Any changes to the mortgage interest deduction now or in the future could threaten recent progress toward stabilizing the housing market, critically erode home prices and values, destroy middle-class wealth accumulation and hurt economic growth.
That was the message delivered by National Association of Realtors® NAR Chief Economist Lawrence Yun during today’s Rethinking the Mortgage Interest Deduction forum, where he joined a panel of experts to debate the future of the MID. The event was hosted by the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institute, and the Reason Foundation.
“As the leading advocate for housing and homeownership, NAR firmly believes that the mortgage interest deduction is vital to the stability of the American housing market and economy,” said Yun. “The MID facilitates home ownership by reducing the carrying costs of owning a home, and it makes a real difference to hard-working middle-class families.”
Yun argued that now is the worst possible time to discuss changing the tax laws, which could further impair the housing market’s fragile recovery and a broader job market recovery.
“One thing that is indisputable is that eliminating the MID will lower the homeownership rate in the U.S.,” he said. “While we must ensure that the conditions that led to the artificially inflated home ownership rate of the bubble years do not resurface, we also need to create the conditions for sustainable home ownership, which has been shown to provide myriad social benefits for families and communities.”
During the debate, Yun challenged recent proposals calling for changes to the tax code, stating that it’s a misplaced argument to say the MID was a cause of the housing market bubble and is suddenly part of the deficit problem, when it’s been part of the federal tax code for more than 100 years.
Reducing or eliminating the MID is a de facto tax increase on homeowners, who already pay 80 to 90 percent of U.S. federal income tax. Yun said the share could rise to 95 percent if the MID is eliminated.
“Doing away with the MID shouldn’t be thought of as removing a tax break for homeowners, but rather increasing taxes on the middle class,” he said. “Furthermore, housing equity has been a major source of funds for small businesses, and any change to the MID will greatly hamper their ability to create jobs.”
Yun also asserted that it’s a misconception that only the wealthy benefit from the MID, when in reality it benefits primarily middle- and lower income families. Almost two-thirds of those who claim the MID are middle-income earners and 91 percent of people who claim the MID earn less than $200,000 per year.
Other panelists at the Rethinking the Mortgage Interest Deduction forum were Seth Hanton, director of fiscal policy, Center for American Progress; Dean Stansel, adjunct fellow, Reason Foundation; and Eric Toder, institute fellow, Urban Institute, and co-director of the Tax Policy Center. The event was moderated by Edmund Andrews, managing editor for economics, taxes and budget at the National Journal.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
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Filed under: Real Estate