REALTORS® Champion MID on Capitol Hill
While GBAR members were in Washington D.C. last week for the NAR Mid Year meetings, they met with several members of Congress to discuss several issues important to the real estate industry, including the MID. GBAR Members urged specific support for maintaining the current deduction for home mortgage interest. The mortgage interest deduction helps many families become home owners, which is the foundation for a healthy middle class, and it is vital to the health and stability of housing markets. Altering this policy or any others related to homeownership could marginalize current and future home buyers, as well as jeopardize the emerging housing recovery and the overall economy.
Additionally, NAR President Gary Thomas made a forceful case for the mortgage interest deduction and other tax incentives for homeownership in his testimony before the U.S. House Ways and Means Committee in late April. In his testimony, he stated that some provisions in the tax code, such as the deductions for mortgage interest and state and local taxes paid, have been part of the federal tax code since the income tax was introduced 100 years ago. Thus, the values of such tax benefits are both directly and indirectly embedded in the price of a home. While economists agree that there is no accurate measure of the value of those embedded tax benefits, they all generally agree that the value of a particular home includes tax benefits.
NAR believes that individual tax rates should be as low as possible while still providing for a balanced fiscal policy. NAR further believes that there should be a meaningful differential between the rates paid on ordinary income and capital gains on investments. However, NAR does not endorse a particular rate, nor does it believe that long established provisions in the code should be changed or eliminated solely to lower marginal rates. When Congress last undertook major tax reform in 1986, it eliminated a large swath of tax provisions, including major real estate provisions, in order to lower rates, only to increase those rates just five years later in 1991. Most of the eliminated tax provisions never returned and in the case of real estate, a major recession followed. Congress must be mindful that eliminating widely-used and simple tax provisions can have harsh and dangerous unintended consequences, particularly if the sole purpose of eliminating non-abusive provisions is to obtain a particular marginal tax rate. NAR also notes that American homeowners now pay between 80 and 90 percent of all federal income taxes. Congress should avoid further raising taxes on homeowners in a quest for additional revenue while federal spending is at record highs. Congress must first look to reduce spending in order to get our nation’s fiscal house in order. To read all of President Thomas’ testimony, click here.