November 29, 2012

Tax break on mortgages at risk in fiscal cliff talks

By BRADY DENNIS The Washington Post

(Continued from page 1)

Some researchers have argued that the tax break actually does little to boost home ownership, given that people affluent enough to benefit from the deduction are likely to buy homes even without it.

"It's a clunky subsidy for home ownership," said Ted Gayer, co-director of the economic studies program at the Brookings Institution. "It also subsidizes things we don't want to subsidize, like borrowing a lot of money for your home. It's a tax credit for people who have large mortgages."

Any efforts to shrink the mortgage interest deduction are likely to face stiff opposition from real estate agents, home builders and others who argue that millions of middle-class Americans also benefit.

Few special-interest groups are better equipped to wage an all-out campaign than the real estate industry, which has defended the tax break for decades as a driver of home construction and a key motivator of home ownership.

"It has always been NAR's position that the (mortgage interest deduction) is vital to the stability of the American housing market and economy," Gary Thomas, president of the National Association of Realtors, said in a statement. "And we will remain vigilant in opposing any future plan that modifies or excludes the deductibility of mortgage interest."

David Stephens, chief executive of the Mortgage Bankers Association, said many people in his industry expect that the mortgage interest deduction will be part of the long-term debate over fixing the nation's budget woes, and he acknowledged that it could face changes as part of a future overhaul of the tax code.

But what he and other industry advocates don't want, Stephens said, are sudden or drastic changes to current policy as part of a last-minute effort to avert the "fiscal cliff" on Jan. 1.

He said such a move would threaten the fledgling housing recovery, cause harm to the larger economy and put a dent in the pocketbooks of many middle-class Americans.

"We are by no means knee-jerk, reactionary on this subject," Stephens said. "The greatest concern we have is that in a rush to deal with the fiscal cliff before the year's end, it could lead to an environment where less-thoughtful decision-making could occur. This is something that has to be managed extremely carefully. This could be stepping over dollars to save pennies if we do it too soon."

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