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*
EITC has nothing to do with taxes. It is welfare, pure and simple.
Totally support this. Never made sense to me why we reward debt, which is at best a necessary ill.
BUMP to the flat tax.
You do realize there are many who don’t own real estate (including some here) whom view this as fair. It really is another variation of “Tax Those Evil Rich People”, only in this instance, the “Rich” are the middle class.
What they don’t realize is the incredible tax increase would further the growth of Government and crush out what little life is left in our economy, as Real Estate was a major part of the overall economy.
“There is none righteous, NO, not one” Romans 3
The left won’t be happy until every expressionless person live in a gray government housing projects, eat tasteless food, ride buses and train to their government jobs, and sit in the dark at night because they only have enough allocated power to watch the one government channel on the telescreen.
Not a single thing from the phoney commission has been draw up,voted on , or implemented so why is lefty peddling some bogus 2013 date ???
I don't see in this article any mention why there is 2013 in the headline ?
Does anyone seriously think a GOP congress would vote yes on this and expect to be reelected ? Maybe old DC Mitch McConnell and his fellow lobbyist owned senators would .
Have you lost your mind ?
Do you have any idea what such a law would do the US economy and everyone’s finaces ?
Get out last year’s tax return and then take away all of your deductions including the individual deduction and the mortgage interest deduction and then figure a flat 10% tax. Don’t bother to contact me with your findings I already know what it will be. I lost money on the “lower flat tax”
WE only ever got to claim it one year before it was taken away bck in 1987. I alwys thought it made no sense to only allow those who had more expensive homes to claim it while leaving out those who bought homes they could afford out.
“EITC needs to be ended before the child credit is.”
SSN sharing helps the poor. Why are you against the poor?////ssssssssss
Most of us with affordable homes haven’t been ble to use the tax brak sicne it was eliminated for anything under $5000 a year back in 1987.
Most of us with affordable homes haven’t been ble to use the tax break since it was eliminated for anything under $5000 a year back in 1987.
We need MORE children ..more native BORN American children ...elimation of tax credit might mean fewer children
I think we need to eliminate the UNEARNED TAX CREDIT..
In NYS people stay on welfare all year.. work at Christmas for a few weeks and then claim a nice bounty of tax credit money.. now that money is supposed to go to welfare.. That money is supposed to payback welfare, but they are smart enough to go off the rolls ( after the monthly check comes ) until they get their tax’ return” and then go on again the following month
Hey there is a sucker born every minute..I want to know how we got them all in the congress ???
Yes and the entire Code can be no more words In Total than the: Decloration of Independence, Consitution, and Bill of Rights in those Pocket Consitutions you can buy or get when you have Jury Duty.
And yes, it has to fit in your shirt pocket....
You can’t have “hope and change” without getting rid of all the tax deductions.
They are already screwing homeowners on the real estate taxes. Last year, if you didn’t have enough deductions to file a Sch A you could claim real estate taxes on the Sch L and use it as part of your standard deduction. They took that away this year!
The mortgage interest deduction is a poor, government-intrusionist policy. It’s led to overinvestment in housing, underinvestment in economic productivity, and unfair tax burdens.
It needs to be phased out with a compensating reduction in income tax rate, however, to ease the blow to those taxpayers using it as a subsidy from their fellow taxpayer citizens.
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