In a letter to senators who are leading President Bush’s Advisory Panel on Federal Tax Reform, the president of the National Association of Realtors trade group told them not to tinker with home-ownership tax benefits.
“Never dismiss or underestimate Americans’ passion for home ownership,” said Al Mansell, president of the Realtors group. “The housing market, while large, is a fragile, delicate instrument. We believe that penalizing current homeowners by reconfiguring the mortgage interest rules is a completely inappropriate mechanism for curtailing abusive lending practices or defeating local land use decisions.”
“The tax system supports home ownership by making it more affordable. While it is true that only about one-third of taxpayers itemize deductions, it is also true that, over time, more than one-third of taxpayers receive the benefit. Over time, mortgages get paid off, other new homeowners enter the market and family tax circumstances change. Arguably, the standard deduction gives non-itemizing taxpayers a ‘better’ answer than utilizing the mortgage interest deduction, so it is not clear that non-itemizers have been put at a disadvantage.
Mansell noted that the association’s counsel attended an Oct. 11 meeting held by the tax reform panel and “could discern no clear articulation” on how much the cap on mortgage indebtedness could be adjusted as a measure of eligibility for mortgage interest deductions. “We were startled that the panel would even consider reducing that cap,” Mansell stated.
The “lack of clarity” by the panel, Mansell also stated, “is confusing to us, to our members and, most of all, to consumers. It is unwise to create uncertainty of that magnitude in any marketplace, much less in a high-priced, active but delicate housing market.”
Some media reports have suggested that the cap on mortgage indebtedness could be cut down to $300,000 to $350,000, Mansell noted, adding that the Realtors trade group is compiling a list of states and metropolitan areas in which median home prices are above $300,000 “to illustrate just how very far reaching this type of proposal would be.”
Mansell also stated in the letter that the very suggestion of a decrease in homeownership-related tax benefits is harming the housing market. “The public may be misconstruing the news reports, but the fact remains that the news reports and public perception are already chilling some parts of the marketplace, particularly in high-cost areas,” he wrote. “The Panelists must understand that limiting or eliminating tax benefits will have an adverse impact on housing markets and the value of housing.”
He added, “The federal policy choice to support homeownership has been in the Internal Revenue Code since its inception. We see no valid reason to undermine that basic decision.”
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