The proposal by the president's deficit commission headed by Erskine Bowles and former Wyoming Senator Alan Simpson to curtail the tax deduction for mortgage interest is sounding an alarm, according to an article by David Kocieniewski in yesterday's edition of The New York Times.
More than 35 million Americans claim the deduction and the federal government estimates it will cost the Treasury $131 billion in foregone revenue in 2012, the article said, adding that "its size, popularity and link to the emotionally charged American notion of homeownership has made it so politically sacrosanct that there are serious doubts whether Congress will even entertain the idea."
"But," the article continued, "by raising the specter of ending one of the most cherished tax breaks, the commission is trying to jar the public into recognizing the magnitude of the nation's budget deficit and some of the drastic steps that might be needed to close it."
The commission's chairmen offered the option of capping the deduction at $500,000 rather than the present limit of$1 million, the article said, adding that "The prospect brought an angry outcry" and "House Speaker Nancy Pelosi blasted the commission's suggestions, saying it would force middle-class homeowners to subsidize tax breaks for the wealthy."
"Officials in the real estate and mortgage industries," the article continued, "warned that ending the deduction could cripple an already ailing housing market." It said that Michael D. Berman, the chairman of the Mortgage Bankers Association, said that "the mortgage interest deduction is one of the pillars of our national housing policy," adding that "Limiting its use will have negative repercussions for consumers and home values up and down the housing chain."
The article said that some experts maintain that the value of the deduction in public policy is debatable, noting that countries like Canada and Australia, which do not allow such deductions, have homeownership rates similar to those of the United States" and Roberton Williams, a fellow at the Tax Policy Center, said that "what the subsidy is doing is driving up prices by encouraging well-off people to take out bigger loans to buy bigger houses."
More than 35 million Americans claim the deduction and the federal government estimates it will cost the Treasury $131 billion in foregone revenue in 2012, the article said, adding that "its size, popularity and link to the emotionally charged American notion of homeownership has made it so politically sacrosanct that there are serious doubts whether Congress will even entertain the idea."
"But," the article continued, "by raising the specter of ending one of the most cherished tax breaks, the commission is trying to jar the public into recognizing the magnitude of the nation's budget deficit and some of the drastic steps that might be needed to close it."
The commission's chairmen offered the option of capping the deduction at $500,000 rather than the present limit of$1 million, the article said, adding that "The prospect brought an angry outcry" and "House Speaker Nancy Pelosi blasted the commission's suggestions, saying it would force middle-class homeowners to subsidize tax breaks for the wealthy."
"Officials in the real estate and mortgage industries," the article continued, "warned that ending the deduction could cripple an already ailing housing market." It said that Michael D. Berman, the chairman of the Mortgage Bankers Association, said that "the mortgage interest deduction is one of the pillars of our national housing policy," adding that "Limiting its use will have negative repercussions for consumers and home values up and down the housing chain."
The article said that some experts maintain that the value of the deduction in public policy is debatable, noting that countries like Canada and Australia, which do not allow such deductions, have homeownership rates similar to those of the United States" and Roberton Williams, a fellow at the Tax Policy Center, said that "what the subsidy is doing is driving up prices by encouraging well-off people to take out bigger loans to buy bigger houses."
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
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