While everybody’s all for cutting the deficit, agreement on who should pay — in one form or another — will be tricky. Opinions vary even within industries.
Commission's Erskine Bowles, left, Alan Simpson (AP)
Just-released summaries of deficit-slashing recommendations from the bipartisan National Commission on Fiscal Responsibility and Reform seemingly have three critical impacts for real estate:
- Shrink or end the mortgage deduction
- A 15-cent-per-gallon gasoline tax to fund new infrastructure programs.
- Raising taxes on dividends, which could curb the appeal of some income-producing assets such as commercial real estate investments.
As you’d expect, reaction from real estate interest is mixed:
- The National Association of Home Builders isn’t happy: “For a battered housing industry, which is struggling with a 21% unemployment rate among construction workers, this is absolutely the worst time to be considering changes to the mortgage interest tax deduction. Tampering with the deduction would be a major setback for today’s slowly emerging housing recovery. It would disrupt the plans of young households who are gathering their financial resources to purchase a home. And it would impose a substantial tax burden on existing home buyers, many of whom continue to stay current with their mortgage payments even as they struggle to make ends meet. Diminishing or ending the deduction would exert further downward pressure on home prices, leaving more home owners with mortgages larger than the value of their property and fueling even more foreclosures. It is absolutely clear that the mortgage interest deduction should not be on the table.”
- The Mortgage Bankers Association wasn’t too pleased: “Given the fragile state of the nation’s housing market, now is not the time to be scaling back incentives for homeownership. The mortgage interest deduction is one of the pillars of our national housing policy, and limiting its use will have negative repercussions for consumers and home values up and down the housing chain. We are also concerned about proposals to tax dividends and capital gains at ordinary tax rates, which would seriously impact investment in commercial real estate. We share the widespread concern over the growing national debt and want to help identify reasonable solutions, but we cannot support proposals that would chip away at the foundations of the real estate market.”
- But the Associated General Contractors of America (and others) in a public letter to the commission seemed overjoyed: “We applaud the draft proposal released today by the National Commission on Fiscal Responsibility and Reform co-chairs to increase the gas tax by 15 cents to support vital transportation infrastructure improvements. This preliminary recommendation is bold, but necessary, and our organizations urge commission members to support its adoption as part of its report to Congress and the President.”
Commission’s draft proposal can be found here.
Chances the mortgage tax deduction survives?
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