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Mortgage Interest Deduction Softens Blow as "Tax Day" Approaches

WASHINGTON, April 11 - With the April 17 tax-filing deadline right
around the corner, the most important tax deduction for tens of millions
of middle-class families could be on the chopping block as early as next
year's tax season if some policymakers get their way.

"The mortgage interest deduction has been in existence since the
inception of the federal tax code nearly 100 years ago and is a
cornerstone of U.S. tax and housing policy," said Barry Rutenberg,
chairman of the National Association of Home Builders (NAHB) and a home
builder from Gainesville, Fla.

"With many local housing markets across the nation just now showing
signs of a long-awaited spring thaw following the worst downturn in
decades, protecting the mortgage interest deduction and promoting tax
policies that will keep homeownership affordable is very important to
create jobs and keep the economy moving forward," he added.

The deduction is broadly used across income groups and geographic areas.
Data from the Joint Committee on Taxation indicate that more than 33
million families benefitted from the deduction in 2010 and that these
households saved a collective $83 billion on their tax bills.

Though the mortgage interest deduction is the primary reason that
taxpayers become itemizers, critics have unfairly attacked it as a tax
loophole (despite the fact that more than 33 million households claim
it) and a subsidy to the rich. 

Here are the facts. The mortgage interest deduction primarily helps
middle class home owners and is consistent with the principles of a
progressive income tax. Two-thirds of the benefits flow to working class
American households who earn less than $200,000 annually and nearly all
those who own a home of their own will claim the deduction at some point
during their tenure as home owners.

NAHB research has shown that as a share of household income, the
deduction is most important for younger home buyers, who typically have
less equity, tighter household budgets and are paying mostly deductible
interest and relatively little principal. 

"The American people understand that curtailing or getting rid of the
deduction to help lower the federal debt would result in a big tax hike
on millions of middle-class home owners and that prospective buyers whoare counting on its benefits to lower their monthly mortgage payments would remain on the sidelines," said Rutenberg. 

The collateral damage to the economy would be even more devastating, resulting in lower home values, which would leave more home owners underwater, trigger more foreclosures and prolong the housing slump for
years to come.

Changing the rules now would not only take money out of the pockets of those home buyers who rightfully counted on the deduction being there when they needed it, but also penalize millions of baby boomers nearing retirement and seniors who own their homes outright.

Those looking to use the proceeds from their home to move into a retirement community, help defray health care costs or to fund other long-term obligations may find that declining home values will shrink
their retirement nest egg and force them to keep working and stay put because they can't afford or are unable to sell their current home.

Yet, there are critics who still suggest that the mortgage interest deduction should be weakened or even abolished in order to raise tax revenues for the federal government, a minority view that flies in the
face of public opinion.

A New York Times/CBS News poll conducted last summer reveals that nine out of 10 Americans oppose eliminating the mortgage interest deduction and a nationwide survey of likely voters commissioned by NAHB earlier this year shows that 73 percent oppose abolishing the deduction. 

Further, the NAHB poll found that three out of four voters believe it is appropriate and reasonable for the federal government to provide tax incentives to promote homeownership and 68 percent would be less likely to vote for a congressional candidate who proposed to eliminate the deduction, a sentiment that cut across party lines.

"Raising taxes on the nation's home owners is clearly not the right answer to resolve our nation's fiscal woes," said Rutenberg. "Such an ill-advised action would devalue housing, lead to massive job losses and
derail the fledgling economic recovery." 

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