With proposals from both President Obama and Republican leaders to increase the tax base, it seems likely that some popular income tax deductions may be reduced or eliminated. One leading candidate for the chopping block is the deduction for mortgage interest. Despite its popularity among homeowners, real estate agents, and builders, momentum is building on Capitol Hill to curtail or eliminate the mortgage-interest tax deduction.
Approximately 40 million Americans claim the mortgage interest tax deduction each year. It was estimated by Congress’ Joint Committee on Taxation that between 2009 and 2013, this deduction will allow about $600 billion in potential tax revenue to stay in homeowners’ bank accounts instead of going to the Treasury. In 2009, the tax break was worth over $80 billion to homeowners, about 2 percent of all federal spending. The new spotlight on the mortgage deduction and other tax expenditures comes as Congress seeks ways to reduce the nation’s ballooning debt.
The consequences of such an approach to deficit reduction would be devastating for home owners, the housing market and the nation’s economy. MHI is also part of a broad business coalition that opposes significant changes to the current home mortgage interest deduction.
However, on June 23, it was reported the Republican leaders had pulled of negotiations with the White House–spearheaded by Vice President Biden (D-DE)–and Congressional Democrats.
Both House Majority Leader Cantor (R-VA) and Senate Minority Leader McConnell (R-KY) have characterized that negotiations have reached an impasse and urged President Obama to step in.
Republican leaders are insisting that spending cuts equal or exceed the size of any debt limit increase, and are refusing to consider Democratic proposals that any spending cuts be accompanied by revenue increases.
Treasury Secretary Geithner indicated that unless the $14.3 trillion debt ceiling was raised by August 2, the U.S. was at risk of defaulting on its debt.
President Obama has proposed cut $400 billion from projected discretionary security spending through 2023, while saving $770 billion in non-security spending during the same period. Democrats and the White House have held firm that any spending cuts must be accompanied by tax increases, specifically the elimination of industry-specific tax breaks and tax exemptions for the very wealthy.
For additional information, members can contact Jason Boehlert at 703-558-0660 or jboehlert@mfghome.org or Rae Ann Bevington at 703-558-0675 or rebevington@mfghome.org.
