Hands off the Mortgage Interest Deduction

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When government kills a deduction that’s been around as long as the MID, they essentially are creating a new tax – something American voters are finding more and more unacceptable. This cutback would require America’s homeowners to help pay for an ever-expanding government. Additionally, it would put the dream of homeownership further out of reach for America’s new families.

There are many good reasons to keep the MID. And the reasons to kill the deduction just don’t hold water. First of all, a home of your own has always been the foundation of the American Dream. The social benefits are immense. President Franklin Delano Roosevelt said that a nation of homeowners is unconquerable. President Clinton called homeownership an essential part of the American Dream, and President George W. Bush said it has the power to transform people.

Documented research has shown that there is a higher educational performance and better behavior of children among homeowners, that crime rates are lower, where is less dependency on welfare, greater household participation on in civic affairs and better household health. As intangible as some may paint it, pride of ownership is the number one reason why people strive to own their own home.

From a financial standpoint, there is absolutely no question that buying a home has a number of advantages: Deduction of mortgage interest. Deduction of real estate taxes. Capital gain exclusion. And the fact that, regardless of market ups and downs, in most cases the value of the typical family home is that family’s major asset.

Paying off a mortgage for many has become a form of enforced savings. Economists, market experts and analysts agree that elimination of the MID would result in a further drop in home values. There would be even more foreclosures. Home sales would suffer. And even greater unemployment would result.

Bob Jones, former chairman of the National Association of Home Builders, had this to say about the proposed legislation: “The collateral economic damage of what happens when something comes along to pull the rug out from under housing values is all around us, so who in their right mind would advocate a plan to bring down housing prices by 10% or more? The MID was not responsible for the housing bubble; countries without an MID have also experienced dramatic swings in housing prices in recent years. The benefits of the MID are also expansive in scope geographically.”

Public support for retaining the interest deduction is overwhelming. According to a nationwide survey of likely voters this past September, nearly 80 percent support retaining federal tax incentives to promote homeownership, which has been in the tax code since the introduction of federal income taxes in 1913, nearly a century ago. Surprising to some but not to me, an even higher percentage (82 percent) of renters favor providing tax incentives to promote homeownership. Most renters aspire to someday become owners.

Which brings us to “How to Lose an Election – 101.” Voters stated in the poll that they would be less likely to vote for a candidate for Congress who supported either eliminating or reducing the home mortgage interest deduction. The message is clear. Yet, our obese federal government still lumbers and wheezes down Pennsylvania Avenue with pending bills of extravagant legislation fluttering from the folds of it’s bureaucratic fat. Eliminating this tax break for home owner’s is tantamount to forcing new taxation on an economy where most thinking people believe the best way out of a hole is not to dig it any deeper with new taxes.

Kush is managing member of the Citadel land Advisory Group. He is also national area chairman of the National Association of Home Builders (NAHB) for a six-state area including Arizona, Colorado, Nevada, New Mexico, Utah and Wyoming. And he is the former chairman of the Home Builders Association of Central Arizona and currently serves as an honorary life director. A home builder for 30 years, he has been selected five times the Phoenix Home Builder of the year.

Editor's Note: The views expressed here are Kush's own and do not reflect those of the NAHB.