Wexler: Bush's Tax Commission Proposal Destroys American Dream of Home Ownership

Robert Wexler Press Release ^ | 10-12-05 | Robert Wexler

[My Favorite Headache]

Wexler: Bush's Tax Commission Proposal Destroys American Dream of Home Ownership

FOR IMMEIDATE RELEASE

October 12, 2005

Contact: Lale Mamaux

Phone: (202)225-3001

Wexler: Bush's Tax Commission Proposal Destroys American Dream of Home Ownership

Restricting Tax Deductions for Mortgage Interest Will Harm Our Nation's Housing Market

(Washington, D.C.) - Congressman Robert Wexler (D-FL) is extremely troubled by a recommendation made by President Bush's Advisory Panel on Federal Tax Reform that is calling for the restriction of tax deductions on mortgage interest.

Homeowners currently are able to deduct interest on their mortgages up to $1 million; however the panel's recommendation calls for the lowering of tax deductions on mortgages closer to $300,000, with regional differentiation depending on housing markets that are more or less expensive.

This risky recommendation will carry great weight with the White House, Department of Treasury and Congressional Republicans who have continued on a path of fiscal irresponsibility for our nation's economy and if this recommendation is to move forward, our nation's housing market will be adversely affected and middle class Americans will incur a large- scale tax increase.

Wexler supports the current tax deduction for mortgages and believes that it must be left intact.The President's Advisory Panel is expected to issue a final report with their recommendations on November 1.

"President Bush's Advisory Panel clearly is out of touch with hard-working American families who want to live the dream of homeownership. By lowering the limit of taxable mortgage values, homeowners will be left to pay a significant amount in mortgage payments.I vehemently oppose the Advisory Panel's recommendation and I urge President Bush and my Republican colleagues in Congress to do what is right for the American people and leave the current tax deduction for mortgages in place."

"Every American should be given the opportunity to live the American dream and it is my sincere hope that this misguided proposal will never see the light of day in Congress," Wexler said.

Congressman Wexler is a senior member of the House International Relations Committee and is a member of the House Judiciary Committee.

Lale M. Mamaux Communications Director Office of Congressman Robert Wexler 213 Cannon House Office Building (202) 225- 3001 lale.mamaux@mail.house.gov

[My Favorite Headache]

Have at it

[supercat]

Laws of supply and demand would suggest that the "home interest deduction" reduced the cost of homes for people who bought them shortly after its institution, but the market prices adjusted upward to make up the difference. Repealing it would cause the cost of homes to rise until the price falls to make up the difference.

[bengalsrule]

*****Homeowners currently are able to deduct interest on their mortgages up to $1 million; however the panel's recommendation calls for the lowering of tax deductions on mortgages closer to $300,000,****

I would think a dem might support that. Those stinking rich people don't need a million dollar deduction anyways. LOL!

[Pearls Before Swine]

Either its deductible or it isn't. I hate to agree with Wexler! It is hard to understand why a GOP administration would beat up on the homeowner to raise revenue. This just makes the tax code more complex. I could live without the interest deduction if the code were drastically reformed--as in a sales tax oriented environment, but this adjustment is just another nick out of the hide of the 50% who work and support everyone else.

[KarlInOhio]

The three purposes for the tax reform commission were:

1. simplify Federal tax laws to reduce the costs and administrative burdens of compliance with such laws;

2. share the burdens and benefits of the Federal tax structure in an appropriately progressive manner while recognizing the importance of homeownership and charity in American society; and

3. promote long-run economic growth and job creation, and better encourage work effort, saving, and investment, so as to strengthen the competitiveness of the United States in the global marketplace.

http://www.taxreformpanel.gov

Their suggested changes seem to fail on all three aims. And toss on top of that that there is no "appropriately progressive" tax. If it is progressive it isn't appropriate.

[Kewlhand`tek]

well I dont like the plan but really does it keep you from owning a home? mine cost 39k.....well under the 350k or 1mil

[Pessimist]

There shouldn't be any tax break for home mortgages. Just lower all our taxes across the board by an equivalent rate and be done w/ it.

The system we have now is using tax policy to try to dictate social outcomes (ie. home ownership). That's none of the gvt's business.

However, while this proposal would approach that end, making it dependant on home price (which is a rough proxy for income) just enhances the progressivity of our tax structure. And that's moving in the wrong direction.

