Mortgage Interest Deduction Under Attack
Issue Spotlight: MID Mythbusters
As the discussions of tax reform continue at the federal and state levels, numerous opportunities for misinformation have opened up. Due to the impact that many of the proposed changes could have on specific sectors of the economy, many different groups have chosen to weigh in with their views.
While there are numerous areas that we could talk about, the focus of this discussion is on the information which has been presented about the usage of the Mortgage Interest Deduction and why some individuals and groups feel that it should not be continued or expanded.
Recently a study was published by researchers from the Massachusetts Institute of Technology (MIT), Princeton University, and the University of Copenhagen, which presented the concept that the mortgage interest deduction had “no effect” on homeownership. The study was based on data collected during the 1980s in Denmark when the country had a similar tax deduction. You can learn more about the study and its results here. In response to the study’s release, NAR President William Brown issued the following statement: “Studies comparing our housing market to that of a foreign country offer an apples-to-oranges scenario that often isn’t constructive. What we know for sure is that home values would suffer if the mortgage interest deduction disappeared, potentially putting homeowners under water.”
Since this study’s release, numerous other articles have been released attacking the MID using other data points, including the program’s current usage, the household incomes of those who take the deduction, and many others.
For their part, NAR has not sat idly by on the federal level. NAR has been working with leading economic analysis firm PwC (Pricewaterhouse Coopers) to develop a comprehensive understanding of the usage of the deduction and the potential negative effects on individual consumers, and the economy as a whole if it was ended. To accomplish this, the NAR/PwC study examines the impact that many of the current tax reform plans would have on the deduction. Ultimately, the study found that under these plans, homeowners with incomes between $50,000 and $200,00 would see an average tax increase of $815 annually. Check out more information on the study here.
NAR and NC REALTORS® will continue our advocacy efforts on this issue because we understand the value that it has for current and future homeowners. Thanks to your support on the state level, NC REALTORS® was able to prevent any changes to the state Mortgage Interest and Property Tax Deductions in the current budget. While this is a great win, we know that it may be short-lived as legislators are already beginning discussions about the next version of tax reform.
Please continue to follow all NAR and NC REALTORS® communications for updates on this evolving issue.