Recent actions taken by Congress suggest that a fundamental tax code reformation could be imminent. Federal budget proposals brought before Congress, by both Senate and House committees, have alluded to a tax reform that could overhaul the entire economy. Streamlining the process could potentially lower maximum individual rate brackets and cut corporate taxes, but also might reduce the mortgage interest deduction, second homes and second mortgages, among several other special interest write-offs.
Failure to preserve homeowner tax benefits may not be in the best interest of our economy, as they serve to facilitate homeownership. However, it appears Congress may be ready to do so.
A 560-page report from the nonpartisan congressional Joint Committee on Taxation suggests that the potential tax reform is more than just a possibility. There remains little doubt that it will occur. Included in the recent report are findings from 11 “working groups,” one of which has been solely dedicated to the housing sector. Data provided would serve as the foundation of a potentially huge reform bill, should Congress choose this course of action.
With the increased likelihood of a possible reform, mortgage and real estate groups that want to preserve current homeowner tax benefits have expressed their concern.
According to Capitol Hill real estate and tax experts, Dave Camp, chairman of the House Ways and Means Committee, has encouraged the establishment of a comprehensive tax reform. It appears as if his staff is currently drafting a major legislative package. In his pursuit of reform, Camp has held approximately 20 committee hearings regarding the streamlining of our current federal tax code. His most recent committee specifically addressed how to handle the mortgage interest deduction for many homeowners.
Camp’s latest hearing was met with scathing remarks from those trying to preserve current homeowner tax benefits. The National Association of Realtors (NAR), in association with homebuilders, economists and academics; acknowledged the importance of maintaining current standards. Comprehensive cuts, particularly those to homeownership tax benefits, may serve to harm the housing sector just as it is primed to remove us from our economic lull.
According to Mark Calabria, an economist and former NAR employee, mortgage interest deductions are “bad policy,” and a “subsidy for debt, not homeownership.”
Both Democrats and Republicans have expressed their concern over the fragile state of the economy. Commentary on behalf of each party suggested that if Congress decides to restrict tax benefits favoring homeownership, it would do so in phases. All manners of precaution would be taken to prevent any disruption to the upward trend of our financial situation.
If the project reform is submitted, homeowner tax benefits, as we know them, may become irrelevant.
According to Isaac Boltansky, an influential Washington D.C.-based housing and mortgage analyst for Compass Point Research and Trading, “we believe that if tax reform occurs in this Congress, which is becoming more likely, that the mortgage interest deduction as we know it will be altered.”