Posted on 03/13/2011 9:11:14 AM PDT by Bean Counter
In effect since 1913 and long considered an untouchable provision of the tax code, the mortgage interest deduction as we know it may not be around to celebrate its 100th birthday.
The National Commission on Fiscal Responsibility and Reform is recommending that the mortgage interest deduction no longer be an itemized deduction; instead, it would be transformed into a non-refundable tax credit equivalent to 12 percent of interest paid on mortgages up to $500,000. What this would mean for taxpaying homeowners is up for debate.
According to the National Association of Realtors, progress has been made recently in bringing stability to the housing market, and any MID revisions now or in the future could seriously diminish home prices.
"Sixty-five percent of families who claim the mortgage interest deduction earn less than $100,000 per year, and 91 percent who claim the benefit earn less than $200,000 per year, says Ron Phipps, president of the National Association of Realtors.
"In addition, homeowners already pay 80 to 90 percent of U.S. federal income tax, and this share could rise to 95 percent if the mortgage interest deduction is eliminated," Phipps adds. "Any changes to it now or in the future could critically erode home prices and the value of homes by as much as 15 percent, destroying middle-class wealth accumulation and $2.5 trillion in home values nationwide."
John McGary, a CPA and partner with Marcum LLP, a New York-based accounting firm, says eliminating the MID would be devastating to the real estate industry, leading to more defaults and foreclosures and negatively impacting the nation's economic recovery. McGary says when homebuyers decide on the mortgage they can afford, they often factor in the savings from the tax deductions for mortgage interest and real estate taxes. If they lose the MID, many of these borrowers may not be able to afford their mortgages.
Consider that approximately 75 percent of the more than $85 billion that taxpayers saved via the MID in 2008 went to couples or individuals earning at least $100,000, based on data from the congressional Joint Commission on Taxation. It's numbers like this that draw criticism to the mortgage interest deduction as primarily benefiting wealthier versus low- and moderate-income homeowners The leaders of the deficit-reduction commission, however, indicate that only approximately 50 percent of all American homeowners benefit from the mortgage interest deduction.
Studies in recent years by researchers at the University of Wisconsin-Madison show that converting the MID into a credit would raise rates of homeownership by 3 percent and actually be a boon to Americans who currently don't benefit from the MID. Deduction opponents claim it artificially boosts housing prices, raises unemployment by increasing labor immobility, encourages overconsumption of bigger, costlier homes and discriminates against minorities.
*SNIP*
I hope this takes Congressional action to implement, because if Premier Hussein can inflict this by Executive order or some other means, we are screwed to the wall.
The child credit needs to be eliminated before the mortgage interest deduction is touched.
Flat Tax. No IRS. Stop the insanity.
Yes but 95% of you got a tax break under Hussein’s fuzzy math, so quit yer bellyaching.
That’s why you shouldn’t buy more than you can afford, shop the best rate, get the shortest loan period, and pay it off asap.
EITC needs to be ended before the child credit is.
Flat tax is the only solution.
Huh? What tax break are you talking about?
This ought to open up several thousand more vacated homes for Section 8 “resettlement”.
They are socialists out of OPM and tying for every last drop of blood.
BINGO!!!
Absolutely, with a fluctuating tax, it is nothing but wealth distribution via tax rates at the whim of politicians.
What if the Flat Tax is 65%?
This will just be a huge kick in the ass to lower income home owners.
What?...you didnt notice that 8 bucks a week?
Ingrate.
/sarc
This is the fairest solution, but I would add the following conditions:
If you didn't pay any federal income tax last year, you don't get to vote in a federal election. If you didn't pay any state income taxes, you don't get to vote in state elections.
Obama considers it "spending."
God, please bring sanity back to this country before it is absolutely too late. Show me one righteous man.
This is clearly an attack on middle-class America by Washington Elites!
Agree. 17% across the board. EVERYBODY needs to have ‘skin in the game’.
it seems the way he was going was to say that the government would become the landlord for millions of Americans.
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