to a nationwide survey conducted last year on behalf of NAHB.

“The American electorate is sending a clear message that owning a home remains a cornerstone of the American Dream, and preserving a federal commitment to homeownership is essential to maintain a thriving middle class and get housing and the economy back on track,” says Neil Newhouse, a partner and co-founder of Public Opinion Strategies.

Public Opinion Strategies in Alexandria, Va., and Lake Research Partners in Washington, D.C., conducted the survey, which has a margin of error of 2.5 percent.

The poll shows that three out of four voters — both owners and renters — believe it is appropriate and reasonable for the federal government to provide tax incentives to promote homeownership. This sentiment cuts across party lines, with 84 percent of Democrats, 71 percent of Republicans and 71 percent of Independents in agreement.

In addition, 73 percent of voters oppose eliminating the mortgage interest deduction. That includes 77 percent of Republicans, 71 percent of Democrats and 71 percent of Independents.

Among the poll’s other key findings:

• 96 percent of homeowners are happy with their decision to own; 84 percent who are “underwater,” or owe more on their mortgages than their home is worth, expressed the same sentiment.

• 79 percent of homeowners would advise a family member or close friend just starting out to buy a home, while 69 percent of those who are underwater on their mortgage would offer the same advice.

• 74 percent of homeowners say that despite the ups and downs in the housing market, owning a home is the best long-term investment they can make.

• 68 percent of respondents who are not currently homeowners say that buying a home someday is one of their most important goals.

Some elected officials have gotten the message. A resolution that supports retaining the mortgage interest deduction in its current form was introduced in the House of Representatives on the first day of the 113th Congress.

The resolution, which was introduced by Rep. Gary Miller (R-Calif.) on Jan. 3, states that “the current federal income tax deduction for interest paid on debt secured by a first or second home should not be further restricted.” Rep. Brad Sherman (D-Calif.) is the original co-sponsor of the resolution.

Almost 200 members of the House signed on as co-sponsors, so you’d think the mortgage interest deduction would be safe. But are you really confident that the U.S. House of Representatives won’t do something totally crazy? Me neither.

You can show your support for homeownership and the mortgage interest deduction by signing an online petition at protecthomeownership.com. Folks, we can’t afford to let our guard down on this one.

Penelope Geismar
Publisher
penelopeg@thefloridahomebuyer.com