The housing industry is laying the groundwork for a sustained campaign to fight changes to the mortgage interest deduction if Congress tackles tax reform next year.
Groups including the National Association of Realtors and the Mortgage Bankers Association say the reform concepts being floated on the campaign trail — such as GOP nominee Mitt Romney’s idea of capping itemized deductions at $17,000 — are merely the warm-up for the main event in 2013.
David Stevens, the president and CEO of the Mortgage Bankers Association, said his group wouldn’t “overreact” to what either Romney or President Obama says in the campaign’s final weeks.
“I have the Romney plan on my desk,” Stevens said. “I have a similar one from Obama there, too.”
But another branch of Washington’s housing lobby, the National Association of Home Builders (NAHB), say it’s monitoring the tax-reform chatter closely in case a proposal catches fire.
“It’s possible that any kernel of an idea can gain some traction,” said Jim Tobin, NAHB’s senior vice president for government affairs. “Our members read the papers, and our members are looking to us to see what they should be taking seriously.”
Tobin said NAHB reached out to the Romney campaign to see how serious of an idea the deduction cap was, and said the group was told it was just one of several concepts the campaign was examining. Romney has also tossed out $25,000 and $50,000 as possible figures for an itemized-deduction cap.
“We take the notion of tax reform very seriously,” Tobin said. “In order to get to some of the targets on tax rates, mortgage interest, among other incentives, inherently has to be on the table.”
Housing groups are already lobbying lawmakers about the importance of the mortgage break, and are stressing to members that the tax exemption is widely used by the middle class and helping fuel the economic recovery.
The comments from the housing industry come as Democrats and Republicans alike lay down markers on tax reform in preparation for the post-election debate over the “fiscal cliff.”
On Tuesday, Sen. Charles SchumerCharles SchumerOvernight Cybersecurity: Trump defends Flynn, blasts leaks | Yahoo fears further breach Overnight Finance: Trump's Labor pick withdraws | Ryan tries to save tax plan | Trump pushes tax reform with retailers Democrats declare victory after Puzder bows out MORE (N.Y.), the upper chamber’s third-ranking Democrat, called for an overhaul of the tax code that reduced deficits without lowering the top rate — at least in part, he said, because the mortgage interest deduction and other tax breaks that could be targeted for elimination help the middle class.
Romney, meanwhile, floated his itemized-deduction cap last week after Obama and others attacked his plan as paving the way for tax increases on the middle class.
Because lower-income households are less likely to itemize their tax deductions, higher earners would be hardest hit by capping them.
But the preference for mortgage interest also accounted for around a third of average itemized deductions in 2009, according to the Urban-Brookings Tax Policy Center, meaning a deduction cap would almost certainly occasion a higher tax bill for many homeowners.
“The places where that really could hit hard are the areas with higher taxes and housing costs,” Roberton Williams of the Tax Policy Center told The Hill. “The New Yorks, the Californias — D.C.’s probably in there, too.”
And while most housing groups say they’re taking a wait-and-see approach, they have responded sharply to proposals to curb the mortgage interest deduction before.
“We have banks lending defensively already. The last thing that we can afford right now is having borrowers afraid to buy because of some change in tax policy down the road,” said Stevens of the mortgage bankers group. “My emphasis right now is not to create more uncertainty in the housing market.”
The mortgage bankers, for instance, said in a statement that the plan from the president’s fiscal commission, known as Simpson-Bowles, would have “negative repercussions” for homebuyers.
Simpson-Bowles put forward a tax-reform plan that would have eliminated all tax preferences, and another that called for lowering the cap to $500,000.
The housing groups bring sizable political clout to the debate. Political action committees for the Realtors, Mortgage Bankers and Home Builders have contributed more than $5.9 million to candidates or other political committees during the 2012 campaign cycle up to the end of August — with close to $3.6 million of that coming from the Realtors alone.
The Realtors’ super-PAC — the National Association of Realtors Congressional Fund — has spent roughly $5 million on independent expenditures for candidates, making it one of the highest-spending super-PACs this cycle, according to the Center for Responsive Politics.
Some of those super-PAC ads — such as a spot backing Rep. Fred Upton (R-Mich.), the chairman of the powerful Energy and Commerce Committee — highlighted lawmakers’ support for the mortgage deduction.
Gregory of the Realtors’ group said his shop is putting considerable effort into ensuring it is ready for tax-reform proposals next year.
“We are in the process of doing our homework and our research shop is running the numbers downstairs,” he said. “We are going to try to be the source of credible information for when those proposals come out.”