[Pessimist]

"..as in a sales tax oriented environment, .."

I've thought about that too. Pay a one time sales tax on a house instead of yearly property taxes.

Of course for one thing that would drastically increase the initial cost to purchase a house. But for another, it would be interesting to see the long term effect it would have on American life. One would assume people would become drastically less mobile.

[Leroy S. Mort]

Something tells me Bob Wexler owns some Palm Beach real estate.

[the_Watchman]

Not entirely correct. The supply of homes is not fixed. By supplying people with more buying power, more money is placed into the pool for home purchases. The increase in demand will result in not only higher prices, but also increased production as the developers rush to soak up the cash released to home loan subsidies.

The supply curve actually shifts resulting in more homes being built. This is the result envisioned by those that introduced the deduction into the tax code.

Wexler is clearly a demagogue. The proper question would be the effect on home ownership. Presumably, mortgage costs up to $300K would be deductible even if one purchases a more expensive home. In that case, the impact is going to be marginal, rather than catastrophic.

Those most impacted will be yuppies attempting to move out of apartments, where they held zero equity, into upscale homes.

Whenever tax tuning is attempted like this the market shifts in novel ways to allow people to take advantage. I wonder if a new type of "zero interest" second mortgage will emerge which will be available to people willing to accept a higher than normal first? This would allow the higher interest payments to be shifted into the tax deductible side.

[Pearls Before Swine]

I'm not sure you took my meaning correctly. I was pushing consumption taxes over income taxes. That would probably include houses. And, there's no way you could expect a one-time payment to work for all local taxes, given the unpredictability of civic growth and finances. You'd either set it so high that it would severely damage the value of real estate, or so low that you'd have to look to tax everything else that moved.

I wouldn't advocate taxing the sale of a home while leaving the rest of our current system in place. It would make no sense at all.

[stylin19a]

What the heck is Wexler moaning about ?
$300,000 a year of mortgage interest is approx. $4,000,000 loan @ 7.5 for 30yrs.
Oh the agony...

[stylin19a]

In re-reading it, I'm a little confused.
Are they talking about the interest on a 1 million dollar mortage, rather than 1 million in interest ?

[jackbenimble]

This discussion is practically moot. President Bush is going to be so weakened by the Miers fiasco that his agenda, including tax reform, is pretty much kaput. He is just going to be a lame duck place holder in the White House for the next three years.

The good news, at least in my opinion, is that he won't be able to push through his Guestworker Shamnesty either.

[TruthShallSetYouFree]

Let me see if I understand this:

Democrats generally prefer higher taxes.
Limiting the mortgage deduction is effectively a tax increase.
But Wexler is opposed to it because it causes homeowners to pay more in taxes, thus limiting their opportunity to "live the American Dream."
Wasn't Wexler one of the vocal left who strongly disapproved of Bush's income tax cuts? Don't income tax cuts also make it easier for everyday folks to "live the American Dream?"

He can't have it both ways. Oh wait, yes he can. He's a democrat.

Florida, particulary Palm Beach County (Wexler's district), has experienced tremendous economic growth, primarily due to real estate. Perhaps that is what is driving his pronouncements.

[jw777]

Hey Wexler. Under Bush, home ownership is at an ALL TIME HIGH. This includes Clinton's terms.

[Kokojmudd]

I too am surprised that the wexler would be against the blue ribbon panel's marxist social engineering scheme. The president needs to put this panel out of business. Tax simplification will not occur as long as the majority of taxes are paid by a minority of citizens.

[jeremiah]

39K will get you a used mobile home in a park in WA state. It might even have some land and a carport next to it.

[scannell]

ONe point to make is that limiting the interest on a mortgage to the debt limit of $300,000 when allowing for about a 20% downpayment means that the limit on home purchase value is approximately $360,000. Hardly the value of a home that would deny "potential" homeowners their dream. But the number will be closer to $350,000 which means full deduction for interest on home valued up to $420,000.

[dawn53]

I've always felt that new homeowners were sometimes sold, or maybe I should say bought, a home under false pretenses.

They were sold more than they could really afford by hearing the mtg. company, bank, or real estate agent tell them that the mtg interest would give them a "tax break" and help even their expenses out.

What person thinks that spending 4 dollars in order to save 1 is a good deal?

Of course, it's better than renting, but the mortgage rate tax deduction should not be an incentive to buy more house than one can actually afford.