A deduction, endangered
Let’s get right to the point: It is the opinion of the editorial board of Home Channel News that the mortgage interest deduction, or MID, should be left alone, thank you.
Why are we talking about this now? Because the National Commission on Fiscal Responsibility and Reform released its first round of proposals—ideas to get the nation on better financial footing. As part of the comprehensive tax reform, the commission produced an option called “Wyden-Gregg style reform.” Included therein is this bullet point: “Limit mortgage deduction to exclude 2nd residences, home equity loans and mortgages over $500,000.”
On the nightly news, the possibility of MID reform received top billing—and that was on a busy newsday that included the sighting of a mysterious missile shot over California. Since then, it seems that momentum has grown for softening, limiting or outright eliminating the deduction.
Still, every reasonable, educated and thoughtful person inside and outside the industry responds identically when asked for his or her opinion on the MID question. They say four words: “It will never happen.”
I’m not so sure. The question before the nation today isn’t, “Should it stay, or should it go?” Rather, the question is, “Should it be modified, adjusted or phased out slowly?” Questions to which the HCN editorial board answers: “No,” “No,” and “No.”
Note: In the spirit of full disclosure, Home Channel News editors benefit from the MID. But discussions herein are governed by objectivity, not self-interest.
Full disclosure: An editor receives a mortgage interest deduction on this house.
Here’s what supporters of the MID like about it: It encourages home-ownership and home renovation, both of which provide indirect benefits to communities. And at a time of record-low residential construction and spooked buyers, the housing industry and those whose livelihoods depend on it deserve better than the removal of this time-proven support.
To these points I add: If you like the mortgage deduction in tough times, what’s not to like about it for all times?
There was a rallying cry of the home industry brought forth last year: “Fix housing first.” Removing the mortgage deduction would go a long way to fix housing, all right. If by fixing you mean strangling it in its crib.
Currently, the MID doesn’t apply to homes of $1.1 million or more. That seems fair. What seems unfair is the idea of changing the rules in the middle of the game. American citizens with mortgages bought their houses with the understanding that their mortgage interest would be tax deductible.
The builders are making their case loud and clear. Tampering with MID would disrupt the plans of young households about to buy, said Bob Jones of the NAHB. “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,” he said.
The MID effectively encourages home-ownership. HCN encourages home-ownership. We don’t think this is a radical position.
If you believe in the MID, too, let people know. Let us know, too.