With Congress poised to continue the debate on ways to accomplish comprehensive tax reform in the next several months, NAHB’s economists last week set their sights on reminding lawmakers about the critical importance of the mortgage interest deduction (MID) as a middle-class tax provision that families depend upon to achieve homeownership. Looking at a variety of common myths about the deduction, they set the record straight on who benefits from it, what the consequences of repealing it would be, and who supports it — among other important questions. As one example, they explained that eliminating the MID would lead to a reduction in demand for housing by raising taxes on prospective buyers. That lower demand would lower home values for existing home owners, and in fact, just a 1% decline in home prices would result in a loss of $185 billion in wealth for American households. Ramp that up to a 6% decline, and you’re looking at $1 trillion in household net worth being wiped away. Our economists also addressed the issue of second homes that qualify for the MID, which critics contend are primarily large vacation homes owned by wealthy individuals. The truth is that rules relating to second homes often apply to situations that do not involve a vacation home at all, but rather a home that a family purchases before being able to sell their existing one, or a home that’s under construction.
- Recent Polling Confirms Our Messages on the MID
A new survey confirms the broad base of support the MID holds among the public, which is something that lawmakers will have to take into account in any negotiations regarding the future of this key incentive. The United Technologies/National Journal Congressional Connection Poll asked respondents to rate the importance of various tax rules. Results indicated that 61% of respondents believe it is ”very important” to keep the MID, with 86% of individuals saying it is either “very important” or “important.” This placed the MID at the top of the list, behind only tax preferred retirement accounts, which scored a 63% “very important” ranking, and ahead of other popular tax rules including the employer paid health insurance exclusion (59%), the charitable giving deduction (39%), and the preferred rates on capital gains and dividends (27%). These results are consistent with prior independent polling conducted for NAHB last year.
- New Research Adds Even More Fuel to the Fire
NAHB’s economists have also written this week about a new macroeconomic analysis by the Tax Foundation that should give policymakers pause about using the MID as a way to pay for tax reform. The report’s findings are consistent with arguments NAHB has raised regarding other reform proposals that fail to account for the importance of this tax incentive for building wealth and promoting growth. Specifically, the report finds that eliminating the MID to pay for individual income tax rate cuts would contract the economy.
Looking for Land? FDIC Selling Lots and Acreage in Many States
Going forward, NAHB will continue to aggressively defend the mortgage interest deduction as well as other critical housing incentives within the U.S. tax code, including the Low Income Housing Tax Credit that is one of the most successful initiatives ever for providing affordable rental housing in this country. These properties include improved and unimproved land as well as single-family, multifamily and commercial sites that the FDIC is looking to sell. To view a current list of available properties, click here and select the property type, state and city in which you are interested.
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