New home buyers will move to more tax favorable states.
As I have paraphrased this quote on FR in recent days: the power to tax is the power to destroy.
Is this what we Conservatives have come to?
That people's homes, their lives, where they chose to raise their children, where they take care of their elderly parents, where they worship - all of that should be destroyed because we support a Federal tax raise on the middle and upper middle class?
Really?
If that is a "Conservative" position these days - count me out.
The tax subsidies inflate the purchase price of homes. This primarily benefits mortgage lenders and realtors, whose income based on a percentage (of the mortgage and the purchase price respectively) and who therefore have a vested interest in higher prices. Remove the subsidies and purchase prices will decline, benefitting buyers.
But you have to be able to connect the dots to understand this. Few people will stop to think it through, and given the politics involved, the media will actively conspire against informing the public.
Now: a complication. The prospect of lowering purchase prices will scare current homeowners, for whom their home equity is likely a big part of net worth. The House bill grandfathered deductibility as a partial protection. As a practical matter, the political question will be whether the downward pressure on housing prices affects nominal prices. If it takes the form of housing prices rising more slowly than they would otherwise, existing equity would not be affected and the change would not be resented. If housing prices actually fell, there would likely be a reaction. This may very well vary from place to place.
But either way, this is a transitional issue. There is no public purpose served by artificially inflating housing prices to enrich realtors and mortgage lenders. We have a policy induced bubble in housing prices. The bubble should be eliminated.