Elimination of Mortgage Interest Deductions Gains Steam
by Tim Manni
Economist Mark Zandi encouraged the most unlikely group of professionals to jump on the ‘eliminate mortgage deductions’ bandwagon: Realtors. Much to their surprise, or should I say chagrin, Zandi told his audience that the housing sector has received enough support, “it’s time to give back”:
And the industry shouldn’t be shy about its support for such action either, Mr. Zandi argued Wednesday in Washington. Rather, it should “get out ahead of this” and “lead the way,” he said.
But Mr. Zandi made the suggestion to an unsympathetic audience at a real-estate forum hosted by the U.S. Chamber of Commerce. To judge by one audience member, it fell flat. The woman, who described herself as a real-estate investor, said she was bothered by Mr. Zandi’s suggestion and asked him to clarify.
Mr. Zandi didn’t back off. “There is no other sector in the economy that has received more support than your industry, and it’s time to give back,” he told the woman.
Believe me, there are others besides the realtors who are less enthusiastic about Zandi’s idea. “While the merits of the mortgage interest deduction are worthy of debate, how would making yet another change to a venerable-market support improve the outlook for housing?” asks HSH VP Keith Gumbinger. “There would certainly be effects on demand, home prices and homeownership rates. We are already in the midst of wrenching market changes.”
Surprisingly, when we wrote about eliminating mortgage interest deductions last month, the reaction we got from our readers was quite mixed:
-I’d love to see the mortgage deduction rolled back for wealthier homeowners. If you can afford a $500,000 house, we don’t need to be subsidizing your ownership of it; we’d be better off giving that money to people who need it, since we seem to have made so many more of them lately.
-So they want to get rid of MID for the wealthy? When they realize they can’t generate enough revenue, they’ll have to go after someone else. Give you three guesses who they are!! Taxing the wealthy is just a ruse to go after the “little guy”
-The tax deduction should go away. Most people are suckered into buying a house because a realtor or misinformed friend convinces them that they will save a ton of money in taxes. This savings is simply not true for most of us. If you don’t believe me go ask an accountant. It also hurts people because it encourages them to buy a larger house than they can afford or need because they will get a larger write off.
-What no one yet has mentioned (and the most ironic) is that Obama and Congress passed this “stimulus” deal of giving people an $8000 tax credit if they buy a house in 2009/2010. Now after they get people to pull the trigger to stimulate the economy and the housing market, the govt’ is going to eliminate the interest deduction. Unbelievable.
Zandi tried his best to convince the realtors, but will he be able to change your mind and the minds of Congress?
