New poll: Voters open to changing the mortgage interest deductionby Peter Miller
What may come as a surprise is the level of opposition to the mortgage interest deduction and other traditional write-offs.
A new poll from the National Association of Home Builders (NAHB) says that voters of all political stripes are in favor of the mortgage deductions we now have in place. Interestingly, however, a large percentage of voters are also open to change.
Majority are in favor of the mortgage interest deduction
For instance, 73 percent are against “eliminating the home mortgage interest deduction that homeowners can take on their tax returns.” (The poll’s margin of error is +/-2.5 percent.)
In other words, a quarter of voters are open to the idea of eliminating the mortgage tax deduction. Not just changing the deduction or lowering it, but getting rid of it entirely.
This is not just an idle idea. For instance, Kansas Governor Sam Brownback has just proposed a budget plan that would end the mortgage deduction at the state level. It will be interesting to see what Kansas lawmakers and voters think of the Republican governor’s proposal.
The NAHB poll also reveals:
- 54 percent are against “limiting the mortgage interest deduction for those earning over $250,000 per year.”
- 53 percent oppose “scaling back the mortgage interest deduction for homeowners with mortgages of $500,000 or more.”
- 52 percent are against “eliminating the deduction for interest paid for a second or vacation home.”
Given the margin of error, the poll shows that roughly half of all voters would consider limiting or ending the mortgage interest deduction for high-income households and putting an end to deductions for loans on second homes and vacation properties.
Poll: No help for home builders
Such results are surely no favor to home builders. End or cut the deduction for second homes and vacation houses regardless of mortgage rates, and there will be less demand for such properties and less business for builders.
As to ending or limiting the deduction for high-income households, that’s also a concern for the NAHB, a group which has supported higher loan limits.
When Congress passed higher FHA loan limits in November 2011, NAHB Chairman Bob Nielsen said, “We commend congressional leaders in both parties and each chamber of Congress for taking this action to boost overall mortgage liquidity in the marketplace, create jobs, and provide home owners and home buyers with safe and affordable financing.”
Builders favor higher loan limits which favor higher incomes
But very few people care that FHA loan limits rose last year from $625,500 as of October 1 to $729,750 a few weeks later. Less than 1 percent of all FHA loans are for amounts greater than $500,000. In contrast, the typical FHA loan in November 2011 was for $176,858 (88,206 loans with a total principal balance of $15.6 billion).
The higher loan limits favored by home builders create bigger tax write-offs for those who can afford such financing–households with higher incomes.
How will you vote?
We usually don’t think of tax deductions for real estate as endangered, but the NAHB results suggest that the country is surprisingly open to change, especially for those with big loans and multiple houses. Given that a lot of folks who would consider new tax ideas also vote, it will be interesting to see how the political debate unfolds in the coming year.