By Kevin Bogardus - 11/18/10 12:25 AM EST
The National Association of Realtors, the National Home Builders Association and the Mortgage Bankers Association would see their member companies hurt significantly if the proposal were to become law. All three have contributed millions of dollars in political donations to lawmakers on both sides on the aisle and retain lobby firms connected to influential Republican and Democratic lawmakers.
Lobbyists for some of the groups told The Hill that they have already begun to reach out to lawmakers, expressing their opposition to reducing the mortgage tax deduction. And with more than 120 new members entering Congress next year, the trade groups will have to embark on an aggressive education campaign to secure more allies.
One lobbyist monitoring the debt commission’s work predicted “war” from the trade groups if the panel recommended reducing the tax deduction.
“They will use their political muscle to make this very uncomfortable for a lot of folks,” said the lobbyist.
That muscle is considerable.
The Realtors, for example, spent more than $7.1 million on campaign ads, direct mail and consulting services in support of lawmakers during the 2010 elections, according to Federal Election Commission records. In addition, the group gave about $2.9 million in contributions to lawmakers during the midterm campaign, with 58 percent of that sum going to Democrats, according to the Center for Responsive Politics (CRP).
The Realtors have also already spent more than $12.7 million on lobbying so far this year, according to disclosure records. The trade group has Quinn Gillespie & Associates and PricewaterhouseCoopers on its lobbying roster.
At stake is a huge tax incentive widely used by homeowners. The Office of Management and Budget has estimated that the federal government lost almost $92.2 billion in tax revenue from the mortgage interest tax deduction this year. That figure is expected to rise in coming years, reaching more than $104.5 billion in 2011.
Those estimates have made it a juicy target for budget hawks who want to pare down the national deficit. Economists, too, have taken aim at the tax deduction, saying it typically only helps the richest in the country and encourages them to buy larger homes, behavior that had a hand in the foreclosure crisis.
Mark Robyn, staff economist at the Tax Foundation, called the deduction an “artificial preference for capital.”
“Because that housing industry has a tax preference, it encourages investors to invest in that industry more than tech, research and development,” Robyn said.
Last week, the co-chairmen of President Obama’s deficit commission — former Clinton White House chief of staff Erskine Bowles and ex-Sen. Alan Simpson (R-Wyo.) — released their draft report of recommendations. They proposed two options for the mortgage interest tax deduction: either eliminate it or cap it for mortgages worth no more than $500,000, instead of the current $1 million limit. They also proposed ending deductions for second residences and home equity loans.
Though the final deficit reduction report is not expected until December, lobbyists for the trade groups say they are not working to influence the panel’s end product. Many said they found the commission to be unreceptive to their arguments.
“If this wasn’t so irresponsible, it would be laughable,” said Jerry Howard, CEO of the Home Builders.
The Home Builders have given almost $1.6 million to lawmakers during the 2010 cycle, with 60 percent of that going to Republicans, according to CRP. They are also not shy about lobbying — spending roughly $1.7 million so far this year— and have several outside firms registered to lobby for them, including Baker Hostetler and Clark Lytle & Geduldig, which has ties to the incoming House Republican leadership.
Howard called the tax deduction “one of the pillars of our economy” and said reducing it would harm the middle class and housing prices.
“The timing of it couldn’t be worse. You have had a housing market and a financing market that has been in a state of depression. It is just now starting to show signs of a recovery,” Howard said.
Trade group lobbyists said they would focus their fire on Capitol Hill, and have already begun to reach out to new lawmakers elected just a few weeks ago. Ultimately, members of Congress will have to vote on the debt commission’s spending-cut recommendations, presuming 14 of the 18 debt panel members sign off on them.
The Mortgage Bankers have spent almost $2.1 million on lobbying so far this year and have given more than $590,000 to lawmakers during the 2010 campaign, 51 percent of that going to Republicans, according to CRP.
Like Killmer, others are waiting for the commission’s final report to come out.
“Since this is only a draft and not anything official, [the Realtors] does not have any comment until there is something substantive. For the record, we oppose any change at all in the mortgage interest deduction,” said Lucien Salvant, managing director of public affairs for the Realtors.
Nevertheless, some of the trade associations have already begun discussing a paid advertising campaign directed at retaining the tax deduction. That could also include revving up a grassroots effort and having fly-in visits to Washington by the groups’ members, as well as waging letter-writing campaigns to lawmakers.
“I think all of those could be deployed if this turns into a direct debate,” Killmer said.